The Benefits of Voluntary Benefits: Why Washington Employers Should Be Offering More

When most people hear “employee benefits,” they think health insurance. And yes, group health coverage is the cornerstone of any solid benefits package. But there is a powerful — and often overlooked — category of benefits that can make a real difference for your employees without breaking the bank: voluntary benefits.

Whether you are a small business in Bellevue, a growing company in Spokane, or a family-owned operation in Tacoma, voluntary benefits give you a way to compete for talent, support your workforce, and do right by your people — often at zero cost to your business.

What Are Voluntary Benefits?

Voluntary benefits are supplemental coverage options offered through an employer but typically paid for by the employee through payroll deduction — often on a pre-tax basis. Think of them as add-ons to your core health plan that protect employees against financial hardships that traditional medical insurance does not fully cover.

They include things like accident insurance, hospital indemnity, cancer coverage, critical illness, legal plans, identity theft protection, dental, vision, and disability insurance. Employees choose what makes sense for their life and budget. Employers facilitate access and the payroll process.

The Financial Case: Pre-Tax Deductions Matter

One of the most underappreciated advantages of voluntary benefits is the tax treatment. Most voluntary benefit premiums are deducted from employee paychecks on a pre-tax basis through a Section 125 cafeteria plan. That means:

• Employees pay less in federal income tax because their taxable income is reduced by the amount of the premium
• Employers pay less in payroll taxes (FICA) because pre-tax deductions lower the wage base they are taxed on
• Everyone wins — a dollar spent on a pre-tax voluntary benefit is worth more than a dollar spent on a post-tax purchase

For a business with 10 employees each contributing $50/month toward voluntary benefits pre-tax, the employer can save hundreds of dollars annually in FICA taxes alone — often enough to offset the administrative cost of running the program.

Filling the Gap Left by High-Deductible Health Plans

As health insurance premiums have climbed year after year, more Washington employers have shifted to high-deductible health plans (HDHPs) to control costs. These plans lower monthly premiums but expose employees to higher out-of-pocket costs when they actually need care — sometimes $2,000, $3,500, or more before insurance kicks in.

Voluntary benefits are specifically designed to bridge that gap. When an employee breaks an arm, gets hospitalized, or is diagnosed with cancer, supplemental benefits pay cash directly to them — regardless of what their health insurance pays. That money can go toward the deductible, everyday living expenses, or anything else they need.

A Look at the Benefits Your Employees Actually Want

⚖️ LegalShield

Access to a dedicated law firm for personal legal matters — estate planning, family law, traffic violations, and more. For a small monthly premium, employees get year-round legal access they would never be able to afford on their own.

🔒 IDShield

Identity theft is one of the fastest-growing crimes in the U.S. IDShield monitors employees’ personal information and provides a licensed private investigator to fully restore their identity if it is compromised. Peace of mind for a few dollars a month.

🩹 Accident Insurance

Pays cash benefits for covered accidental injuries — ER visits, fractures, hospital stays. One of the most popular voluntary benefits because accidents happen to everyone, regardless of how healthy you are.

🏥 Hospital Indemnity

A daily or per-admission cash benefit when an employee is hospitalized. Especially valuable for employees on HDHPs who face large deductibles at admission.

🎗️ Cancer & Critical Illness

Lump-sum cash payments upon a qualifying diagnosis. These plans give employees financial breathing room during the most stressful times of their lives — when the last thing they should be worrying about is money.

🦷 Dental & 👁️ Vision

Standalone dental and vision plans are among the most requested benefits by employees. They can be offered as voluntary (employee-paid) or partially funded by the employer — and they go a long way in making your benefits package feel complete.

📋 Disability Insurance

Short and long-term disability plans replace a portion of income when an employee cannot work due to illness or injury. Most employees significantly underestimate their own risk of disability — and this coverage can be the most financially impactful benefit they never knew they needed.

Who Can Offer Voluntary Benefits?

This is where small Washington businesses are often surprised. You do not need 50 or 100 employees to offer a meaningful voluntary benefits package. Most carriers make these benefits available to groups of just 3 or more employees. If you have a small team and want to compete with larger employers for talent, voluntary benefits are one of the most cost-effective tools available to you.

The Bottom Line

Voluntary benefits are not a nice-to-have. For the growing number of Washington employees navigating high deductibles, rising costs, and financial uncertainty, they can be a genuine lifeline. And for employers looking to attract and retain great people in a competitive labor market, they are one of the smartest investments you can make in your team.

The best part? In most cases, they cost your business nothing to offer — just a little coordination with your benefits broker to set up payroll deductions and enrollment.

Washington Insurance Brokers serves small and mid-size employers across Washington state including Seattle, Bellevue, Spokane, Tacoma, Redmond, Kirkland, and beyond. Learn more at wa-insurance.com.