Do your employees understand what’s included in the employee benefits package that your company offers? Employee benefits is an important component of employees’ overall compensation, and it’s a significant investment on the part of the employer. 86% of plan members in Canada stay with their employer because of the benefits. Yet, 80% of benefit plan participants do not open/read their benefits materials. These facts highlight the importance of taking the time to educate your employees about their benefits. Here are some of the topics that are often poorly understood:
Coordination of benefits
It is not uncommon for an employee to have coverage under their spouse’s benefits in addition to their own employer’s plan. This would be for Health and Dental benefits only. Coordination of benefits refers to the process of using a combination of your own and your spouse’s benefits plans. It’s important to have clarity on which plan pays first and how to go about submitting these types of claims.
In most situations, an employee’s own plan is the first payor. This means that you have to submit your claims through your own plan first. Then, the portion that is unpaid by your plan can be submitted to your spouse’s insurer.
Not all benefit plans are the same
Some employees don’t take the time to look through the details of their benefits coverage as they simply think that all benefits plans are the same or similar. This is a common misconception and it can’t be further from the truth. Benefit plans are different between employers, between insurers, and the same insurer will have different plan options available. Differences can range anywhere from the amount of life and disability insurance, to the specifics of the paramedical practitioner maximums and ‘reasonable and customary’ amounts.
Moreover, the claim submission process can also vary depending on your carrier and your employer. It’s important to take the time to review the details of your benefits plan – the best practice is to do this continuously and on a regular basis, and not just at the beginning of your employment.
Educate your employees why they pay a portion of the premium
Most businesses in Canada expect their employees to pay for a portion of their benefits premiums. The employee portion is deducted from each of their paycheques, so it’s important to understand which premiums you are responsible for and why.
A common example is a situation where an employee is responsible for paying their Long-Term Disability (LTD) benefit premiums. This is actually a tax advantage for the plan member. When a person pays 100% of their LTD premium, the insurance payout becomes non-taxable in the hands of the employee. In other words, should a plan member become disabled, the amount they would receive from the insurer is tax-free.
On the other hand, if the employer pays all or any portion of the LTD premium, the disability benefit payout becomes taxable in the hands of the employee. To illustrate further with another example, it makes sense to pay a tax on a $100/month premium, rather than having to pay tax on $2000/month benefit. Having to pay tax on your disability benefits is especially daunting when you are unable to work and earn income. However, if the employer wants to pay LTD premiums on behalf of plan members, they can avoid having a taxable LTD benefit in the hands of the employee by charging plan members the tax on their LTD premiums.
Why employee education is important
We wrote an earlier blog where you can find additional tips for educating your employees on benefits. It’s important to take the time to explain the details of your company’s benefits plan your teams. Doing so will increase employee appreciation and understanding of their overall compensation package. Your business will benefit from increased retention, better morale and lower recruiting costs. Educating your employees on benefits is an important part of maintaining a wellness culture too.
At Benavise Solutions, we specialize exclusively in employee benefits. We conduct employee education sessions (in person or virtually) for our clients at no extra cost. Get in touch with us to learn more.