Today, your current and prospective employees have more options for where they work and how they spend their time than ever before. When they are considering their next career move, among their choices could include working for a competitor, changing fields or industries, going back to school, starting their own company, or working freelance. In a tight labor market, if you have high-value and high potential employees, you want to keep them and you want to attract the right talent for you. Offering a comprehensive benefits package that supports your teams’ real, everyday needs can do a lot to support your recruiting and retention goals.
But it’s not just your recruitment and retention efforts that will receive a boost from a revamped compensation package. By using benefits like Health Reimbursem*nt Accounts (HRAs), retirement benefits, Health Savings Accounts (HSAs), Lifestyle Spending Accounts (LSAs), and more, you can increase the overall value of your compensation package without increasing salaries. You encourage increased employee engagement and you can enjoy an overall healthier, more diverse and more productive workforce.
Here are the six best benefits you can offer to improve your company operations.
1. Health Reimbursem*nt Accounts (HRAs)
There are several types of HRAs, all of which are 100% employer-funded. They each have slightly different characteristics and can fill different roles in your compensation package.
Standard or Integrated HRAs. These accounts are a way for employers to help employees pay for out-of-pocket medical expenses that aren’t covered by their health insurance plans. They are 100% employer-funded and employers can choose how much they’ll contribute, the types of expenses they’ll cover and what happens to any unused money at the end of the plan year. These types of accounts can be paired with any kind of group health insurance plan (but employees must be enrolled in a group health plan to participate). These HRAs have no annual contribution limits.
ICHRAs and QSEHRAs. These accounts are offered by employers as a way to help employees purchase health insurance plans in the private market. Employers typically offer these types of HRAs when they don’t offer a group health insurance plan to employees. If an employer is required to offer health insurance to its employees by law, they will need to make sure their ICHRA or QSEHRA includes enough money to meet the affordability requirement as outlined in the Affordable Care Act (ACA). ICHRAs have no set annual reimbursem*nt limit but the IRS sets limits on how much employers can reimburse through QSEHRAs.
Excepted Benefit HRAs. These types of HRAs are offered to help employees pay for out-of-pocket expenses related to dental and vision expenses. Employees can also use money in these accounts to pay for COBRA coverage and short-term medical plans. The IRS sets the annual contribution limit for these types of HRAs ($2,100 for 2024).
Retiree Only HRAs. These accounts are offered by employers that want to help employees who retire from their company with the cost of healthcare. These HRAs can be used to pay for Medicare premiums and other out-of-pocket medical expenses. There are no annual limits on this type of HRA.
2. Health Savings Accounts
HSAs are a popular benefit among employees and can help alleviate the financial stress that comes with paying for medical costs that are continuously on the rise (as well as help employers contain their benefits budget). Since HSAs must be paired with a High Deductible Health Plan (HDHP), and since these health insurance plans typically have the lowest annual premiums, offering an HSA can help incentivize employees to choose the more cost effective health insurance. Which can help employers keep their costs down.
HSAs also have these benefits that employees enjoy:
Contributions are tax-free in the year they’re made, they grow tax-free and distributions for qualified medical expenses are tax-free as well.
Contributions can be invested in the market to grow faster.
Employees’ accounts can receive contributions from the employee, their employer, and anyone else who wishes to contribute.
Once the account holder turns 65, the account functions as a traditional retirement account with the exception that distributions for qualified medical expenses remain tax-free.
HSAs have these benefits for employers:
Lower employers’ FICA responsibility. Since employees’ contributions are made pre tax, they lower employees’ taxable income, which lowers the FICA tax their employers must pay.
Help contain health insurance budgets since HDHPs typically have the lowest annual premiums of the health insurance plans.
Help to keep the workforce physically healthy since they provide a way for employees to pay for the medical care they need.
Help to support a productive workforce because the better employees’ physical health, the more productive they are likely to be.
3. Retirement benefits
In America, there’s currently a gap of between $6 trillion and $14 trillion between what working aged Americans have saved for retirement and what experts have projected they’ll need. Partially as a result of this, 40% of employees are planning to delay retirement and report an increase in the financial stress they feel. Employers can help alleviate this financial stress by offering a retirement savings plan like a 401k or IRA-based plan like Icon Savings Plan.
In addition to these traditional retirement benefits, HSAs can be used to save for retirement as well. Their balances roll over from year-to-year, can be invested in a wide range of investments (as long as the HSA administrator supports this), and once the account holder turns 65, the HSA functions as a traditional retirement account with one exception: distributions for qualified medical expenses are tax-free.
Both employers and employees can contribute to 401ks and HSAs, which makes them a popular and impactful benefit companies can offer.
4. Flexible benefits
Flexible benefits can be a powerful way to offer employees perks that support them in their everyday lives. These are benefits that are optional for employees to participate in and typically have a wide range in plan design, depending on the need(s) the employer is trying to meet and the employer’s budget.
Examples of flexible benefits are stipends provided through Lifestyle Spending Accounts for technology, wellness, home office expenses, pet care, accounts that cover gaps in health insurance coverage for certain needs, transportation benefits like commuter benefits and medical travel accounts, and more.
The goal of flexible benefits is to support real needs that individual employees have, and to give employees enough choice and autonomy in how they use their allowance to meet that need. This helps employees feel supported and empowered to make the best choices for themselves.
5. Lifestyle Spending Account
LSAs are among the most flexible of the flexible benefits and can be tailored to meet just about any need. This is a reimbursem*nt account that is 100% employer-funded and taxable to employees. But reimbursed amounts can be written off as a business expense by the employer.
LSAs are becoming increasingly more popular with employers and employees because of their customizable structure and the fact that they are expressly intended to help employees pay for everyday expenses that would normally come out of their pocket.
The employer can choose the following characteristics of their LSA:
The expenses the LSA(s) will cover. The only stipulation is that the LSA can’t reimburse for expenses covered by medical insurance. But it can be used to fill gaps in medical insurance like reimbursing for costs associated with gender affirmation treatment.
How much they’ll contribute to their LSA(s).
How many LSAs they want to offer. They can offer a general LSA that covers a wide range of expenses, a focused LSA that is meant to help with a very specific life event like family expansion, or multiple.
How often the account resets. Employers can offer an LSA that resets monthly, quarterly or yearly.
What happens to any unused allowance once it’s time for the account to reset.
6. Commuter benefits
Whether you are back in the office full time or your company is on a hybrid schedule, commuter benefits can help ease employees financial stress and make coming to the office more attractive. They are also required in some cities, states, and municipalities. Commuter benefits can be set up pre-tax for specific public transit and parking expenses, or post-tax as a Lifestyle Spending Account for a wide range of commuting-related expenses, such as bike and ride shares and gas.
Generally, employees will sign up for the plan during open enrollment. If the plan includes an account into which employees can save money for their commuting expenses, they will choose how much they want to contribute for the month and are able to change their election on a monthly basis based on their commuting needs. Employers will then take the appropriate amount from their paycheck. Funds roll over from month to month and year to year until an employee leaves their employer, retires, or becomes otherwise ineligible for their plan. Learn more about how to offer commuter benefits in our comprehensive guide.
7. Medical Travel Account
Medical travel accounts (MTAs) are reimbursem*nt accounts that are 100% employer-funded and taxable to the employee. They are meant to reimburse for any travel necessary for employees to seek medical treatment. That means taxis, mileage in their personal car, bus fare, airplane tickets, hotel stays necessary to receive medical care– any expense that they would incur as a result of needing to travel to receive medical care could be reimbursed through this account.
Like with LSAs, employers have a lot of flexibility in how they structure their MTA. They can choose:
How much they’ll contribute to the account.
The cadence at which the account resets.
What happens to the unused allowance when the account resets.
The types of medical travel expenses they’ll reimburse for.
The minimum travel radius from the employee’s house that’s considered reimbursable medical travel. For example, an employer could require the employee travel at least 50 miles to receive medical treatment before they can reimburse for any of the related travel expenses.
Whether or not the account reimburses for the travel expenses of necessary companions.
Get started with Lively
Lively offers a suite of benefits that can be bundled in various ways to help you craft the most impactful compensation package for your workers. We offer expressly designed dashboards and benefit management that integrate smoothly with your current systems. We take care of employee onboarding and communication and have a best-in-class customer service team dedicated to the success of both employees and employers.
If you’re ready to level-up your benefits package, reach out to Lively today.
