The Benefits of Defined Contribution

Defined contribution health benefit plans are employer group health plans individually selected by an employee. In a defined contribution arrangement, rather than providing a certain level of health benefit, the employer provides a predetermined level of funding that the employee uses to purchase their choice of health insurance. Employers are able to choose a flat-dollar amount that fits their budget, rather than a percentage of each employee's coverage costs. Each employee chooses their own insurance plan, but they are combined as a group; essentially, it's group insurance but with individual choice. There are numerous benefits to defined contribution:

Simplified Benefit Management — Defined contribution plans greatly simplify the planning and management of a company's health benefit options. By enrolling in a defined contribution plan on Avenue H, the only decision an employer has to make is how much to contribute toward each employee's health benefit. Employers will no longer be responsible to choose between multiple plans, insurance companies and provider networks.

Predictable Costs — By electing to make a defined contribution rather than choosing a company-wide health plan, employers can predict and contain health benefit costs.

Expanded Benefit Offerings — Enrolling in a defined contribution plan on Avenue H also allows employers to offer greatly expanded health plan options to their employees. Employees will use Avenue H to compare plans, providers and select the option best tailored to their individual needs — no more one-size-fits-all benefit packages. Offering a tailored health benefit will help businesses attract and retain high-quality employees in a competitive marketplace. It allows employers to offer large employer benefit options regardless of their size.

Preserve Tax Benefits — A defined contribution plan also allows employers to continue offering the tax benefits of an employer-sponsored plan. Employees can pay their portion of their health premium with pre-tax dollars, which reduces the employee's taxable income and also reduces the employer's FICA obligations.

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