Voluntary benefits are products and services that are offered by employers as part of a benefits package- but are paid for mostly or fully by employees (via payroll deductions). This is in contrast to health insurance, where employers often pay a significant portion of the employee premium.
Core voluntary benefits include life insurance, dental insurance, vision insurance, disability insurance, critical illness insurance, and accident insurance…. But they can also expand to additional areas such as identity theft protection, travel insurance, mortgage protection insurance, and medical insurance for pets.
Why should I offer voluntary benefits to my employees?
Your business can often get better rates for voluntary benefits than your employees would individually, which makes these benefits a good deal for employees who want the coverage. In many cases, employees are also gaining access to different types of coverage that they might not have even known about before.
And since employees pay all or most of the cost, employers can offer these benefits with minimal expense on their part. That makes voluntary benefits a win-win for employers and employees.
About voluntary life and disability benefits
Among the most valuable voluntary benefits you can offer are voluntary life insurance and voluntary disability insurance — two lines of coverage that can help employees reduce the financial impact of an unforeseen event.
More than 100 million Americans are uninsured or underinsured and 38% of households would face financial hardship within six months of losing a wage earner.1 Voluntary life insurance, which employees pay for through convenient payroll deductions, helps close that gap.
Voluntary disability insurance covers income loss during recovery from illness or injury, which is the most common financial consequence of a disability — not medical costs, but the paycheck that stops coming in.
If you're a Gusto customer, you can offer voluntary life and disability insurance through Gusto and issued by leading national carriers — fully integrated with your payroll. This means employee premiums are deducted automatically, and enrollment happens digitally within the Gusto platform. Availability of plans from leading national carriers means employees can choose the coverage options that will work for them, often with no doctor's appointments or questionnaires needed. Coverage, eligibility, and terms vary by carrier and plan.
Are voluntary benefits pre-tax or post-tax?
Depending on the type of voluntary benefit, employee contributions may be treated as pre- or post-tax.
For some benefits, you can elect to have employees' contributions deducted from payroll pre-tax. If you do, be aware that employees may owe taxes on certain pre-tax benefits if and when they use them.
Many common employee benefits are treated as pre-tax under a Section 125 cafeteria plan, including:
401(k) contributions
Adoption assistance programs
Dependent care assistance programs
Employer-sponsored accident and health plans (including FSAs and accidental death & dismemberment policies)
Group term life insurance (up to $50,000)
HSA contributions
Long-term and short-term disability coverage
Footnotes:
This is not to be taken as legal, benefits, or HR advice. Since regulations change over time and can vary by location and employer size, consult a licensed broker or HR certified expert for specific guidance.
Insurance products and services offered through Gusto Insurance Services, LLC (CA Lic # 0K28399). Availability varies by state.
¹ LIMRA, 2023 Life Insurance Fact Sheet, Life Insurance Awareness Month, 2023. Available at: https://www.limra.com/siteassets/newsroom/liam/2023/0859-2023-liam-fact-sheet-2023_final.pdf
