Forecasting Employee Benefit Costs for Next Year
Planning for the Annual Employee Benefit Budget
Forecasting employee benefit costs for the upcoming plan year is vital for any organization because it helps to secure HR budgets. Although it may sound complex, it does not have to be a difficult process to complete. It can be done in a fairly simple manner, but this does not mean that it should be done lackadaisically. The more in-depth the forecast is, the more prepared the company will be, especially when it comes to dealing with the Affordable Care Act mandates.
Learn how to put a reasonable number on your employee benefit costs for the upcoming year, with these expert tips.
Calculate the Average Cost of Employee Benefits
The largest costs to budget for include the Cadillac Tax, which affects high-value health care plans and will have the biggest impact by 2018. The tax will be as much as 40 percent levied on all plans that exceed statutory limits of $10,200 for self-only plans and $27,000 for full family coverage plans. Employers and employees will likely share this cost.
Other common benefits provided by employers to their employees include dental plans, long-term disability insurance, tuition reimbursement, dependent care assistance and retirement plans. So, when you add it all up, the employer will spend anywhere from $60,000 to $72,000 on an employee who has a $50,000 annual salary and benefits.
ACA Regulatory Compliance
Forecasting employee benefit costs is important for companies because they need to meet ACA regulatory compliance once the new regulations and policies are activated. Putting money aside is important for companies, so they have the opportunity to pay for any fines or penalties incurred if they decide against offering benefits. The money set aside will also help to pay for added benefits for employees as required by the ACA. Companies do not want to deal with any surprises when it comes to spending money on benefits, which is why planning ahead is very important.
Determine Full-Time Employee Classification
One of the first steps a company must take in forecasting for benefits in the coming year is to determine which employees are designated as full-time. This will help the company understand how many employees are required to have benefits as defined by the ACA. Once this number is determined, the company can begin to analyze its spending on benefits.
Determine Costs of Benefits Versus Costs of Penalties
Now the company can determine if it will cost more to provide employees with benefits or to pay the penalties incurred by violating the provisions of the ACA. For some companies, it might be more affordable to pay the penalties than to pay for benefits for full-time employees.
Review Current Employee Benefits Packages
The next step in the process is to review the benefits package the company currently provides to its employees. Your human resources department needs to determine if the package is good enough for your employees or if something needs to be added. If the package is missing one or two items that you want employees to have, make sure that you add the item(s) as you budget for the coming year, so you know you have enough money in the bank.
Other aspects of a benefits package include paid time-off from work, 401(k) retirement savings plans, flexible spending accounts, voluntary benefit programs, bonuses and commissions, wellness perks, and much more. All of these items do not have to be offered by the company but should be considered when putting together a budget for employee benefits for the coming year.
Consult With an Advisor
Whenever a company runs into some trouble with employee benefits, such as planning for the coming years, it should consult with an advisor. An advisor will be able to answer any questions the company might have when it comes to employee benefits. An advisor can be someone who works for your company as a contractor, which means he or she will be accessible quite often. Working with an advisor can help to make the budgeting process much easier for companies.
Present the Budget to Executives
Once the employee benefits budget has been created, it then needs to be presented to the executives of the company. They will review the budget, make any additions or subtractions, and then provide approval so it can be put into action in the coming year.