HIFS Group - Henrikson Financial Services Group

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News & Advice
For Employers

Not only do employee benefits play an important role in recruiting and retaining employees, but they also have a significant financial and administrative impact on a business. Most employees have come to expect a comprehensive benefits program. Indeed, the absence of a program or an inadequate program can seriously hinder a company's ability to attract and keep good personnel. Employers must be aware of what employees need and want, and be ready to make informed decisions when they select employee benefits.

Designing the right benefit plan for your employees is a complex task. There are many issues to consider, including tax and legal aspects, funding, and finding the right vendors or administrators.

A good employee benefit plan:

Protects employees and their families from economic hardship brought about by sickness, disability, death or unemployment.
Provides retirement income to employees and their families.
Provides a system of leave or time off from work.
A comprehensive benefit plan should include some or all of the following elements:

Health insurance
Disability insurance
Life insurance
Retirement plan
Dental Insurance

There are many questions Employers should consider asking:

How much are you willing to pay for this coverage?
What kinds of benefits interest your employees?
Do you want employee input?
What do you think a benefits plan should accomplish?
Do you think it is more important to protect your employees from economic hardship now or in the future?
Is a good medical plan more important than a retirement plan?
Do you want to administer the benefits plan, or do you want the administration done by an insurance carrier?
What is your employee group like today?
Can you project what your employee situation might look like in the future?
An adequate benefit program has become essential to today's successful business, large or small. With careful planning you and your employees can enjoy good health and retirement protection at a cost your business can afford.

For Employees

If you were offered a raise at work simply for being there and requiring no additional tasks, would you accept it? Of course you would. With no downside risk, most people would jump at the chance for additional compensation, but the reality is the raise was there all along. You just didn¡¯t realize it. Many people forfeit a generous raise by not fully taking advantage of the benefits packages provided by their employer. Many people even choose between prospective employers specifically for better benefits packages but after their new hire paperwork is filled out and the core benefits are chosen, maximizing that extra 30% in compensation falls by the wayside. Performing in the new job is top of mind.

Forfeiting additional compensation is one thing, but the consequences of doing so are high. Neglecting to fund a retirement plan could have catastrophic results in losses of hundreds of thousands of dollars and delaying retirement for many years. Not using a Health Savings Account or taking advantage of a company legal benefit could result in unnecessarily high out-of-pocket expenses for yourself and your family. There are also many free perks that could add value or enjoyment in life that are often simply overlooked.

There are reasons for this. HR Departments can¡¯t give personalized advice to employees on benefits, but they can provide education, communication, and tools for employees to use, but that is the extent of it. The financial planning field doesn¡¯t always incorporate employee benefits such as health insurance into financial plans, or does so at a minimal level. Their expertise lies in the insurance and retirement products they sell or provide to their clients, not in the ones provided in the workplace. Americans who work with financial planners that do not take a comprehensive look at their total financial life aren¡¯t truly getting the whole picture and a full value of working with an advisor. For better or worse, most Americans are in a situation where they have to rely on themselves when it comes to benefits decisions. This can be tough with our hectic lives, but the good news is that you know you have your own best interests at heart, which isn¡¯t always the case with outside financial experts who may care more about their own commission. Plus, getting more out of your benefits is probably easier than you think. We¡¯ve created a three-step process for employees to maximize their benefits and recapture some of the ¡°lost raise¡± they were missing. Below are the steps we share with the employees we counsel that you can use on your own with your spouse or loved ones:

Step 1: Maximize your core benefits¨C This is where you stand the most risk of leaving money on the table and, ultimately, jeopardizing your health or retirement in the process. Core benefits are a major drive to long-term financial success, and if mishandled, can lose virtually all their value.

The biggest mistakes we, as educators, see employees making are to miss out on the complete company matching contributions and to not withhold enough of their paycheck. In a company with 5,000 employees and an average salary of $50,000, the wealth generated just from employee matching contributions would be about $7.5 million dollars a year. Employees often stop there however and only save to the matching percentage. Maximize this benefit by taking full advantage of every dollar of matching contributions from your employer and increase your savings contribution percentage to the maximum allowable contribution over time.

Step 2: Take advantage of your free benefits¨C Here¡¯s where employees are overwhelmingly missing the boat and spending thousands, in some cases tens of thousands, of dollars a year out of their own pocket on services their companies will actually pay for. In our experience, the most expensive and common company-subsidized benefits that employees miss out on are legal and financial services, counselling, health care spending. To avoid this obtain a list of benefits from your HR department or review your benefits portal on your company intranet. Sit down with your spouse or significant other and review the benefits you have available. Many people don¡¯t even realize the benefits they have! Then earmark the most valuable benefits and put them to use.

Step 3: Determine which voluntary benefits are right for you¨C These are benefits that you have to pay for but might (and I stress the ¡°might¡±) get a discounted rate from your employer. Some may be very important to your overall financial plan and ultimate financial security. Others may, quite frankly, be a complete waste of money.

While health insurance is usually a given that there will be a cost savings, some other benefits such as life insurance or disability may be better purchased separately.

Consider the cost savings first, but also ask yourself these questions:

Is it portable? Do you own the policy or is it tied to the workplace? If the policy is tied to the workplace and you plan on leaving soon, it might be better to purchase coverage outside of work.

Is it accessible outside of work? In other words, can you obtain the benefit outside of the workplace? People with health problems may not be able to qualify for life insurance or disability in an individual plan, so getting the benefit through work may be the only answer.

Is it convenient or easy to use? Voluntary benefits through work are often more convenient than those purchased outside of work since they can often be paid for through payroll deduction¡ªso if convenience is important, this may make a work policy more attractive.

Lastly, is it a quality benefit? Quality sometimes matters much more than cost¡ªso it¡¯s critical to make sure the work benefit is the quality you need before purchasing the benefit through work. For example, discounted legal services provided through a work pre-paid legal plan may give basic estate planning documents, but if you need complex trusts drawn up, the benefit at work may not be of the quality needed to fill your need.

There are hundreds of ways your benefits can make you more money, help you grow your wealth, provide savings on services you use daily, and can ultimately be the difference in your family¡¯s financial security. Next time you look at your paycheck or log on to your company¡¯s benefits portal, try reading between the lines and take a deeper look at what benefits you¡¯re utilizing. There is most likely money hidden between them that you can find without having to hassle the boss for a raise.

 Nancy Anderson, Forbes
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