Defined Contribution Plans

Defined Contribution Health Plans

A Defined Contribution Health Plan is a benefits plan that is customized specifically for the employee’s needs. It allows employees to tailor their health insurance plan with funds (a fixed dollar amount or “defined contribution”) given to them (set aside) by the employer.

The benefits of a Defined Contribution Health Plan are many for both employee and employer. The employee is more involved in their healthcare choices, while the employer enjoys reduced risk. Also, both employer and employee save a significant amount of money on premiums and taxes, while retaining health benefits that are just as good, if not better than a traditional group plan.

Defined Contribution Plans are easy to set up and maintain:

  • The employer will need to join a private exchange (an on-line insurance marketplace where various carriers participate and compete for business) and select the specific plans they want to make available to their employees.
  • The employer will need to allocate a monthly amount (premium) for each employee who will participate.
  • Employees will be given access to the private exchange to select his/plan of his choice and will be able to manage their benefits 24/7 through the on-line account provided by carrier/plan selected.

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