Do You Have to Provide Insurance for Your Employees? Some Expert Advice!

As an employer, you will want to have a team of great employees, and one way to ensure that you get that is to offer a strong employee benefits package. Exactly what benefits you offer will depend on the type of company you run and the employees you have, as well as the state that you are in. Some employees will expect a retirement plan, holidays, a company car, etc. Insurance, in various forms, tops the list, however.

What is Required?

The corporate insurance policy that you are required to have for your employees will depend on your industry. Certain kinds of liability insurance may be a legal requirement to operate your type of business in your state. Other forms of insurance, such as medical insurance and disability insurance, are not necessarily required, but they are strongly advisable if you want to remain an appealing employer to your team.

The Law and Employee Benefits

The law requires that employers offer at least the following:

– Time off to go on jury duty, perform military service, and vote.

– Workers’ compensation that is in accordance with state or federal requirements.

– That employers withhold FICA taxes from their employee’s paychecks, and that they pay their own portion of those taxes, so employees pay in towards retirement and disability benefits.

– Payment of state and federal unemployment taxes, to provide benefits for unemployed workers.

– If the state has short-term disability programs, then employers should be contributing to those.

– Operate time off policies that comply with federal family and medical leave.

Employers in most states are not legally required to offer:

– Dedicated health plans

– Life insurance

– Dental plans

– Eye care plans

– Retirement plans

– Paid sick leave

– Paid holidays

There are some exceptions to this – for example, Hawaiian employers are required to offer health plans.

Good employers offer more than the law requires to their employees. Indeed, in skilled work positions employers often provide benefits that go above and beyond what is required – sometimes covering everything on the list, in order to retain their best workers.

The Complications With Benefits

As soon as you start offering benefits, you put yourself in a position where you may face more government scrutiny, and some employers are wary of this because they fear that they could end up running afoul of the law. It is easy to make mistakes when you start setting up health insurance and other benefits, and any mistakes could quickly be discovered if the IRS opts to audit you. The U.S. Department of Labor has been increasing its audit activity in recent years as well, and if you are found to have made a mistake which generated tax benefits in your favor, then you could lose those benefits, and have penalties imposed. Intimidatingly, any penalties may be applied retroactively.

One common mistake that employers make is that when they start offering benefits such as health insurance, they leave out custodial staff and clerical workers. This is not permitted. If you are offering one employee a ‘tax advantaged benefit’, then you should be offering the same benefit to all employees. There are a few loopholes that do make it possible for certain workers to be excluded from such offers, but the law is complex, and it is best not to try to navigate this issue by yourself. Seek expert advice if you are considering opening a benefit scheme to a limited number of workers.

You can do the preliminary research on your own then take your plans to a consultant or a lawyer, but that final step of getting advice from a lawyer is vital and could save you thousands upon thousands of dollars.

Health Insurance for Your Employees

Health insurance is perhaps the most desirable of all of the optional benefits, and it is one that many employees seek out when they are looking for a new job. There are a few different options when it comes to creating a health insurance plan for your employees – they include:

– Traditional plans: With a traditional indemnity plan, the employee can choose which medical care provider to work with, and the insurance company will pay the provider directly, or will reimburse the employee for the amount that was covered.

– Managed care: There are two particular forms of managed care that are seen a lot: The Health Maintenance Organization, or HMO, and the Preferred Provider Organization, or PPO.  The HMO is a prepaid health-care arrangement, and under such a plan the employee must use a doctor that is employed by the HMO and go to hospitals that feature on an approved provider list.  With a PPO, the insurance company will negotiate discounts with specific hospitals and physicians. The employees choose doctors from a list of approved providers, and then will pay a set fee per visit, with the insurance provider then paying the difference.

– Archer Medical Savings Account:  This is a popular option with small employers, and with self-employed people. It allows the employee to set up a medical savings account that will help to pay health-care expenses. The accounts are held with a U.S financial institution and allow people to save up a large amount of money to cover medical expenses. When this is used in conjunction with a health insurance policy that has a high deductible, the accounts can be funded with an employee’s pre-tax dollars. Disbursements from the Archer MSA program are tax-free when they are used for an approved medical expense, and the un-used funds in the account will earn tax-free interests. There is a similar scheme, called Health Savings Accounts, that is open to all, not just small employers.

As an employer, you are not obliged to offer a large list of insurance packages and other benefits to your employees, but you will find that it is much easier to attract employees, and to retain them long term, if you do show that you care about their long-term health and their future.  Employees will be more motivated to invest in you if you invest in them.