Voluntary Benefits 101: How they can benefit employers and employees

Today’s multi-generational workforce has unique needs and goals, and employers are recognizing the power of voluntary benefits to help them personalize benefit packages for a diverse employee population.¹ For example:

• Generation Z is in search of benefits that address mental health concerns and help them manage work-related stress¹
• Millennials are looking for assistance with student loan debt to help enhance their overall financial wellness¹
• Generation X requires flexible benefits to help them juggle family responsibilities, including child and elder care¹
• Baby Boomers are interested in advice and guidance to help them optimize their financial stability to and through retirement¹

With three in four employers reporting increased benefit costs in 2023,² more organizations are harnessing traditional supplement health benefits to help control these costs and enhance their overall benefits.³ For example, between 2022 to 2023, employer interest in accident insurance rose 41%.³

The rise in interest is understandable. Voluntary benefits can help employers provide their workforce with additional benefit options. In turn, these benefits can then help employees minimize the financial impact of specifically covered events such as an illness or hospitalization. But even as the trend toward voluntary benefits grows, employers and employees alike still question what these benefits are and how they work. Let’s dive into the world of voluntary benefits and explore how this growing suite of products can help companies and employees alike.

What are voluntary benefits?

Employers use voluntary benefits to supplement their employee benefits package. As their name suggests, they are not part of the standard benefits provided but instead optional for employees. Voluntary benefits encompass a wide range of areas, from financial to mental health to personal benefits to identity security. Besides critical illness,* hospital indemnity, disability income and accident insurances, other voluntary benefits include student loan repayment assistance, employee assistance programs (EAPs), and even pet insurance.

Unlike health insurance or retirement plans, voluntary benefits allow employers to increase their benefit offerings without a lot of extra costs to them. Both employers and employees may even share the cost of voluntary benefits. Employees can elect the benefits that serve them and based on what the employer offers, may pay part, or all, of the premium.

For employers, the expenses can vary based on what they offer and how they offer it. For some voluntary benefits, they may pay administrative fees and incur minor ancillary costs, such as time spent by HR staff to communicate and educate employees about the offering. The bottom line is voluntary benefits enable employees to customize their benefits package and supplement a company’s standard offering with specific additions they feel they want and need.

Voluntary Benefits: By the numbers

According to a 2023 voluntary benefit survey of employers conducted by the International Foundation of Employee Benefits Plans (IFEBP):

• 74% offer life insurance⁵
• 54% offer accident insurance⁵
• 52% offer critical illness insurance⁵
• 33% offer short-term (29%) disability coverage⁵
• 29% offer hospital indemnity insurance⁵

A holistic benefits approach

Employers are leveraging voluntary benefits to build out more holistic and competitive packages. As of 2022, about 9 in 10 (90%) responding organizations offered at least one voluntary benefit, a slight increase from the 2020 iteration of the study (87%).⁵ In addition, larger employers (those with 500 or more workers) are more likely to offer at least one voluntary benefit (97%) compared with smaller organizations (82%).⁵

The added options enable employees to make optimal choices for their families and finances. For instance, an employee may opt for a less expensive health insurance plan with a higher deductible and then also enroll in hospital indemnity insurance, which pays a daily benefit for a covered hospital stay. Likewise, employees with a family history of specific health conditions — such as cancer, stroke or heart attack — may enroll in critical illness insurance to help fund out-of-pocket costs.⁶

It’s important to note that coverages such as hospital indemnity, critical illness and accident insurance are limited benefit policies. They are not health insurance and do not satisfy the requirement of minimum essential coverage under the Affordable Care Act. These benefits can offer employees more coverage options. But the reasons for providing these benefits go far beyond providing options for customization of a benefits package.

Benefits that yield returns

If employers utilize voluntary benefits for all the above reasons, then the next logical question is: Do they work? The answer is yes. There are several studies that show voluntary benefits have a positive impact on employees — and provide returns for employers as well.

Within a competitive job market, benefit options that offer increased protection can help improve employee satisfaction. Employers report that they rely on voluntary benefits to help attract and retain employees. In fact, 31% of employers report using voluntary benefits as a way to support employee recruitment and retention.³

Voya research reveals that 56% of employed Americans are more likely to stay with their current employer if offered access to voluntary benefit offerings like critical illness, hospital indemnity, disability income, accident insurance, etc. (significantly higher in 2023 vs. 49% in October 2022).⁷ LIMRA also reports that more than 6 in 10 employees say their benefits packages make them more inclined to stay with their current employers — with older workers in particularly likely to cite benefits as a reason for staying.⁸ In addition, employees say benefits are the No. 2 reason for switching jobs after better pay.⁹

Employees turning to their employers for more help

While voluntary benefits may seem like nice-to-haves, they are rapidly becoming must-haves. The COVID-19 crisis revealed how benefits help (or hinder) employees during challenging times. And in the wake of the pandemic, more employees are demanding and expecting their employers to offer more assistance across a range of issues.

Since voluntary benefits are administered by employers, their employees can benefit from group rates or discounted services — providing another layer of protection that can cost less, compared to similar coverage purchased individually.⁵ In addition, voluntary benefits like accident, hospital indemnity and critical illness insurance can help offset medical costs not covered by regular health insurance. Roughly 20 million people — nearly one in 12 adults — owe medical debt totaling around $220 billion.¹⁰

Hospital indemnity insurance provides a benefit that can help with those out-of-pocket costs when an employee has a covered stay in the hospital. When an insured is diagnosed with a covered illness or condition, a critical illness insurance benefit can also be used for out-of-pocket medical costs, as well as household expenses like rent, utilities or a mortgage.

With U.S. student loan debt topping $1.7 trillion in 2023 — and an average student loan balance of $37,853 — younger employees may value student loan assistance programs.¹¹ To help address this concern, employers can set up a Student Loan Repayment Program (SLRP). One SLRP option enables companies to make direct after-tax contributions to the servicers of their employees’ student loan debt.

The employer is — in effect — making loan payments on behalf of the employee, but since the money is considered income for the employee, both the employer and employee must pay taxes. This solution helps employees pay down their debt more quickly and, in turn, direct more of their income toward other saving and spending needs.

We offer a range of voluntary benefit options

Our suite of voluntary benefits can help employers enhance their existing plans and reduce the expense of out-of-pocket expenses for their employees when they experience a covered event:

• Health account solutions: These include health savings accounts, flexible spending accounts and commuter benefits accounts. These accounts help eligible employees save easily and efficiently for qualified health care, commuting, and even childcare expenses.
• Emergency savings solution: This is a benefit that can help employees build up their emergency savings so that their finances don’t get derailed by an unexpected medical or other expense.
• Student loan debt benefit support: These include a range of resources for employees navigating student loan debt, including access to repayment options, financial counseling and guidance, and employer assistance for paying down loans.
• Supplemental health insurance benefits: From critical illness and accident to hospital indemnity, these voluntary benefits can help employees lessen the financial impact of a covered event such as an illness, accident or hospitalization.
• Disability income insurance: Short term disability and long term disability products enable employees to replace a portion of their income during periods when they’re unable to work due to an illness or injury.
• Life insurance: Access to life insurance products, such as group term and whole life, provide employees with coverage that will pay a benefit to their beneficiary, often a spouse or other family member, in the event they pass away.

Conclusion

Employers can support their employees by connecting them to meaningful voluntary benefits. These benefits can also support the whole employee, helping them to achieve a healthy balance of living for today, preparing for tomorrow, and feeling confident about the future. In the wake of COVID-19, offering voluntary benefits is increasingly important as more employees turn to their employer for support. Offering these types of benefits are not only good for employees, but they’re also good for business.

Want to learn more about our voluntary benefits suite? Contact your Voya representative today.

Neither Voya® nor its affiliated companies or representatives provide tax or legal advice. Please consult a tax adviser or attorney before making a tax-related investment/insurance decision.