Employee Benefit Plans

Audrey M. Jones
Benefit Plan

For many employees, offered benefits can make or break their interest in or dedication to a job. Therefore, compiling an inclusive benefits plan might make your job positions more attractive to potential employees or turn current employees into long-term ones.

Federal Legal Requirements

The federal government requires employers to offer certain benefits to employees. Some of these benefits may only be required to be offered by employers of a certain number of full-time employees. Required benefits include:

  • Social Security and Medicare tax withholding: Employers are required to withhold Social Security and Medicare taxes from employee paychecks according to employee instructions. These taxes are automatically deposited with the Social Security Administration on the employee's behalf.
  • Leave under the Family Medical Leave Act (FMLA): The FMLA applies to employers of 50 or more employees. This Act entitles employees who meet requirements to take up to 12 weeks of unpaid leave with health benefits during a qualified life event and to be able to return to their jobs at the end of that period. Qualified life events include the birth or adoption of a child or experiencing a serious medical illness.
  • Health insurance: Under the Patient Protection and Affordable Care Act employers of 50 or more employees must offer health insurance to employees. This act also provides incentives to employers of less than 50 employees to induce offering health insurance.
  • COBRA: Individuals who lose health insurance coverage due to job loss, transition between jobs, or another reason, are entitled under the Consolidated Omnibus Budget Reconciliation Act (COBRA). Coverage only lasts for a specific period of time and may require that the individual pay up to 102% of the premium amount.
  • Worker's Compensation: State law governs which employers must pay worker's compensation insurance to assist workers who are injured on the job, usually by determining how much the employer pays employees. The federal government sets the rules for state worker's compensation practices and operates its own insurance plan for federal employees.

State Legal Requirements

Some states also require that employers of a certain number of employees, or any employees at all, offer specific benefits. Depending on the state in which the business operates, these benefits may include unemployment insurance, which protects employees who lose their jobs through no fault of their own.

Laws about which employers must participate are established by individual states.

Voluntarily Offered Benefits

Some benefits are not legally required to be offered, but employers do so on a regular basis. The type and amount of these benefits can be determined by the employer.

  • Leave: There are many different types of leave, including personal leave, holiday leave, sick leave, and funeral leave. Employers can voluntarily offer this leave to employees.
  • Insurance: Life insurance and long-term care insurance are options that an employer can voluntarily offer to employees.
  • Employment Retirement Income Security Act (ERISA): Overseen by the Employee Benefits Security Administration, this Act helps employees establish retirement plans for employees.

Some companies offer additional benefits such as tuition assistance or reimbursement, gym memberships, company cars, or other benefits that help sweeten the deal for employees.

Creating a Benefit Plan

When creating an employee benefit plan, the first place to start is with federal requirements. Check with the Department of Labor to see what benefits you are legally required to offer. To avoid penalties, any benefits package you subsequently create must include these benefits.

There are also private companies that assist small businesses with establishing and managing employee benefit plans:

  • AmCheck: This company provides benefits administration services and can also help businesses scale their benefit plans to fit its needs. AmCheck's services include finding the best health insurance and retirement plans for a business' situation, ensuring that a business complies with recent changes to health care laws, and managing worker's compensation plans and claims.
  • MJ Insurance: This company helps businesses find appropriate benefit plans to offer, set up employee benefit plans, and assist with enrollment services. It also helps businesses review enrollment to ensure that current plans are meeting the business' and employee's needs.
  • Northwestern Mutual: This company's Strategic Employee Benefit Services helps businesses' design benefit plans to offer employees. Its services include health, COBRA, dental, disability, and life insurance plans.

Next, check with your state's department of labor and small business association to determine which state laws apply to your business. Your benefits package must also include these benefits.

Enhancing the Work Environment

Determine which voluntary benefits you would like -and can afford- to offer your employees. Employees always appreciate benefits, but you must ensure that you feel comfortable offering a benefit and that you feel the benefit will enhance your work environment.

When structuring your benefit plan, you might consider placing benefits required by state and federal law at the top of any pile. Ensuring that employees see and complete this paperwork first makes it more likely that you will fulfill your legal obligations.

Where to Turn for Help

If you're unsure how to select, create, and structure a benefits plan, review what the U.S. Small Business Administration has to say about benefits packages. The SBA, along with the U.S. Department of Labor, can outline the benefits you must (or can) provide and give specifics about what these benefits should include.

Employee Benefit Plans