The current hot trend in the benefits space is offering employees fully customizable plans. Benefits brokers and carriers alike are building flexibility into their plans in order to maximize market share. But just how flexible and customizable should workplace benefits be? Is there a point at which it can get to be too much?
BenefitMall is a brokerage general agency representing more than 100 carriers to thousands of brokers around the country. They ran a post in early 2022 discussing four expectations of the modern workforce. Third on their list was the customized benefits package. BenefitMall cited a 2017 study suggesting that more than 70% of employees want the ability to customize their benefits.
A certain amount of customization seems reasonable. But adding flexibility and customization to a benefits package is a lot like diversifying one’s business activities. An employer can go too far, to the extent of offering a lot of sub-par voluntary benefits rather than a smaller selection of higher quality.
Customization and the DEI Concept
It is clear that America’s employees want more flexibility in their benefits package is. It’s all so clear that they want voluntary benefits. But from the employer’s perspective, there is something else in play: the diversity, equity, and inclusion (DEI) concept. According to EBN’s Rob Whalen, benefit flexibility and customization are essential to implementing a successful DEI policy in the workplace.
Whalen uses the example of paid time off (PTO). He suggests that certain types of employees, would prefer to maximize PTO to make it easier to meet certain family or medical obligations. Others would rather convert PTO into cash they can contribute to a health savings account or retirement plan.
Allowing employees to either use their PTO as designed or convert it into some other type of benefit seems easy enough to implement. But do not assume that all such customizations are so easy. Also don’t assume that it’s easy to make everyone happy.
Offering More Targeted Benefits
Customized benefit plans are often presented as a way to offer more targeted benefits to select groups of employees. Student loan debt reduction benefits are a good example. A company choosing to offer such benefits would have to face the fact that some of their employees don’t have any student loans to pay off. Not providing them with an equal benefit could result in plenty of workplace discontent.
The seemingly obvious solution is to allow employees without outstanding student loans to take the equivalent benefit in cash, or have it put toward one of the other voluntary benefits they do utilize. But think about it. Trying to set up something like this could become a quagmire in short order. Let’s just create a fictional scenario to demonstrate the point.
Let’s say 25% of a company’s employees are eligible for a student loan reduction benefit. They all take advantage of it. The remaining 75% are given the opportunity to convert the employer’s matching contribution into some other benefit:
- 25% choose a direct cash payment
- 15% want a cash contribution to their health savings accounts
- 10% want the contribution to go into their retirement plans
- 10% want to use the money to buy pet insurance
- 8% want their employer to make a charitable contribution
- 7% want their contribution to go to a dental plan.
This is an extreme example, for sure. Yet it still illustrates just how complicated things can get when employers offer too much customization. No doubt that flexibility and customization make for better benefits plans. But employers need to draw the line somewhere. There need to be limits.