When it comes to employee benefits in recent years, the main focus for employers has been on major medical health plans. This focus is, of course, due to the Affordable Care Act (ACA) and the near-constant state of change and uncertainty around major medical health benefits.
But many employers offer other health and welfare benefits in addition to their major medical health plans. Employers often refer to these other benefits as ancillary or voluntary benefits.
We are finding that employers are renewing their attention to ancillary benefits, particularly as major medical health plans becomes less comprehensive, yet more expensive.
There are many types of ancillary benefits. Here are some examples (but not an exhaustive list) of health and welfare ancillary benefits:
Critical illness insurance. Usually, a critical illness plan pays the insured a lump sum payment if the insured is diagnosed with certain covered illnesses, such as cancer, heart attack, kidney failure or stroke.
Hospital indemnity insurance. A hospital indemnity plan pays a fixed amount of money for a hospital stay on a per-day, per-week, per-month, or per-visit basis.
Life insurance. A common benefit, life insurance pays a fixed amount of money upon the insured’s death. Many life insurance policies also offer accidental death and dismemberment benefits, which pay fixed amounts in situations where the insured person dies or is dismembered due to an accident.
Disability income insurance. Disability income insurance is a wage replacement benefit that replaces the insured person’s wages if they are unable to work due to a disability.
Long-term care insurance. Long term care coverage provides the insured person with a fixed daily amount for services associated with a lengthy illness or disability, such as nursing homes, assisted living centers, hospice, and home healthcare.
Dental/vision insurance. Dental and vision plans are limited benefit plans that provide benefits solely for specified dental and vision expenses.
In addition to the benefits listed above, employers offer many types of benefits outside of the major medical plan. For example, employers may offer military duty pay, standalone wellness plans, adoption assistance, education assistance, paid maternity/paternity leave, and many other types of benefits.
Employers offer ancillary benefits to increase the options available to their employees, but they may do so without being fully aware of the unique compliance considerations raised by ancillary benefits.
A benefit may be labeled as “ancillary” or “voluntary,” but it may be subject to regulation under a number of employee benefits and tax laws. It is not uncommon for an unwary employer to adopt an ancillary benefit, only to learn later that the employer has failed to comply with the employee benefits laws that apply to that benefit.
In our experience, the laws employers should be most concerned about with respect to their ancillary and voluntary benefits are the Employee Retirement Income Security Act (ERISA), the tax laws, and the Affordable Care Act.
The failure to understand how these laws can apply to ancillary or voluntary benefits can lead to unpleasant surprises. As just one example, employers aren’t always aware that employees who pay for disability income insurance on a pre-tax basis will be taxed on any disability income benefits they actually receive, whereas employees who pay the entire cost of their insurance on an after-tax basis will not be taxed on those benefits.
Whether or not an ancillary or voluntary benefit is subject to regulation, not to mention which regulations it is subject to, depends in large part upon how the benefit is structured and how it is funded. Fortunately, employers who are aware of the issues can design their ancillary benefits to minimize compliance obligations while continuing to offer valuable benefits to employees.
Register for our upcoming webinar “Beyond the group health plan: Ancillary and voluntary benefits” to learn more about these benefits and strategies employers can use to navigate their unique compliance considerations. For more information about voluntary benefits or other employment benefit issues, please contact us.
Sarah provides employer-focused guidance on human resource matters. With an emphasis on employee benefits and the Affordable Care Act, she distils the complexity of employment laws into understandable action items that meet a client’s business goals.
Sarah provides employer-focused guidance on human resource matters. With an emphasis on employee benefits and the Affordable Care Act, she distils the complexity of employment laws into understandable action items that meet a client’s business goals. During previous private practice experience, Sarah handled numerous complex benefit matters, including the transition of benefit plans in large corporate acquisitions, de-risking solutions in pension plans, contested health plan claims, DOL and IRS audits and the implementation of ACA-compliant health plan solutions. Sarah graduated from University of Wisconsin Law School, with a Bachelor of Arts degree from Grinnell College.
Like Wrightstown Community School District Superintendent Carla Buboltz, many civic leaders — as well as business owners and executives — are seeing their job descriptions evolve. Healthcare reform, along with escalating health insurance costs, are demanding more of their attention than ever before. A survey by the U.S. Chamber of Commerce says the effects of the Affordable Care Act (ACA) are now the top concern for organizations, edging out general uncertainty about the U.S. economy.
It is commonly known that employees who feel their healthcare and financial security issues are being addressed by their employers’ benefit offerings are more engaged, productive, loyal and in the best position to help grow your business.
Recent studies show employee concerns over financial security is impacting company performance more than ever.
Send a Message
Find a Location