The 3 R’s

Recruiting, retaining, and rewarding

n working with numerous businesses, I hear a common theme from business owners: it is increasingly difficult in the current marketplace to not only find quality employees but retain them and reward them, as well.

This conundrum has forced employers to be more creative in separating themselves from competitors to gain an advantage in the workplace. The objective of this article is to share strategies which will help businesses recruit, retain, and reward employees, managers, key employees, and owners and partners, including information on both non-discriminatory (available to all employees) options as well as discriminatory (available to only select individuals) options.

Most employers are familiar with traditional benefit plans: health insurance, short term and long- term disability, 401(k)s or retirement plans, cancer and accident policies, term life insurance, and more. There are two additional options that you may not be aware of.

The first of these is a dental plan developed by the American Dental Association, or ADA, called Direct Reimbursement Dental, and for employers who have twenty-five or more employees, this is a good option for providing dental coverage in the marketplace today.

Direct reimbursement is not dental insurance but a self-funded reimbursement plan, so there are no pre-existing condition restrictions, waiting periods, benefits schedules, or insurance company restrictions to the patient or dentist.

The costs are less than traditional dental plans and the benefits are richer. Because there are no catastrophic claims in dental, there is an annual maximum per employee and there is low utilization, making this a cost-effective way to provide a valuable benefit at a reasonable cost.

The second option is a Health Savings Account, or HSA. With health insurance premiums continually on the rise, it has become increasingly hard for employers to provide quality healthcare insurance. To address this issue, many employers have turned to HSAs. In an HSA, the employer purchases a high deductible health insurance plan. For the employer, this reduces the cost of the health insurance premiums and makes the plan more affordable. The second component of the plan is an employer-funded HSA to address the employee’s out-of-pocket expenses.

The government sets annual contribution limits for an individual and family each year for the plan, which will pay for traditional out-of-pocket expenses such as deductibles and co-pays and for non-traditional items, such as dental, orthodontics, laser eye surgery, vision, sterilization, orthopedic shoes, and more. The plan allows the employer to save money and control rate increases, and the employee can have enhanced coverage.

In the workforce, certain people are instrumental to the success of the business. This could be an employee, manager, department head, partner, or owner. In the past, owners may have felt that they did not have an option to be “discriminatory” in their benefit offerings, as they had to be offered to everyone. This is not the case, and you as an employer can decide who is eligible for the benefits and what that benefit is. Not only can you decide who is eligible for the benefit, you can customize the benefits by job title, position, length of service, productivity, profitability, and more. In addition, you can set a vesting schedule where the benefit is not payable until the person performs a certain length of service so that you create “golden handcuffs” mandating a certain employment period. You can also set the criteria so the benefit is only payable in certain situations, i.e. length of service, profitability, productivity, or other goals you determine and set up contractually with the key employee, manager, partner, or owner. These plans are called Executive Bonus plans and are used to recruit, reward, and retain key individuals within the business. In these plans the employer pays the person receiving the benefit a bonus, which in turn is used to purchase either a life insurance contract or an annuity, depending on the needs and insurability of the person receiving the benefit. If there is a vesting schedule, then the employer is named as the beneficiary until the vesting period is satisfied. If there is no vesting schedule, then the person receiving the benefit names their own beneficiary.

The advantage of these plans is the business is able to recruit, retain, or reward key employees, managers, partners, or owners and receive a tax deduction for the bonuses they provide. The person receiving the benefit gets a benefit that is unique to them that can provide additional protection—life insurance protection that is portable, a guaranteed income stream for life, a tax-free income benefit, and long- term care benefits as well. I have businesses that use these strategies for high-income earners as a tax planning tool, as the individual receiving the benefit earns too much income to qualify for a Roth IRA. There are no contribution limits, so these can be ideal solutions for many situations.

As an employer, it is so important to realize that one size does not fit all, and in this marketplace it is important to think “outside the box” when considering benefits.