A Future of Greater Benefits Flexibility for Employees

Doug Prince| December 10th, 2024

Benefits+, Retirement

Benefits may change, but these truths will never change: For any group of employees, a broad range of priorities and needs exist. And the better you can help them meet those needs, the more successful they—and you—become. In response, benefits have grown more and more tailored to workplaces and the people within them, and a recent private letter ruling (PLR) issued by the IRS presents an option for bringing even greater choice to employees through spending accounts.

To be fair, a PLR doesn’t change practices but applies only to the company it was issued to. These rulings often create a bigger impact, however. There’s plenty of precedent for shifts in practice that began with a PLR. Before Congress made automatic enrollment the law of the land, it was approved by a PLR for a particular company.

The idea behind this ruling would give employees greater flexibility to meet their unique life situations with help from their benefits plans, and it’s certainly worth considering on a grander scale.

What the plan would mean in practice

The PLR addresses scenarios like these:

A 24-year-old employee who is on their parents’ healthcare plan and missing out on educational assistance—despite needing help with student loan payments—because they didn’t have the option to split medical insurance from educational assistance
A 35-year-old employee who would rather see more money going into their 401(k) than utilizing student loan benefits or a richer healthcare plan
A 45-year -old employee who wants to fund their Health Savings Account (HSA) to the maximum to earn triple-tax free benefits and would rather have the employer’s 401(k) contribution go into their HSA
A 55-year-old employee who has saved to retire before age 65 but will need to pay for healthcare expenses until reaching Medicare eligibility and wants to convert some of their employer’s 401(k) contributions to a health retirement account

New ways to maximize benefits

Imagine the impact of changes like these to your financial wellness program. More options do mean further responsibilities, however: Each employee will need to be educated about their options, and many will need help determining how they can maximize their benefits.

Providing a wealth of options to support every situation unfortunately falls short if employees aren’t properly shown what’s possible. There’s a bit of a paradigm shift in every opportunity, and I recommend you take advantage of outside resources to provide accurate, accessible counseling to help your employees make the best decisions for them.

Although the PLR didn’t address utilizing auto enrollment for each of these benefits, I have to wonder whether the next step might be for employers to consider using the information they know about each employee and automatically enrolling them into the 401(k), HSA, educational assistance program, and the health retirement account at a level reasonably appropriate for their circumstances. Employees could opt out, of course, but we have found from automatic enrollment and automatic increases that employees appreciate the guidance and will typically follow what the employer suggests from the autoenrollment.

Even without auto enrollment, the additional personalization and its value to employee wellbeing suggest a future I hope we’ll see—and soon.