Pub. 17 2018-2019 Issue 4

N E W J E R S E Y C O A L I T I O N O F A U T O M O T I V E R E T A I L E R S 25 new jersey auto retailer W W W . N J C A R . O R G such, a broad portfolio of offerings is ideal to meet the needs of a diverse and evolving workforce. In addition to “what” to offer, “how to offer” the benefits is important. Administering many programs through different vendors can be a daunting task. Fortunately, there are numerous technology solutions available in the marketplace. These platforms are often available at no additional cost, when one agrees to offer certain benefits. Furthermore, many technology platforms can do a good job of aggregating various carriers under a single umbrella, and even transfer employee enrollment choices electronically to participating vendors and insurance companies. Traditionally, common ancillary benefits such as dental and vision coverage are offered through a premium sharing arrangement between employer and employee. Life insurance might be provided by an employer at a fixed benefit level such as a flat dollar amount or multiple of salary, with an option for employees to purchase additional coverage at the employee’s expense. On the other hand, benefits such as critical illness and accident coverage are often made available under a group policy, but with the employee taking on the full cost of elected coverages. Though the employer is not paying for coverage, they are affording employees the chance to purchase coverage at preferred group pricing. To complicate matters, who pays for coverage can have significant tax implications. In the example of long-term disability (LTD), if an employer pays the full cost of coverage, the benefit is generally taxable to the employee. Conversely, if the employee pays fully for LTD, with post tax dollars, the benefit is generally NOT taxable. Additionally, some benefits are eligible for pre-tax contributions, while others are not. Clearly, dealerships are seeing value in offering ancillary benefits. As seen in the recent NJ CAR Employee Benefits Survey, more than 50% of respondents indicated they offer Dental and/or Life Insurance. And those statistics have grown steadily since 2015. Furthermore, nearly 75% indicated they offer “work site” benefits through American Fidelity or Aflac. Perhaps the question to ask now is whether the dealership’s current ancillary benefits portfolio meets the needs of a changing workforce? Disability Insurance might be an example of a program that is under-utilized (or too limited) in the market. Two primary disability benefits exist – Short-Term Disability (up to 26 weeks) and Long-Term Disability (beyond 6 months). While work site vendors may offer disability coverage options, they are generally limited in terms of maximum benefit. This often leaves your higher paid key employees with less coverage than they would need. In this instance, an Executive Benefits disability strategy might be warranted. The newest trend in ancillary benefits are programs that address financial wellness. While a 401k program is a great tool to reward employees and help them plan for retirement, financial wellness goes beyond the traditional retirement plan. Comprehensive financial wellness could include financial planning, access to loan refinancing, and even employer-based programs to assist in paying down college debt. More than 40 million Americans have college debt, and those debt levels are even more significant among millennials. According to Ion Tuition, 80% of managers surveyed felt that the associated financial stress of college loans decreases employee productivity, and nearly 80% believed offering a student loan repayment program would prove valuable in the recruiting process. But what might such a program look like? Let’s consider Abbott Laboratories’ “Freedom 2 Save” program. All employees who have qualified for the company’s 401k have enhanced benefits to assist with student loan repayment. An eligible Abbott employee, who contributes 2% of their pay towards student loans, can get a match to his or her 401k, even if that 2% is in lieu of any contribution to the 401k. The benefit here is that an employee can earn 401k matching funds without actually contributing any 401k dollars of their own. The intent of this article was to address the “what”, “how”, and “why” of ancillary programs. Offering the right benefits package takes due diligence, an understanding of the financial and tax implications, recognition of a growing millennial workforce, and the right professional advice. In summary, I will leave you with the following quote from Jon Shanahan, CEO of Business Solver- “In 2019, employees will demand more from their benefits packages, and employers will need to deliver and meet multigenerational employees' needs to stay competitive in the job recruitment market. Voluntary benefits are a way for employees to personalize their benefits to fit their lifestyle needs." Bruce Mazzarelli is the Vice President of Employee Benefits with HUB International. He can be reached at (732) 894-9849 or via email at burce. mazzarelli@hubinterntaional.com Use the red key. ® Our end-to-end financing solutions help dealerships grow and customers buy. All credit products are subject to credit approval. Key.com is a federally registered service mark of KeyCorp. ©2017 KeyCorp. KeyBank is Member FDIC. 170912-290440 As a full-service dealer finance company, we understand the challenges you face. Whether for retail or commercial operations, we deliver comprehensive solutions that drive your business forward. Visit key.com/dealer or contact David Stevenson, Commercial Services, at 610-212-4276 or Brian Meierhofer, Retail Services, at 973-222-9474.