How to avoid unintended consequences of unique benefits
When it comes to recruiting and retaining top-notch employees, theres plenty of plush perks employers offer: an aromatherapy relaxation room, laundry service, even paying for egg freezing. The latter sparked plenty of discussion when Apple announced in October it will join Facebook in offering such services in 2015. Supporters say its a nice perk, while opponents see it as a blunt message from the tech giants that women should put career ahead of family.
From a legal perspective, advisers arent so much responsible for the message surrounding a benefit as the underwriter, says Susan Combs, president of full-service firm Combs & Company. They have compliance-approved information typically to be shared, she says.
For something like egg freezing, which Combs says is a company policy and not really an insurance plan, she suggests consulting with an employment attorney more than anyone else to make sure everything is above board.
If there is backlash regarding a unique benefit, an adviser isnt liable, per se. But, their reputation is on the line any time they make a recommendation to a client, says employment attorney Keith McMurdy. Before suggesting something like egg freezing, McMurdy says advisers need to understand the tax implications and whether or not its tax deductible. Qualified tax deductions outlined in the Tax Code include the diagnosis, cure, mitigation, treatment, or prevention of disease, or for the purpose of affecting any structure or function of the body. According to tax attorney Kelly Phillips Erb, elective egg freezing in the absence of a specific infertility diagnosis would not qualify as a deductible medical expense for this purpose, she says in an Oct. 17 article on forbes.com.
Added benefits, increased cost
Unless youre a huge employer, quirky benefits are typically self-insured, Combs says. Adding even a small benefit increases medical costs by about 4%, says Leslie Pearce, executive vice president of employee benefit sales at Bolton & Company. Most employers, with rising health care costs and [Affordable Care Act] fees, are not finding budgets to increase their overall costs for a small group of their employees, Pearce says. On a self-funded basis, adding a benefit like this would dramatically increase stop loss and aggregate insurance costs.
McMurdy is concerned that employers could regret adding a unique benefit. People are constructively thinking up ways of solving whatever you perceive as being the problem, he says. The issue becomes one of not can you do it, but should you do it. If you decide you should, go back and look at can again.
Employers are constantly being challenged to offer more creative benefits and match their competitors, McMurdy says, which could lead to potential problems. Thats where advisers need to step in, he says. Make sure your clients understand that theres more to it than, Im going to do this thing just because the guy across the street did this thing.
An advisers job is to provide solutions to problems, not create them, McMurdy says, and those solutions need to be vetted. Im reluctant to ever be the guinea pig, he says.
Todays regulatory environment can be tricky, says David Underhill, Cignas vice president of voluntary products. Not everything is 100% defined, he says. Creating new products is easy, Underhill says, its navigating newer ACA rules that can be difficult, so he recommends consulting a lawyer. However, Underhill says, an attorneys interpretation could be different from the governments.
Implementing a new benefit doesnt take long for rich companies like Apple and Facebook, author and health care expert Craig Lack says, but Silicon Valleys market is unlike any other. They have to recruit high-powered women, he says. Theyre having an arms race for recruitment and retention.
For the more average employer, patience is needed when implementing something like egg freezing, Pearce says. Adding a benefit like this quickly would not be advised, she says. A client would want to understand potential exposure and give the carriers time to adjust pricing.