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Small Business Employee Benefits and HR Blog

How to Successfully Implement Defined Contribution Health Benefits

Implementation of a new health benefits program is key to its success. Educating and onboarding employees in a positive way makes plan management more successful in the short-term and in the long-term - and creates benefits that both the business and employees love.

successfully implement defined contribution health benefits

Your business has gone through the process of researching health insurance options, selecting a pure defined contribution health benefits model, designed your perfect plan, and completed setup with your defined contribution software provider.

The final (and perhaps most important) step is to implement the defined contribution health benefits. In the implementation phase, your business will enroll employees, educate employees, and prepare payroll for reimbursing employees.

Here are five easy steps to successfully implement defined contribution health benefits. (These steps don't necessarily need to be completed in this order.)

Implementation Step #1: Enroll Employees

implementation step 1   enroll employees

After setting up your defined contribution health benefits and downloading your Section 105 HRP plan documents, the first step is to enroll employees online.

With defined contribution software, this is a simple task of entering basic personal information and enrolling them in their employee class.

Read more about defined contribution software here.

Implementation Step #2: Educate Employees 

After you enroll employees, your defined contribution software provider should provide you a custom tool kit to educate employees on:employee education defined contribution

  • The benefits of a defined contribution health benefits (e.g. What is an HRP? How does their health insurance allowance work?)

  • The benefits of individual health insurance (e.g. vs. group health insurance)

  • How to request premium reimbursement and take advantage of the benefit

  • How to get questions answered if they have them

Because even though defined contribution health benefits and individual health insurance are growing in popularity, many employees are not familiar with having an allowance to spend on their own policy.

For this reason, look for a defined contribution software provider who:

  • Provides a custom on-boarding process 

  • Provides an instant, electronic way to send Welcome Kits to employees

  • Provides an online help and support center with tutorials for employees and the business

  • Has a responsive support team knowledgeable about defined contribution, individual health insurance, and health care reform

  • Provides a link to a broker or quoting system so employees can easily have access to health insurance options

All of these activities (and features) will contribute to employees understanding the health benefits -- and create happier employees.

Implementation Step #3: Provide a Health Insurance Broker to Help Employees Select Plans

Choices

With "pure" defined contribution health benefits, employees purchase their own individual health insurance. For some employees, this is a new experience. Providing a health insurance broker or consultant to help employees select and purchase plans will help guide employees through the application process. This will also help employees choose plans that best fit their individual or family needs, such as keeping the same network of providers and balancing their premium with out-of-pocket costs.

Implementation Step #4: Plan for Reimbursements

First, decide how your business will issue reimbursements to employees. Common ways include on payroll, direct deposit, or by separate check. Then, set up a line item in your payroll system. If using a Section 105 HRP as the foundation of your defined contribution health benefits, the line item will be classified as a tax-free business expense reimbursement.

Your defined contribution software provider should integrate with any payroll system, and using a software platform reduces health benefits administration to 5 minutes per month-- you'll simply add approved reimbursements to paychecks.

plan for HRP reimbursements

Implementation Step #5: Communicate with Employees Early-On & Frequently

communicate with employees about defined contribution health benefits

How and what you communicate to employees varies by company. But as a rule of thumb, keep the communication open between HR and employees, and check in frequently. Many businesses make assumptions about what employees prefer or understand when it comes to benefits. By keeping communication open, you can address questions early-on in the transition, and measure their overall satisfaction in the long-term.

For more on employee education and onboarding see: Employee Education - Maximizing the Success of a New Health Benefits Program.

What are your tips for implementing defined contribution health benefits?

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