Editor’s note: HR & Benefits News is a new monthly column by Chris Cooley, co-founder of MyHRConcierge and SMB Benefits Advisors.
Benefits costs are the second-highest expense behind labor costs. This puts benefits costs ahead of other expenses including rent, utilities and advertising, according to the 2017 Independent Grocers Financial Survey. But many grocers overlook the significant impact benefits can have on their labor costs and overall cost structure.
The domino effect of benefits review
Reviewing your group benefits plan annually helps ensure you are providing the best benefits possible—based on your budget—to recruit and retain valuable workers. It has a domino effect of reducing labor costs and overall expenses with two essential steps:
- Ensure you are offering competitive benefits your workers want. This enables you to recruit and keep the best workers (See FMS’s Lower Worker Turnover for Less webinar for more information.)
- Identify opportunities to lower direct benefits costs.
Opportunities to lower direct benefits costs
Many grocers overlook this opportunity, thinking they can’t significantly impact their cost structure by assessing benefits costs (2.43 percent of revenues on average). This couldn’t be further from the truth.
Here are some examples of key areas that may present opportunities to reduce benefits costs.
Affordable Care Act—“pay or play”
Special Note: While the President recently signed an executive order to weaken the Affordable Care Act (ACA), it does not eliminate the Employer Mandate or the requirement to file 1094/1095 forms.
As you review your group benefits plan, it is important to evaluate your status as it relates to the ACA. Has the number of your FTE (full-time equivalent) employees been close to 50, the threshold that requires compliance with ACA? It is important that you perform an Applicable Large Employer calculation to determine if your business is required to comply in 2018.
Many business owners mistakenly think they don’t have to comply with ACA, and the calculation can be confusing. If you meet the requirements to comply, you can choose to “pay or play”—meaning decide to comply with the ACA or pay the penalty. It can be more economical for companies to pay the penalty versus meet the ACA requirements to offer insurance. Speak with an ACA expert help you determine whether it makes sense to pay the penalty or comply with ACA.
Fully insured vs. self-insured
Whether to use a fully insured health plan or go self-insured is another important point to consider during an annual review of your group benefits. Increasing premiums on fully funded plans have many companies moving to self-insured plans. According to the Employee Benefit Research Institute, the number of companies offering health plans with at least one self-insured plan increased from 25.3 percent to 30.1 percent between 2013 and 2015.
Level-funded plans, a variation of self-insured plans, are often ideal for healthy groups and can provide significant savings. Groups as small as 10 employees are offering level-funded plans to decrease their costs and decrease the risk often associated with self-insured plans.
Not having a fixed monthly premium (except for level-funded plans) is one disadvantage of self-funded plans. Other disadvantages of self-funded plans include more in-depth ACA reporting requirements and having to comply with Section 105(h) nondiscrimination rules.
It is important that companies discuss with their brokers the pros and cons of moving from a fully insured plan to a self-insured plan to determine if it is the best option for them.
Grocers impacted by the recent hurricanes may qualify for a tax credit of 40 percent—up to $6,000—in wages paid to each eligible employee.
Learn more ways to decrease labor costs
While employee benefits costs continue to rise, there are ways companies can save money by reviewing their group health plans. It is important that you talk with your broker to learn more about ways to decrease your benefits and overall labor costs.
Cooley provides HR compliance and administration, workforce management and benefits advisory solutions; his companies specialize in helping small to medium businesses throughout the U.S. He can be reached at 855-538-6947, ext. 108, or at [email protected]
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