At one time, employers referred to an employee’s fringe benefits as their ‘ hidden paycheck.’ This meant that up to 32% of an employee’s compensation is paid out in the form of benefits. Healthcare coverage, retirement matching funds, as well as life and disability insurance are critical components of an employee’s financial security. Good employee benefit plans have three pillars of financial security: immediate, short-term, and long-term. These pillars all play a role in an employee’s present and future financial wellbeing.
Your Immediate Financial Security
The most important aspect of an employee’s immediate financial security is having a good healthcare plan. Since the passing of the Affordable Care Act, there are now “essential health benefits” that protect an employee and their dependents from any surprise charges. Under this act, health plans provide pre-existing condition coverage. Without proper healthcare coverage, expensive medical treatments can cause real financial harm, sometimes even bankruptcy. Having the right health plan is crucial for a family’s quality of life.
Your Short-Term Financial Security
A good employee benefits plan should have a disability and life insurance plan with reputable insurance companies. The financial protection of your income and assets is critically important especially if you have dependents. If something unexpected happens, the ability to earn an income could be lost, and there should be a disability contract to help replace that income. If there is an untimely death, then an employee’s family should be protected by having adequate levels of life insurance coverage. Having a good disability and life insurance can help when the unexpected occurs.
Your Long-Term Financial Security
This is the third pillar of a benefit plan that should help you plan for the future when you no longer want to work (or not work full-time). A good benefit plan makes it easy for you to save for retirement through a 401(k) plan or other savings vehicle, by building up your net worth paycheck after paycheck. A good plan should have solid investment offerings, low fees, and be properly managed.
Because the cost of employee benefits does not typically show up in an employee’s W-2, it is easy to forget that they are a significant part of the overall compensation package. They should be taken seriously when an employee looks at his or her overall compensation.
Every good benefits plan should consist of these three pillars. These pillars should provide for immediate, short-term, and long-term financial security. If your benefit plan is not performing in one of these key aspects, there is likely a problem. If you have concerns or are denied benefits for which you are entitled, call us, we are here to help.