There are two different schools of thought. The first is that the employer should continue with the defined benefit. The other is that the employer should be willing to try the benefits of the defined contribution vs defined benefit.
The reasons why employer should try the defined contribution is that there are several benefits of defined contribution vs defined benefit small business owners especially find this most intriguing,
The defined contribution health plan is better for the employer as well as for the human resource departments of the company. This also helps as it decreases the amount spent by the company on health insurance for the workers and the workers are more satisfied as a result of it.
The way that this helps employers is that :
- The employer does not need to answer questions about the benefits for the employee or to handle the claims made by the employee. When the company has the contract set up with private health insurance places, they only need to pay. The benefits directly go to the employee and the adjustments are made in the payroll software of the company
- The worker needs to select and purchase the insurance and he or she directly needs to deal with the carrier
- The IRS considers this as tax deductible
- The company knows in advance as to how much the health care will cost them. That way the budget line is predictable as well as simple. The health premiums will not go up yearly.
- The business can offer different classes of workers different kinds of health care reimbursements
- The workers are able to get better choice as per the health plan they want to opt for and they can put in their health care savings into various HSA Accounts. They also can see the exact amount being paid by the employer