Authored by Cathy Spain, Executive Vice President, Bearing Advisors
Employees are a city’s most valuable asset, and the benefits a city provides to its employees are a strategic investment that shapes both recruitment and retention outcomes. Losing talent is costly and disruptive; failing to attract high-quality talent affects performance and resident satisfaction.
Recruiting and retaining great talent requires great benefits. According to the Mployer Advisor, the industry leader in benefit metrics, highly rated benefits often include competitive medical plans with transparent costs, paid family and medical leave, mental health and wellness support, retirement matching or financial coaching and other plans that support diverse needs.
New research finds that employee wellbeing programs supporting employees’ physical, mental, and financial health are key drivers of employee satisfaction. When budgets are tight, employers can provide these benefits on a voluntary basis through pre-tax payroll deductions. Employers may pay a portion of these voluntary benefits, but there is a significant drawback. Employees must reduce their take-home pay to acquire the benefits, so participation is limited and low-pay employees are less likely to participate. Specific programs that are included in these three categories of benefits are:
- Physical Health: telemedicine; diet, nutrition and exercise resources; chronic disease management support; biometric scanning; pre- and post-natal support; addiction recovery services; and stress reduction tools.
- Mental Health: peer support management, therapist matching, resources, wellness check-ins and clinical support.
- Financial Health: life, critical illness, disability, accident and medical bridge insurance; offsets to the cost of medical health insurance premiums; and contributions to post tax-retirement funds such as a Roth IRA.
An innovative approach to benefits financing now makes it possible for governments to enhance these benefits in a way that is affordable. It has the power to be transformative because new benefits are provided without increasing a city’s budget for the benefits or decreasing employees’ take-home pay. Cities are adopting this approach in lieu of offering costly new employer-funded benefits and voluntary programs that have limited appeal due to affordability.
How does this new financing method work? Employees voluntarily choose to participate in the program and reduce their salary on a pre-tax basis to pay for the benefits. However, unlike traditional voluntary programs, they do not have a reduction in their take-home pay. Provisions in the federal tax code allow the employer to reimburse the employee for the salary reduction. The new benefits are funded by the tax savings realized from employees’ lower income and FICA taxes. Importantly, because the employer’s payroll is reduced, the employer has a reduced FICA tax bill — making the program revenue-positive for the participating city.
Sound too good to be true? It’s not. And this is the model behind Bearing Advisors’ Prevent+Protect, an NLC-endorsed program.
Visit the NLC Strategic Partnerships page to learn more about organizations like Bearing Advisors dedicated to making NLC the premier resource for local governments.
Upcoming Webinar
On Thursday, Aug. 27 at 2:00 PM ET, join NLC and Bearing to explore this innovative financing method, featuring Jim Hunt and Mike Conduff, Executive Vice Presidents at Bearing Advisors, who will explain how these programs work.
About the Author
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