Benefits and Compensation

What Is a Voluntary Benefit Plan?

A voluntary benefit plan is a suite of benefits offered by an employer that is voluntary for employees to use and is typically paid for by the employee via payroll deductions. These types of benefits are usually offered in addition to the core benefit program provided by the employer. They represent extra benefits that the employee can opt to use at his or her own cost.

One of the most common options in a voluntary benefit plan is insurance. This could include nearly any type of insurance that is not already offered by the employer. Offering insurance at the group level typically means lower premium costs per individual. As such, the employees who opt to sign up for these insurance plans will frequently save money compared to buying the same insurance individually.

There are many different types of insurance that may be suitable for a voluntary benefit plan. Examples include disability insurance, pet insurance, life insurance, vision insurance, dental insurance, accident insurance, critical illness insurance, umbrella insurance, etc.

Note: Under the Affordable Care Act, most health insurance coverage would no longer be eligible to be offered as a voluntary plan, paid for exclusively by employees. But, as you see from the examples above, supplemental plans are a good fit, and they may serve to bridge the gaps in traditional healthcare coverage.

Besides insurance options, here are a few more examples of what could be included in a voluntary benefit plan:

  • Identity theft protection
  • Legal counseling for employee family matters
  • Financial counseling
  • Discounted gym membership

Why Offer a Voluntary Benefit Plan?

Given that employees typically pay for the cost of these benefits, you may be wondering why this is a good idea. Here are a few reasons why both employees and employers might enjoy such plans:

  • Voluntary benefits may allow the employer to offer a much wider range of benefit choices, which can help to attract new employees and retain current ones.
  • Employees may have a greater level of satisfaction with the pay and benefit package on offer.
  • Adding benefits improves the benefit package without significantly increasing costs to the employer. (The main costs are setup and administration.)
  • The employees get convenience and (possibly) better prices for items they may have wanted to purchase anyway. They do not need to search—the tough part is already done.
  • It allows employees to pick and choose which benefits they value the most and take advantage of them. It’s customizable to employee needs.
  • Payment via payroll deductions is convenient for employees, which is a bonus of such a plan.
  • Even small businesses can benefit; often it does not take too many employees to get a group discount.
  • When employees have peace of mind, they’re more likely to be more satisfied and engaged on the job. (Peace of mind can be the net result of some of these types of benefits, such as life or disability insurance.)
  • Adding benefits like these can offset other negative changes, such as increases in health insurance premiums.
  • These types of benefits are easy to offer to both full-time and part-time employees because they cost little for the employer.
  • These benefits can be offered as enhancements to existing (paid) benefits. For example, if the employer offers life insurance, there could be a voluntary benefit allowing the employee to pay for upgraded coverage.

If you’re considering offering more voluntary benefit options, it may be a good idea to take a survey of employee needs. That will help to determine which types of benefits would be most valuable to your employees, so you can focus on assessing (and possibly adding) those options first. If offering supplemental medical coverages, be sure to be clear in your communications that these options are not a substitute for (and do not constitute) health insurance.