VOLUNTARY BENEFITS: WHO PAYS AND WHAT YOU REMIT.
Each plan pays cash to the employee, not to the doctor or the hospital. Accident plans pay a set amount for a listed injury or service. Hospital indemnity plans pay for a hospital stay, often per stay or per day. Critical illness plans pay a lump sum after a diagnosis of a listed condition. Employees usually pay the premium through payroll deduction, so the employer's direct premium cost can be close to zero. What the employer does pay is payroll administration, enrollment time and the monthly job of matching what was withheld to what the carrier bills. The money withheld is a liability until it is sent to the carrier, and it does not belong in labor burden.
These plans are cheap for the employer on the premium line and easy to book wrong on the balance sheet. This page explains what each plan pays, who pays for it, how it differs from workers comp and health insurance, and how the deductions and the carrier payments are recorded.
WHAT IT MEANS.
Voluntary accident, critical illness and hospital indemnity plans are supplemental policies that pay an employee a fixed cash amount after a covered event, in addition to any health insurance, and the premium is usually paid by the employee through payroll deduction.
Plan terms, benefit amounts, waiting periods and exclusions differ by carrier and by plan, and the plan documents control. A licensed broker or benefits advisor places the coverage, and this page does not say which plan to buy. State wage laws, plan rules and tax rules differ, so check the deduction rules with the plan advisor and the tax treatment with a tax professional.
WHAT EACH PLAN PAYS.
Accident plans: a set amount for a listed injury
An accident plan pays a flat amount tied to an event on the plan's schedule, such as an emergency room visit, a broken bone or an ambulance ride. The amount depends on the event and not on the bill. Plans cap how often a benefit can be paid in a year, and the schedule in the plan documents lists the events and the amounts.
Hospital indemnity: a payment for time in the hospital
A hospital indemnity plan pays a fixed amount for a hospital admission or for each day of a stay, depending on the plan. Carriers set limits on how many days or how many times a year the benefit is paid. It pays the same amount whether the hospital bill is small or large.
Critical illness: a lump sum after a diagnosis
A critical illness plan usually pays one lump sum when a covered condition is diagnosed, such as cancer, a heart attack or a stroke. The list of covered conditions differs by carrier, some plans pay less for an early stage of a condition, and carriers can set waiting periods or lifetime limits. The definitions in the plan documents decide whether a diagnosis is paid.
Paid to the employee, in addition to health insurance
These plans pay the employee, not a provider, once the claim is approved. The employee can use the cash for a deductible, a copay, rent or groceries, and carrier materials describe payment regardless of other coverage. They do not replace health insurance. Health insurance pays the medical bills under its own rules, and these plans add a fixed amount to the employee's pocket.
Not workers comp
Workers comp is set by state law and the employer pays for it, and it covers injuries from the job. Voluntary accident plans are separate policies and they do not make the employer's workers comp go away. Some accident plans pay for injuries on or off the job, and some exclude work injuries, so the plan documents say which. Voluntary plans are best described to employees as extra cash, never as a substitute for workers comp or health coverage.
Who pays the premium
In most voluntary plans the employee pays the premium through payroll deduction, and only the employees who enroll have a deduction. Some employers choose to pay part or all of the premium, and that share is the employer's cost. How the premium is paid can change how the benefit is taxed, so the owner checks the setup with the plan advisor and a tax professional.
What the employer does pay
Even when the employee pays the premium, the employer pays in time. Someone enrolls the employee, sets up the deduction, stops it when coverage ends, and pays the carrier. Many states and carriers expect written authorization for the deduction, and state law differs. Benefits advisers also report that mismatched deductions and carrier bills are a common source of trouble with voluntary plans, because enrollment changes that reach payroll late leave premiums owed but not deducted, or deducted after coverage ended.
WHAT IT LOOKS LIKE IN DOLLARS.
Take 8 employees who each choose an accident plan at $9 per biweekly paycheck. That is $72 withheld on each payroll and $1,872 over 26 payrolls. Each payroll, the books record $72 as a credit to an employee voluntary benefits payable account. The $72 is not an expense and it is not labor cost, because it came out of the employees' pay.
If the carrier bills $156 a month, which is $1,872 divided by 12, the employer pays $156 in cash and records a debit to the payable account and a credit to cash. In a month with two payrolls the account collects $144 and in a month with three payrolls it collects $216, so the balance moves up and down and comes back to zero when the year is done. One employee who leaves after the first payroll and is still deducted creates a $9 difference between the payable account and the carrier bill, and that $9 is either refunded to the employee or explained.
If the employer pays half of the same $9, the employer's share is $4.50 per employee per payroll. For 8 employees that is $36 a payroll and $936 a year, and it is an expense that belongs in the labor burden. On $5M of revenue, $936 is about 0.02 percent of revenue. The deduction side stays a liability and the employer share becomes cost.
WHAT WE CHANGE.
SPM sets up one payable account for employee voluntary benefits, and one line for each carrier when there is more than one. Withholdings go in as a credit when payroll posts, and the carrier payment clears it. Deductions never go in labor cost or in the labor burden rate.
SPM compares the carrier's monthly bill to the deductions withheld, by employee. A difference means a deduction that did not start, a deduction that did not stop, or a bill for someone who left. Each one is corrected while the amount is still small.
SPM asks for the signed deduction authorization and the enrollment list from the carrier, and keeps them with the payroll records. When an employee is hired, changes coverage or leaves, the change goes to payroll and to the carrier the same pay period.
When the employer pays part of a premium, SPM puts that share into the burden on each hour of labor, with the other costs of an employee. The true cost of an employee and the labor burden pages show how those costs are added up for estimates.
FLAT MONTHLY FEE. NO SURPRISES.
Three tiers, priced by your trailing twelve month revenue. Which one you're in depends on how much of the work you want off your desk. No hourly billing. No payroll. The one-time onboarding fee is right here in the table.
| Last 12 months revenue | Monthly fee | One-time onboarding |
|---|---|---|
| Up to $1M | $1,900 to $2,900 | $1,000 |
| $1M to $3.5M | $2,600 to $3,900 | $1,500 |
| $3.5M to $6.5M | $3,800 to $5,700 | $3,000 |
| $6.5M to $9.5M | $5,100 to $7,100 | $4,500 |
| $9.5M to $12.5M | $6,100 to $8,500 | $6,000 |
| $12.5M to $15.5M | $7,400 to $11,000 | $7,500 |
| $15.5M to $18.5M | $9,400 to $13,500 | $9,000 |
| $18.5M+ | Quoted individually | Quoted individually |
The onboarding fee covers migrating your books back to the start of your last taxable year and getting you fully operational in 60 days. It's billed once, with your first invoice. It's the same for all three tiers. Your first month is prorated, and your monthly engagement starts on the first of the first full month.
Range reflects the three tiers below. Which one you're in depends on how much of the work you want off your desk. No payroll. No hidden line items. The onboarding fee is right here in the table.
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