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What you need to know about voluntary benefits at work

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5 mins

Most employers offer voluntary benefits at work, also known as worksite benefits.

According the Bureau of Labor Statistics, about 90 percent of large and mid-size employers offer medical benefits. The same percentage of employers offer 401(k) retirement plans. And the Society of Human Resource Management says about 78 percent of companies offer short-term disability insurance to their workers.

Whether you’re entering the professional workforce or looking to change jobs, here is what you should know about voluntary benefits at work.

Why should I accept voluntary benefits at work?

Though worksite benefits are voluntary, it may be in your best interest to consider accepting some of these perks. If you don’t, it’s like turning down money.

Most voluntary benefits are subsidized by employers. They pay a portion of the premiums owed to the insurance companies that provides health, disability, and life insurance coverage. Those premiums are a significant part of your compensation package. It makes getting these benefits cheaper.

And some companies offer lifestyle benefits at no cost to their employees as a way to recruit and retain top talent.

What types of voluntary benefits do employers offer?

Most employers offer group insurance coverage, including:

Employer-sponsored insurance plans are group plans. This means any covered employee can receive coverage without underwriting. Group insurance is also typically cheaper than buying an individual policy, though the coverage may not be as comprehensive as an individual policy.

Group Insurance premiums are typically subsidized by the employer, meaning the employer pays some, most or even all of the premiums charged by the insurance company that issues the group policy.

Other common voluntary benefits at work include:

  • 401(k) retirement plan. You can contribute a percentage of your pay to your retirement plan, up to the IRS annual maximum. Many employers also contribute money above your normal compensation into your plan.
  • Tuition reimbursement. A 2017 World at Work survey found that 92 percent of U.S. companies offer some form of tuition-assistance program. Companies offer this benefit to encourage employees to continue their education, earn a graduate degree or obtain an undergraduate degree.
  • Health care spending accounts. This enables you to allocate money on a pre-tax basis to a special account that you can use to pay out-of-pocket health care expenses.
  • Dependent care spending accounts. Similar to health care spending accounts, this allows you to allocate part of your paycheck to paying for child care or other dependent expenses.
  • Employee assistance programs. This is typically offered for free to employees who may need counseling to deal with grief, stress, financial issues or other circumstances that affect one’s mental health.

Many companies have also added lifestyle benefits to boost their compensation packages:

  • Student loan repayment assistance
  • Fitness club membership subsidy
  • Pet insurance
  • Identity theft protection
  • Public transportation assistance

How much should voluntary benefits factor into job decisions?

It’s important to consider more than just your base salary when deciding on job prospects. While one job may offer better base pay, another company can provide a superior benefit package that nets you higher overall compensation.

Voluntary benefits at work can account for as much as 30 percent of your overall compensation package. Therefore, it’s important to review what you’re offered and ensure that the benefits offered meet the needs of you and your family.

How much do voluntary benefits cost?

The cost of worksite benefits will vary greatly depending on the employer. One thing to keep in mind is that you will likely pay less for benefits offered through an employer than if you purchased them individually.

You may hardly miss the money spent on voluntary benefits. That’s because your cost is typically paid through payroll deduction. The money comes out before you receive your paycheck.

Are there tax implications of voluntary benefits?

A few of your voluntary benefits at work offer immediate tax advantages.

The premiums you pay for your health-related benefits are deducted from your paycheck before taxes. The same is true for your contributions to your 401(k) or other retirement plan.

This means that, for IRS tax purposes, you actually earn less money than if you didn’t elect health insurance or contribute to a 401(k).

For example, say your pre-tax income for a pay period is $2,500. If your health insurance cost $200 and you contribute $100 to your 401(k), your taxable income will be $2,200 for the pay period. You will only be taxed on the lower amount. This includes both state and federal income taxes.

Your voluntary benefits at work can help you protect your health, your income and your family. Some company benefits enable you to continue your education so that you can advance in your career. Other benefits help you save for retirement for when your career winds down. And more and more firms are offering benefits to support their workers’ physical and mental well-being.

Whatever your employer offers, it’s a good idea to take advantage of these benefits.

Joel Palmer is a freelance writer and personal finance expert who focuses on the mortgage, insurance, financial services, and technology industries. He spent the first 10 years of his career as a business and financial reporter.

The information and content provided herein is for educational purposes only, and should not be considered legal, tax, investment, or financial advice, recommendation, or endorsement. Breeze does not guarantee the accuracy, completeness, reliability or usefulness of any testimonials, opinions, advice, product or service offers, or other information provided here by third parties. Individuals are encouraged to seek advice from their own tax or legal counsel.

— Published December 20, 2019
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