Since voluntary benefits work well, they are likely to remain an important part of employee benefits packages. Health care reforms and regulatory changes have created many challenges, but voluntary benefits remain popular because they are affordable and flexible.
Employers and HR teams can review additional background in The Importance of Voluntary Benefits in Employee Packages.
Advantages of offering voluntary benefits
- Desired Benefits. Employees commonly ask prospective employers about disability, life, health and dental benefits, so offering these options helps attract quality candidates.
- No Employer Expenses. Offering desired benefits with little or no employer contribution is possible; payroll tax savings from Section 125 often offset administrative costs associated with voluntary plans.
- Group Rates. Group pricing typically lowers individual employee costs, making the same benefits more affordable than individual purchase.
- Lower Employee Turnover Rates. Employers with stronger benefit choices tend to experience lower turnover and have an easier time recruiting when the job market is competitive.
- No Secondary Market. Some plans and pricing are only available through employer sponsorship, which can make employer-offered options more valuable to employees.
- Fosters Goodwill. Providing meaningful benefit choices signals that the employer cares about employees and their families.
- Good Underwriting. Many employer-sponsored voluntary plans offer simplified underwriting or guaranteed coverage without health questions, helping employees with adverse medical histories obtain protection.
Historically, employers used voluntary benefits to retain staff, attract candidates, and boost morale. Economic pressures and the appeal of low employer cost have increased the popularity of these plans, and many employees can afford coverage through payroll deductions who could not buy similar plans on their own.
Business owners use voluntary benefits to manage healthcare expenses and add flexible choices. In addition to reducing employer costs, some voluntary plans can lower payroll taxes. Employees may receive cash benefits or cost sharing that can be used for groceries, travel, living expenses, or other costs related to illness or injury. For more on supplemental options, see Understanding Supplemental Health Insurance.
Whether an employer offers indemnity, discount, or insurance-based voluntary plans, these options support employee relations, retention, and company savings. If you want to evaluate options for your workforce, talk to an agent.
Frequently Asked Questions
What are voluntary benefits?
Voluntary benefits are employer-offered plans paid mostly or entirely by employees through payroll deductions, such as supplemental health, disability, and life insurance.
Who typically pays for voluntary benefits?
Most voluntary benefits are employee-paid, though employers may choose to contribute to certain plans or offer enrollment assistance.
Can I keep voluntary coverage if I leave my job?
Portability varies by plan and insurer; some coverages are portable while others terminate at separation, so check the policy terms before relying on continued coverage.
Are voluntary benefits tax-advantaged?
Some voluntary benefits purchased through a pre-tax payroll arrangement may reduce taxable income and payroll taxes, but tax treatment depends on the plan and applicable rules.