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Royal Oak, Mich.—January 6, 2022—While salary and wage considerations are often the determining factor in accepting employment, prospective hires should be looking at benefit plans as a source of considerable compensation in their own right, according to John J. (J.J.) Conway, a nationally recognized employee benefits and Employee Retirement Income Security Act (ERISA) attorney and founder of Royal Oak-based J.J. Conway Law.
“At one time, employers referred to employee fringe benefits as the ‘hidden paycheck.’ While that expression isn’t used much today, the reality is that up to one-third of an employee’s overall compensation is paid to them in the form of benefits,” Conway said. “As employers ramp up work-life balance benefits, it’s important to pay at least equal attention to insured benefits when considering the overall value of a job offer.”
Conway offers the following job offer scenarios to convey the value of insured benefits:
- Two different employers extend competing offers to a prospective employee. Employer A offers a salary and benefits of $75,000, which includes comprehensive health coverage, including coverage for infertility treatments.
- Employer B offers a salary of $85,000 with comprehensive health benefits but no infertility coverage. For an employee for whom starting a family is an important life objective, understanding this difference could affect the employment decision.
- The additional health benefits offered by Employer A, with the lower salary offer, could amount to upwards of $30,000 in extra, non-taxable compensation, versus the higher salary offered by Employer B.
- The additional salary is taxed, and any uncovered healthcare expense would be out-of-pocket and non-deductible. Employer A saves on salary costs and provides insurance for a scenario in which a claim may or may not ever be filed.
Conway says good employee benefit plans have three pillars of financial security: immediate, short-term, and long-term. Healthcare coverage, retirement matching funds, as well as life and disability insurance are critical components of an employee’s financial security and future well-being.
- An Employee’s Immediate Financial Security. The most important aspect of an employee’s immediate financial security is having a good and comprehensive healthcare plan. Since the passing of the Affordable Care Act, employees can reasonably expect that their “essential” healthcare needs will be met. Now that the ACA’s protections are near universally applied, employees and their dependents are protected from any surprise charges for essential healthcare like physical exams and emergency room treatments. Under the Act, health plans provide pre-existing condition coverage. Without proper healthcare coverage, expensive medical treatments can cause real financial harm, sometimes even bankruptcy.
- An Employee’s Short-Term Financial Security. A good employee benefits plan should have a disability and life insurance plan underwritten by reputable insurance companies. The financial protection of an employee’s income and assets is critically important, especially if the employee has dependents. If something unexpected happens, the ability to earn an income could be lost, and there should be a disability contract to help replace that income without a prolonged wait. If there is an unexpected death, an employee’s family should be protected with adequate levels of life insurance coverage.
- An Employee’s Long-Term Financial Security. The third pillar of a benefit plan helps an employee plan for a future when the employee no longer wants to work (or not work full-time). A good benefit plan should make it relatively easy to save for retirement through a 401(k) plan or other savings vehicle, by building up net worth paycheck after paycheck. A good plan should have solid investment offerings, low fees and be effectively managed.
“Because the cost of employee benefits don’t typically show up in an employee’s W-2, it is easy to forget their significance in the overall compensation package,” Conway said. “That’s why the three pillars of employee benefits that provide for immediate, short-term, and long-term financial security deserve close scrutiny during the job offer process.”
About J.J. Conway Law
J.J. Conway Law was founded by John Joseph (J.J.) Conway in 1999 to work with individuals seeking full access to the employee benefits they have earned. The firm has been involved with nationally significant employee benefit, disability and pension cases, including class action lawsuits for such landmark decisions as requiring Michigan private insurers to cover autism health treatments for children through age 18 and protecting the pension rights of City of Detroit employees, police and firefighters as well as Wayne County employees by holding their trustees accountable for investment decisions. The firm’s motto is “Conquer Tomorrow®” and is dedicated to making tomorrow easier for their clients across the United States. Learn more on the firm’s website.