Over 1,000 small businesses participated in our recent survey and nearly 40% reported they provide dental insurance to their employees. Putting this benefit in employees’ hands is clearly a priority for many companies, but it can take some time to understand the options.
What you’ll learn
What you’ll learn
Key takeaways
- Dental coverage is never federally required, even for employers with 50 or more full-time equivalent employees. However, 74% of workers rate it as an extremely or very important benefit.
- Group dental premiums are among the most cost-stable benefits, with fees rising by less than 1% in 2024.
- There are three main plan types: PPO, DHMO, and Usual, Customary, and Reasonable. PPO dominates the market.
- A Section 125 plan allows employees to pay premiums pre-tax and saves the employer 7.65% in FICA.
In this guide, we break down how group dental works, the tax advantages you can pass on to your team, and the compliance rules you must know.
What is employer-sponsored dental insurance, and is it mandatory?
Employer-sponsored dental insurance is a group plan that you offer your team. Your company pays part of the monthly premium while employees cover the rest. Because the risk is spread across a group, pricing tends to be lower than what any one individual would pay for a plan of their own. That said, dental insurance is often considered one of the more cost-effective benefits you can offer your team.
Is dental insurance mandatory for employers under the ACA?
No. Offering dental insurance isn’t required for employers at the federal level. This question sometimes stems from the Affordable Care Act’s list of 10 Essential Health Benefits.
Pediatric dental is one of the 10 benefits in the individual and small-group markets, but adult dental is not a federal Essential Health Benefit. According to State Health & Value Strategies (a Georgetown/RWJF project), states gained new flexibility to add adult dental to their benchmark plans starting in 2027. That doesn’t create an obligation for employers.
- What about larger companies? Applicable Large Employers (ALEs) or generally those with 50 or more full-time-equivalent employees, must offer affordable health coverage that meets minimum essential coverage. Otherwise, they may end up receiving unwanted attention from the IRS.
- The IRS treats standalone dental coverage as an “excepted benefit,” so it doesn’t count toward the requirement. Dental insurance is not mandated at the federal level.
Though you’re not legally required to offer dental insurance, many job seekers will look for companies that offer it when comparing new career opportunities.
Dental insurance options for small businesses with under 50 employees
Group dental generally comes in three structures — the differences come down to network rules and how claims get paid. The National Association of Dental Plans (NADP) and the American Dental Association describe them this way:
- Dental PPO (DPPO): Members can visit any licensed dentist, with lower in-network costs. Plans carry an annual maximum. This is the most common structure, with around 86% of commercial enrollment.
- Dental HMO (DHMO): With this plan, people pick a primary dentist and stay in-network. Premiums tend to run lower, and costs are copay-based, often with no annual maximum.
- Dental Indemnity: Sometimes called “traditional” insurance, this plan allows members to choose their own dentist because there is no restricted provider network. The insurance company pays claims based on the procedures performed, typically as a percentage of the charges, up to a maximum allowance. This is known as the Usual, Customary, and Reasonable (UCR) fee.
Orthodontics pro tip
One of the most frequent questions our in-house brokers receive from business owners is whether to include orthodontic coverage with dental coverage. If your team includes parents of young children or adults who are interested in braces or aligners, this might be worth a closer look.
Many insurance carriers do not automatically include orthodontics in small-group plans — be careful not to assume it’s part of a standard quote.
When designing your plan, take these steps:
- Evaluate your demographics: Consider if your employee population actively needs or expects this specific benefit.
- Be explicit: Clearly tell your broker that you need orthodontic coverage included in your market search.
- Tailor the offering: Use your broker’s expertise to find carriers that include small-group orthodontic add-ons that fit your company’s budget.
Now that we better understand some of the options, let’s delve into why many companies consider dental insurance.
Why should small businesses consider offering dental insurance?
Offering dental does more than check a box, it can give employers an edge in hiring. The coverage even helps protect against productivity losses when people put off care they can’t afford. Both angles matter when you’re weighing the expense.
How dental benefits impact employee retention and recruitment
Research shows that dental coverage is one of the most valued employee benefits. This sentiment is backed up by 2024 workplace benefits research from LIMRA, a global trade association for the life insurance and financial services industry. It found:
- 74% of U.S. workers consider a dental benefit extremely or very important.
- Six in 10 workers are extremely or very interested in an employer offering dental coverage in the future.
While dental coverage is technically optional, it carries real weight with candidates you want to hire and retain. Even if you can’t offer the highest salary, a generous dental plan enhances your recruiting efforts. It signals that you truly take care of your people. It also gives top candidates an additional reason to choose your business over a competitor with a less comprehensive benefits package.
As a small business owner, should I offer dental coverage to attract talent?
For most owners who want to compete for talent, it’s worth considering. When it comes to costs, you can feel confident you won’t be on a rollercoaster ride in terms of the investment. How so? Group dental premiums are among the most stable benefit costs around. According to the NADP, they rose less than 1% in 2024 — the latest in a long run of below-inflation increases.
It can be a good idea to weigh this data against the cost of turnover or unfilled roles. There’s also a productivity angle worth thinking about.
Stat to know
Per the CDC, roughly 92 million work hours are lost each year to unplanned or emergency dental care. Untreated oral disease annually costs an estimated $46 billion in lost productivity.
Of course, the right answer likely depends on your budget. You control cost by choosing the plan type and deciding how much of the premium you contribute. OnPay’s licensed in-house brokers help owners right-size a plan, so the coverage fits both the team and the budget.
How much does dental insurance cost, and how is it funded?
Two things drive dental costs:
- The plan you pick
- How much of the premium you cover versus your employees
A plan with a higher annual maximum costs more, while a plan with more employee cost-sharing costs less. That flexibility is what allows most employers to fit dental plans into almost any budget.
That said, because actual pricing depends on your location, team size, plan design, and contribution level, the most reliable way to see real numbers is to consult with a benefits expert. With so many variables, OnPay’s team of licensed brokers is available to answer questions and help you figure out what will work best for your employees and budget.
Tax advantages of offering dental insurance to employees
Offering dental often comes with a tax upside for your business. The premiums you contribute are generally deductible as an ordinary and necessary business expense under IRC Section 162. The IRS excludes those contributions from employee wages under IRC Section 106.
It can be a nice win-win as you provide a benefit that almost every employee wants and lower your taxable income at the same time.
One caveat to keep in mind: Special rules apply to more than 2% S Corporation shareholders and partners. Check with your accountant on how your entity type is treated.
Value and ease of use
“OnPay is the best value out there, and I’ve compared them all. Their system is glitch-free and highly detailed. Their customer service is excellent and very responsive, both by phone and email.”
— David E. Butts, DMD, Wellspring Family Dental, PA
What are the limits, waiting periods, and compliance rules?
Before you sign off on a plan, it helps to know how coverage is structured and if there are any specific rules you need to follow.
Waiting periods and exclusions in group dental policies
Most dental plans share a common coverage structure, though details vary. Many DPPOs use what the industry refers to as a 100/80/50 model:
After any deductible, the plan covers:
- Preventive care (cleanings and exams) at 100%
- Basic work, such as fillings at around 80%
- Major work, like crowns, at about 50%
Consult with your broker about your particular situation to be sure you have the right plan in place to fit your needs.
Dental insurance is a business investment
Dental insurance is optional for your business, but it’s a low-cost, high-value way to compete for talent and retain your existing team. The smart move is matching the plan type, funding model, and your premium contribution to what your budget can handle, while staying on top of ERISA and Section 125 requirements.
Ready to build a benefits package that fits your team? You don’t have to sort it out alone. OnPay brings payroll, HR, and benefits into one place. Licensed in-house brokers help you select a plan and pre-tax deductions that stay in sync with payroll.
This article is authored by OnPay, a top-rated payroll provider for small businesses with more than 30 years of experience in payroll, taxes, and small business compliance.