The Advantage of Portable Benefits
Since companies first competed to hire returning soldiers after World War II, employers have offered worker benefits such as health care insurance, retirement plans, and workers’ compensation. However, today’s workforce model has changed considerably. Between 2007 and 2017, the percentage of the workforce engaged in alternative work arrangements rose by almost half, accounting for 94% of total job growth.1
Today’s independent contractors operate under a wide range of hiring models, including temp agency, on-call, subcontracted, and part-time workers, as well as freelancers, artists, performers, handymen, commission-only salespeople, house flippers, private caregivers, ride-hail drivers, Instacart shoppers, DoorDash delivery drivers, and handmade mask makers.2 Among this rugged crew of income earners, only 13% of temporary agency workers, 28% of on-call workers, and 41% of contract company workers have employer-provided health insurance.3
Unfortunately, this means millions of Americans don’t have access to affordable benefits critical to achieving long-term financial stability. This problem became all the more evident during the pandemic when 44 million workers lost their jobs and more than 5 million people lost their health insurance as well.4
The danger of so many Americans without access to health insurance and a retirement plan can be that many more could be added to the rolls of government safety net programs, such as Medicaid and food assistance.
A system of portable benefits, whether privately or publicly sponsored, would enable people to continue their insurance coverages throughout their lifetime, regardless of how many job changes they make. The U.S. already has many portable benefits programs, such as Social Security, Medicare, the individual retirement arrangement (IRA), and the health savings account (HSA). Each of these programs has criteria that limit eligibility, but they are generally available to both traditional and independent workers. Unfortunately, the independents do not have the same level of access to benefits such as employer-sponsored health insurance, disability insurance, worker’s compensation, or a retirement plan with an employer match.5 This can leave independent contractors at a disadvantage.
An affordable and universally available portable benefits system could offer advantages to employers as well. Providing health care insurance is both complex and expensive, so employers should devote considerable resources to pay for and manage their in-house benefits. By enabling “gig workers” to access comparable portable benefits, employers could be better able to staff up and down as needed without adding excess expense to their personnel budgets.
Furthermore, having life, health, disability, worker’s comp insurance and a lucrative retirement plan may inspire more entrepreneurs to start their own small businesses. This could be a key boost to future economic growth since 64% of net new private-sector jobs in the U.S. are created by small businesses.6
Our firm assists retirees and pre-retirees in the creation of retirement strategies utilizing investment and insurance products. Advisory services offered through B.O.S.S. Retirement Advisors, an SEC Registered Investment Advisory firm. Insurance products and services offered through B.O.S.S. Retirement Solutions.
1 Aspen Institute. March 24, 2017. “Benefits Innovation Fund: Providing Seed Capital to Create Innovative Portable Benefit Models.” https://www.aspeninstitute.org/publications/benefits-innovation-fund/. Accessed Dec. 10, 2020.
2 Liya Palagashvil. The Center For Growth and Opportunity at Utah State. October 21, 2020. “Barriers to Portable Benefits Solutions for Gig Economy Workers.” https://www.thecgo.org/research/barriers-to-portable-benefits-solutions-for-gig-economy-workers/. Accessed Dec. 10, 2020.
3 Aspen Institute. September 2020. “A Modernized System of Benefits Is the Foundation For an Inclusive Economy.” https://assets.aspeninstitute.org/content/uploads/2020/09/B21A-Modernized-System-of-Benefits.pdf. Accessed Dec. 10, 2020.
6 Alphonso Serrano. Fundera. July 24, 2020. “How Many Jobs Do Small Businesses Really Create?” https://www.fundera.com/blog/small-businesses-job-creation. Accessed Dec. 10, 2020.
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