As the name implies, portable benefits are benefits that can be tied to the person, not the job, and thus can be carried into a new job. The benefit itself is ported either into the new employer’s plan or to the individual on his or her own. This is possible and common with many types of defined contribution plans. In fact, it’s probably something your organization participates in even if you don’t call it such—most 401(k) plans are portable, meaning they can be rolled over into another organization’s 401(k) when an individual changes jobs.
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Historically, portable benefits have been used less frequently with other types of benefits beyond 401(k) and related plans. It is relevant today for other benefits, as well, mainly with health care, but the benefit itself is not portable. A healthcare plan typically does not transfer to another employer, but some aspects of the healthcare coverage, like coverage for preexisting conditions, have been guaranteed by the Affordable Care Act (ACA). As such, even though the health insurance itself isn’t ported to a new employer, these aspects of it will remain consistent.
Going forward, a portable benefit may look different from the structure we see today. One trend we’re seeing is for legislation to require employers to make contributions to defined benefit plans based on how much someone works for them—regardless of whether that person is an employee or a contractor—such that the benefits get paid for regardless of which company the individual is working for from week to week. This type of setup could be used for things like workers’ compensation, health care, paid time off (PTO), and more— benefits that not all workers currently qualify for and few freelancers typically have access to.
Why Would Employers Want to Provide Portable Benefits?
There are actually several reasons employers may want to consider creating portable benefit options. For example:
- Having this type of benefit could help people who would otherwise lack benefits when in between jobs or when switching jobs. This could help in recruiting.
- It could allow people to make better career decisions if benefits are not tied to a single employer. This could help in recruiting and retention.
- From an individual perspective, it can be helpful to have the security of knowing that benefits will be there during times of transition.
- Portable benefits could make it more seamless to integrate freelance or contract workers. This would enable employers to continue to use more on-demand labor through these types of workers.
You’ll likely hear more about portable benefits in the coming months and years. As more individuals shift to working at least part of the time in a gig-based role, the portability of benefits will become more important. Some states are seeing this now and introducing legislation to outline how portable benefits could work and whether companies will be required to participate.