A benefit allowance is an amount of money released to people under the terms of a benefits plan. Benefits plans can work in a number of ways, ranging from plans where the money needs to be used for specific purposes to plans allowing people to receive payments they can use in the way they see fit. When a benefits plan is originated, the benefit allowance is discussed in the enrollment paperwork and people have an opportunity to ask questions about how benefits are determined.
In the case of benefits plans administered for citizens by the government, like retirement pensions and disability benefits, the benefit allowance is usually based on a combination of factors. Work history is important, as is the cost of living. The level of impairment involved may also be considered, in the case of things like disability benefits, with people who need more support receiving more benefits to help them afford it.
Benefit allowances originating in things like employee benefits, life insurance plans, and related benefits plans can vary widely. The amount paid into the plan is usually a factor, as are the specific terms of the plan. People may need to wait for a period of time to elapse before they can receive benefits, and the benefits may be adjusted in response to how long people have been paying into the plan and how many years of service they have with a given company.
In addition to receiving disclosures about the benefit allowance at the time people join benefits plans, people can also request statements at any time with a review of their benefits under the plan. The statement can be used in financial planning and people can also discuss the terms of the statement with an agent of the benefits plan if it seems that the benefits will no longer meet their needs. For example, a person might want to increase the size of a life insurance policy, or get better medical coverage.
Some employers provide their employees with flexible benefits in the form of a benefits plan where employees receive a benefit allowance and decide how they want to apply it. Rather than signing up employees with specific health insurance providers and other benefits plans, the employer gives funds to the employees, up to a certain amount, and allows them to spend the money in the way they think is most effective and suited to their needs. This is often done to avoid complaints about rigid benefits plans or gaps in benefits created by poorly administered plans.
