Employee Benefit Considerations

Overall Concerns

When offering an employee benefits package, there are concerns which should be addressed:

 Employer and employee objectives need to be reconciled.
 What benefits should be provided?
 Who should be covered by the benefit plans?
 Should employees have multiple benefit options?
 How should the benefit plans be funded between employer and employee contributions?
 How should the benefit plans be communicated?
 How much benefit plan administration should be handled internally and how much should be outsourced?

Most employee benefit packages consist of one or more of the following plan types:

 Medical, Dental and Vision Coverage
 Life/Accidental Death & Dismemberment Coverage
 Short Term and Long Term Disability Plans
 Medical and Dependent Care Reimbursement Accounts
 Travel Accident Insurance
 Employee Assistance Programs
 Benefit Administration Services
 Voluntary Programs (i.e., Life, AD&D, Cancer Benefits, Long Term Care)
 Retirement

In the Greater Washington, D.C. area we typically find the following benefits offered by employers:

Medical Insurance

Many employers may offer employees a choice between two plans, such as an HMO plan and a PPO plan, which allows for greater flexibility. Payroll contributions are geared to encourage enrollment in the lower cost HMO plan. Just as common are employers who offer only one plan, which is typically a PPO/POS. The average monthly cost of health insurance in 2007 ranges from $200 - $350 for individual coverage and $700 - $1,200 for family coverage. The cost of insurance is determined by the average age of the group, the industry of the employer, the richness of the benefit provisions (deductibles, copays and coinsurance) and the claims experience of the group.

Employers usually pay around 80% of the total cost of insurance and employees pay the remaining 20% through pre-tax payroll contributions.

Dental Insurance

Dental plans are a very common benefit offered by employers today. Most employers offer a dental plan which includes a PPO option whereby employees benefit from the negotiated discounts arranged between the insurance carrier and network providers. A common schedule of benefits may include:

• A calendar year deducible of $50 per person, with a family maximum of $150 (waived for preventive care)
• A calendar year maximum benefit of $1,500 per person
• 100% coverage for preventive services such as cleanings
• 80% coverage for basic services including fillings, inlays, onlays and oral surgery
• 50% coverage for major services including crowns, bridges, endodontics and periodontics
• 50% coverage for child orthodontia services with a $1,500 lifetime maximum

The monthly average cost for single dental coverage is around $25 and the family cost is around $80.

Vision Insurance

An eyecare benefit promotes good vision and enhances employees' productivity and performance for a very low cost. Plans usually cover a comprehensive eye exam as well as frames and lenses (or contacts). The monthly average cost for single coverage is about $10 and the monthly cost for family coverage is around $20.

Life Insurance and Accidental Death & Dismemberment

Typically employers provide employees with a flat base benefit amount (e.g., $20,000) or a benefit which is a function of their salary (e.g., one times salary up to a maximum of $50,000). The average cost for Life/AD&D benefits is $0.28 per $1,000 of insured volume.

An employer may choose to set up a voluntary insurance program whereby employees may apply for additional amounts of life insurance payable through payroll deductions.

Short Term Disability and Long Term Disability Insurance

Short Term and Long Term Disability Insurance provides employees with protection against the inability to work due to an accident or illness. The short term disability plan may have a 14 day waiting period before benefits are payable and typically the benefit is 60% of weekly compensation up to a maximum dollar amount (e.g., $1,000). Benefits continue to be paid as long as the employee is disabled and unable to work; the usual duration is 26 weeks. If a disability continues longer than 26 weeks typically the long term disability plan will also pay a benefit of 60% of monthly earnings with a maximum dollar amount (e.g., $5,000). The long term disability benefits may continue to normal retirement age.

Retirement Plan

Select retirement plan providers offer recordkeeping, administration, investment options and technology resources typically found in the large group marketplace to small companies. The average cost for plan administration is typically $2,000-$4,000 per year and the only other cost is if a matching contribution (401(k)) or a profit sharing contribution is made.

Voluntary Benefits

Voluntary benefits are a great way to round out an employee benefit package without adding to the cost of the benefits budget. Employees elect to participate in plans which they feel are appropriate for their life situations. The most common plans are accident, cancer and hospital indemnity plans.