Considering Cost in Benefits

Oct 11 | 2017

Cost Predictability: No longer something to feel bad about

It’s never been more acceptable to hunt for bargains than it is today. People crow on social media about the deal they got on home renovations or post pictures of receipts showing discounts from professional couponing. One thing you’ll never see? An employer raving about what a bargain their employee benefits plan is – that’s because the very nature of benefits is to provide peace of mind for employees, and that’s not something an employer would want to nickel and dime.

That being said, it is okay for employers to consider cost when providing benefits – in fact, it’s the responsible thing to do! Working with an Advisor, employers can evaluate various plan designs and select one that gives them cost predictability while still providing comprehensive coverage. With the technology-supported solutions available today, it’s possible for employees to have coverage, sometimes choose their coverage, and employers to not break the bank providing it. How is this done? One way is blending a traditional benefits plan with a defined contribution “boost” or by choosing a plan that provides cost-controlled, flexible coverage. How much you choose to contribute to this area of the plan each year is entirely up to you.

Incorporating Cost Predictability

There are three advantages to incorporating cost predictability into the design of a benefits plan:

Stability

Price predictability in part of a benefits plan means employers can more easily ride out changes in the market and even economic hardship because parts of their benefits are budgeted for, saving surprise from climbing or unexpected expenses.

Scalability

It’s rare that a business stays the same in terms of staffing, year over year. Benefits plans need to grow as new employees are added, or provide choice for employees of different demographics joining the plan. Defined contribution benefits provide options for different people’s different needs, in a cost-controlled way.

Confidence

Benefits are about showing that you care as an employer and are about providing peace of mind coverage for employees. Plans that support employee health maintenance as well as help when illness or issues arise keep employees confident they will have what they need, when they need it.

For employers who realize they need to control costs but want to offer benefits, there are a number of options available.

Option A: Getting started with coverage

Never offered benefits before? Not sure where to begin? A Standalone® plan provides predictable annual expenses and flexibility for employees. Offering coverage for CRA-approved medical expenses via a Health Care Spending Account and an employer-defined Wellness Spending Account for things like gym memberships and fitness equipment is a great first step in offering benefits.

Option B: Enhancing existing coverage

Have an existing plan? Want to increase flexibility for employees and provide them with choice in terms of where benefit dollars are allocated? Consider a Defined Contribution “boost.” Like a bolt-on accessory for a traditional plan, employees can decide where employer-provided benefits dollars go – towards an HCSA, PSA, or even their retirement, if a group RRSP is in place.

Option C: A plan designed to offer optimal choice while being reasonable about costs

Imagine setting an account for each employee to use, that contains all of their benefit “dollars.” The amount is determined as a percentage of salary or a set annual amount. Then picture those employees using an easy online method of choosing their benefits, putting any remaining dollars towards health or personal spending accounts. Sound fantastic? It’s the new normal and it’s called Benaccount.

There are multiple plan design options available that can help you meet the ever-changing needs of your clients. More than ever, one size does not fit all when it comes to group benefits. In addition, for all three options, advisors can support employers’ desire for creativity and flexibility where appropriate. For example, employers can choose to increase funding levels based on years of service or class of employee.

Your Advisor Can Help

Start a conversation today about how these or other plan design options can help contain costs and increase flexibility in a benefits plan. Speak to your Advisor or reach out if you would like to be connected to an Advisor – BBD is here to help.

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