Young woman with laptop at a table smiling.

Tips on Transitioning From Fixed to Custom Benefit Plans

The overall trend in the last several years for employee benefits is to move away from traditional or fixed benefits to more tailored, custom benefit plans.

One example is Health Spending Accounts that allow employees to choose the benefits they want. And, since employers only have to pay for the benefits that have been used, employers can save.

There are several reasons why Canadian companies are moving to custom benefit plans instead of traditional plans:

  • Cost Savings – Employers are able to control costs by setting benefit limits each year.
  • More Desirable – Employees are empowered to choose how to spend their employee benefits allowance, which helps them feel like they are getting better coverage.
  • Flexibility – Custom benefit plans are suitable for diverse workforces as employees can choose which benefits they actually need and want.

In this article, our Edmonton employee benefits brokers will offer four important employee benefits tips to consider if you are thinking of switching from a traditional benefits plan to more tailored, custom benefit plans.

1. Consider a Health Spending Account

Health spending accounts are great for employers because they can set the health spending amount. Employees in turn are able to choose where to spend their money. Be sure to read our article What Can a Flexible Benefits Plan Offer Your Employees?

Many companies transitioning between traditional and custom benefit plans ask this question, “What happens in the case of serious, costly medical issues or emergencies?”

Employees can often anticipate their needs for eyeglasses or prescription medications for the year, but what happens if there is an unexpected medical expense that exceeds their health spending account?

One solution is to keep a basic traditional plan and have a health spending account as an “add-on” for employees. Many employers are choosing to pair the custom benefit plans with a catastrophic covered or pooled plan. This ensures that employees are covered for more eventualities.

2. Check Out Administrative-Services Only (ASO) Plans

If your main reason for switching to custom benefit plans is cost savings, you may want to consider an ASO Plan.

ASO Plans are funded by the employer and administered by a third party. The employer only pays for what is used because the plan costs are based on actual (not anticipated) claims. If fewer claims are made than anticipated, the employer gets to keep the surplus.

The only downside to this option is that the employer will be left owing if there are any claims above the premiums paid for the year. Basically, the insurance company will predict anticipated claims for your workplace and if you exceed that amount you will be responsible to pay the deficit.

If you plan to offer employee benefit plans year over year, this option often ends up being slightly more cost effective.

3. Clearly Communicate the Potential Changes with Employees

Change in the workplace is often met with resistance regardless of how big or small the change is.

Be sure to work with your insurance broker to put your benefit plans into action to help make the transition very smooth. Employees may be worried the new custom benefit plans do not offer the same coverage or value. Be sure to outline the advantages of the change and confirm that each employee understands what they are getting under the new plans.

4. Find a Balance Between Employee Satisfaction and Bottom Line

There is always a fine balance of cost savings for the employer while still offering sufficient benefits plans to make sure your employees are well taken care. You should also consider making your traditional benefits plan or your tailored benefits plan a part of a competitive compensation package.

Can you attract and retain a qualified workforce with your current benefits plan?

About Benefit Strategies

For over four decades Benefit Strategies Inc. has been working with corporations and business owners throughout Alberta and Canada’s Western provinces to create cost effective employee benefits plans that reflect current market conditions.

Want to learn more about the differences between traditional and tailored health spending accounts? If you wish to discuss how to transition over to custom benefit plans, please call our office in Edmonton, Alberta at 1-780-437-5070 or send us an email.