Nonprofit organizations that want to successfully serve their communities require skilled and experienced workers. Employee benefits, as part of a comprehensive benefits plan, can help attract and retain top talent.
Job seekers are often on the lookout for key benefits, such as health insurance, dental insurance, retirement benefits and paid time off. However, it is important for employers to be aware of what requirements accompany these offerings. Here is a look at employee benefits requirements that generally apply to nonprofit organizations.
Benefits Offered by Nonprofits
When developing their compensation package, nonprofit organizations must consider ways to pull in job seekers and motivate existing workers to stay. Some popular incentives that may appeal to both candidates and employees include the following:
Group Health Insurance
Nonprofits often offer group health insurance to their employees at a lower cost than that which is available with individual policies. A group health insurance policy can benefit both employers and employees with tax advantages and significant healthcare savings. Premiums are often lower with group health insurance and the coverage is typically better.
When shopping for group health insurance, nonprofits must ensure that the policy they choose complies with ACA requirements. The Affordable Care Act (ACA) does not require all nonprofit organizations to offer medical coverage to employees. However, if a nonprofit with 50 or more full-time or full-time equivalent workers fail to offer health coverage, they could face a penalty.
Paid Time Off
Paid time off (PTO) is another common benefit commonly offered by nonprofit organizations. Many PTO policies provide employees with compensation for sick days, vacation days and holidays. Under the Fair Labor Standards Act (FLSA), paid time off is not a requirement; however, it can be a highly attractive benefit for employees.
Since there are no laws that govern paid time off, employers have free rein as to how they want to determine how much vacation time to offer. Employers cannot discriminate illegally to determine who receives vacation; this means that decisions cannot be based on protected characteristics including religion, race or disability.
When comparing job offers, many qualified job candidates look for positions that offer retirement benefits. Employer-sponsored retirement plans are designed to help workers save for their future, often with financial contributions from their employer. There are several types of retirement plans available, such as 401(k) plans, SEP plans, SIMPLE plans, 403(b) plans, 457 plans and Roth 401(k) plans.
The Employee Retirement Income Security Act (ERISA) of 1974 is a federal law that specifies when an employee becomes eligible for participation in a retirement plan, how long a worker has to be employed to participate, whether a spouse has a right to part of the benefit and similar specifications. ERISA does not require nonprofits to offer a retirement plan but it does guarantee payment of certain benefits if a defined retirement plan is terminated.
Disability insurance provides employees with a guarantee that they will receive compensation in the event that they become seriously ill or injured, and are unable to work. With disability insurance, the illness or injury does not necessarily need to be work-related to qualify. These benefits may be optional or mandated by law based on location and other factors.
Short-term disability insurance is a private policy that an employer can purchase for their employees. Benefits are generally delivered for a shorter period of time, usually at a maximum of 13, 26 or 52 weeks. Employees are generally required to wait for a specific amount of time before disability benefits can be drawn.
Long-term disability insurance is designed to pick up where short-term disability insurance leaves off, if warranted based on the employee’s health. In many plans, benefits are paid as a percentage of the employee’s basic compensation prior to the injury or illness and until age 65.
Nonprofit organizations may choose to offer life insurance benefits to their employees. This optional benefit requires employers to make several important decisions, such as who it will cover and the amount of coverage. Although nonprofits are not legally required to provide life insurance, they do have certain requirements to meet if they do choose to offer this benefit.
When offering life insurance, businesses cannot use discrimination when determining who is eligible. A group term life insurance plan does not discriminate against a worker’s eligibility to participate if certain conditions are met. First, the plan must benefit at least 70 percent of all employees in the organization. In addition, at least 85 percent of these participating employees must not be key employees.
Group term life insurance is the most common type of life insurance offered by employers. With this type of life insurance, employers can offer benefits to small sub-groups of employees based on certain distinctions including job duties, marital status, length of service, compensation as well as participation in stock bonuses, profit-sharing, pensions or health plans.
Other Fringe Benefits
It is important to understand what types of fringe benefits are required by law and which are optional. Mandatory fringe benefits aim to provide employees with necessary medical care and other essentials. Most employers are required to offer health insurance, medical leave, unemployment insurance and workers’ compensation under federal or state laws.
However, not all fringe benefits are legally required and are, instead, at the discretion of the employer.
Some of the most common optional fringe benefits include paid holidays, stock options, paid time off, disability insurance, education reduction, meal plans, achievement awards, fitness training, retirement planning services, commuter benefits and employee discounts.
Contact an Experienced Benefits Consultant
Nonprofit organizations sometimes struggle to find and maintain employee benefits as part of their employee compensation package. Nonprofits are often faced with strict budgets that leave only a small margin for the addition of new incentives and perks for job candidates and existing employees.
Employees must also comply with the requirements that accompany these benefits which are often subject to change. To learn more about employee benefit requirements for nonprofit organizations or to schedule a consultation with an experienced benefits consultant, contact the Business Benefits Group today.