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Flex Benefits Plans

A flexible benefits plan lets each employee personalize a benefit offering around their own life within limits. Instead of everyone getting the same fixed benefit offering, the employee gets to choose what’s best for them.

Benefits shouldn’t be a one-size-fits-all approach.

What is a flexible benefits plan?

A great way to think of it is that it is a menu instead of a set meal. The employer puts a fixed dollar amount (or “credits”) on the table each year for each employee. The employee can spend it on the benefits that matter most to them. (i.e. Life Insurance, Dependent Life Insurance, Health Care, Dental Care, etc.). If there are any excess dollars, they are put towards a built-in Health Care Spending Account.

History

In the US, flexible benefits have been around for a long time. Large employers started building the plans and named them “Cafeteria plans.” This is because employees pick benefits the way they’d pick items in a cafeteria line. They’ve become very mainstream in the early 2000s across employers of every size. There’s been a huge push towards producing software that makes annual enrollments easy.

Modular Flex Plans / Tiers

Most providers don’t offer an endless à la carte menu as you would see in a restaurant. This is because it’s too hard to price and too confusing to choose from. Instead, employers build pre-packaged modules that are bundled together at different price points, so employees are choosing between a handful of options rather than each individual item.

Normally, a modular flex plan is structured with a “core module” which every plan member gets automatically. This could include basic life insurance and health care. They may also get the option for optional modules to layer on top (i.e. extra dental, higher maximums, more life insurance, etc.) This design makes the tier system. Many modular plans are packaged into 3 tiers.

Example of a Modular Plan

BRONZE

Lowest Monthly Cost
Basic Health & Dental
Standard Life Coverage

SILVER

Mid-range cost
Higher Health maximums
Added Dependent Life Coverage

GOLD

Highest Monthly Cost
Top Health & Dental Limits
Enhanced Life

The One-Tier Step Down Rule

Most plans limit how far down you can move in a single year to stop plan members from adverse selection. For example, if you selected “Gold” in your previous year because you expected to have larger claims and decide that during this selection period you would like to move down to bronze, you would be unable to make this jump downwards. You can only move up or down by one tier.

The Pros of Flex Plans

Reality: Employees choose coverage for the life stage that they are in, not what others are going through. People are different, and a flex plan lets the benefit spend reflect that.

Cost Control: Employers can set a fixed budget, which makes year-to-year benefits easier to predict.

Retention Edge: When people can shape their own offering, it tends to be more valued than one package that might not be valuable to the plan member.

Let’s Build a Better Benefits Experience, Together.

Our team is here to help you design, manage, and optimize benefits & retirement plans that work for your business.

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