In this article, PEOs an Employee Perspective 101, we will focus specifically on the employee benefit packages and retirement options that Professional Employer Organizations make accessible to small businesses, and why employees should be excited about it.
Many Professional Employer Organizations work with thousands of small businesses; through co-employing with each one of them, they essentially operate as one large conglomerate when it comes to purchasing group health insurance, effectively buying in bulk. This allows their clients to offer their employees benefits packages that rival the quality offered by much larger corporations at cost-effective prices. The traditional benefit package includes:
- Major Medical Insurance
- Dental Insurance
- Vision Insurance
- Group Life Insurance
- Short & Long Term Disability Insurance
- Wellness Plans
- Various Niche Products
Most PEOs offer more than one health care plan design, so an employee is able to decide which type of insurance plan fits their budget. Having the option of multiple PPO (Preferred Provider Organization) or POS (Point of Service) plans, HMOs (Health Maitenance Organizations), and High-Deductible Health Plans with Health Savings or Reimbursement Accounts (HSAs & HRAs) is common practice for PEO clients.
Supplemental benefits such as vision, dental, and life insurance are commonly offered to employees in a cafeteria format, which allows the employees to choose whatever plan they like, usually with a base stipend offered by the employer to help offset costs. There are usually one or two vision plans offered, various levels of life insurance protection, and a variety of dental plans including PPO-style dental plans and Dental Maintenance Organizations (DMOs).
Various niche products often include:
- Cancer Insurance
- Legal Insurance
- Pet Insurance
- Identity Theft Protection
- Roadside Assistance
All of these plans are optional for each employee and are usually paid for by each employee. Since they are purchased collectively by the PEO, they are usually less expensive than buying individually.
Retirement & Savings:
Professional Employer Organizations also offer various investment vehicle options ranging from retirement plans (401k) to child’s college education plans (section 529). PEOs also offer health savings accounts (HSAs) to cover expenses under a high deductible heath plans (HDHP), and flexible spending accounts (FSA) for out of pocket medical expenses such as co-pays, child care, and dependent care expenses.
In major metro areas, qualified transportation benefits (QTB) are popular to allow employees to pay for transit costs with pre-tax dollars.
Most 401(k) plans PEOs offer employees the ability to customize investment strategies through diverse groups of funds in order to satisfy different thresholds for risk and personal retirement goals. In most cases employees can monitor and manage their investment account through an account representative or online 24×7.
The average PEO client is 17 employees, however companies from 5 – 500 employees work with a professional employer organization. Seamlessly being able to offer such comprehensive benefits without the administrative burden of procuring and managing each plan is extremely valuable for a business that wants to focus on their core competencies. Compare the typical benefit package offered by a PEO to that of a typical 15 person company and the differences will most likely be staggering, not only in price, but in richness, and ease of use.
Be sure to bring up looking into a PEO the next time your company gets a double-digit health increase, you won’t regret it!