The Issue
As one of our long-time group insurance customers grew over the years, their workforce became more diverse and the management team found it difficult to accommodate each employee’s unique insurance needs. As much as the team wanted to provide the necessary coverage for the employees, they also required some control over the employee benefits budget. They came to us for advice.
The Solution
We proposed that this employer consider a defined contribution strategy. Defined contribution plans build benefit portfolios around a specific dollar amount, rather than around a specific plan or plans. In this way, the management team could select an amount that the company would contribute toward the cost of each employee’s benefit package, allowing them to pinpoint a fixed employer benefit cost. Each employee would then have the ability to select the programs that are best suited for their own family’s needs from a menu of available options. We set up three medical plans and a wide array of voluntary benefit plans for them to choose from.
The Result
The employees loved being able to choose their own plans and seeing the cost of each benefit was enlightening. By selecting the defined contribution strategy, the employer was able to set the benefits budget for the year ahead of time and ended up saving $28,000 the first year.