What could happen if a company offers too many cash options in a flexible benefits plan?

When a company offers too many cash options in a flexible benefits plan, it may lead to underinsurance among employees because they might opt for cash instead of purchasing necessary insurance coverage. Employees may prioritize immediate financial gain from cash options over long-term protection that insurance provides. As a result, they may not allocate sufficient resources or attention to securing essential benefits, putting themselves at risk for unexpected expenses or health issues.

This scenario highlights a fundamental principle of flexible benefits plans: while they can provide choice and flexibility, an imbalance towards cash options can encourage employees to undervalue the importance of insurance. Consequently, if employees are incentivized to take cash rather than invest in adequate coverage, it increases the likelihood of them being underinsured, leaving them vulnerable in times of need. Understanding this helps ensure that flexible benefits plans are designed to balance immediate employee preferences with long-term protection needs.