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5500 Preparer's Manual for 2012 Plan Years
The premier resource in the field of Form 5500 preparation, 5500 Preparer's Manual will help you handle the required annual Form 5500 filings for both pension benefits and welfare benefit plans.
from Spencer’s Benefits Reports: The rising tide of employee benefits costs is forcing employers to make tough decisions, often reducing disposable income for employees in order to maintain benefit levels. This was one of the key findings of Trends and Tradeoffs in Employee Medical Benefits, a survey conducted by Corporate Synergies Group and the Financial Executive Research Foundation.
While 54% of senior financial executive respondents said that keeping their employees’ costs on medical employee benefits to a minimum was important, many companies are forced to act against this principle as the cost of medical coverage continues to rise. In the past five years, a vast majority of companies surveyed (88%) increased employee cost-sharing, copayments, and/or deductibles. One-fifth (21%) of companies even reduced or eliminated salary increases and/or bonuses for employees. Almost two-fifths of the respondents (38%) took a different tack—they reduced health benefits.
“Financial executives are clearly faced with tough financial trade-offs as they remain committed to offering medical coverage to their employees. Yet in aggregate, these decisions—increased employee cost-sharing, higher deductible plans, reduced employee raises and bonuses—can mean significantly less disposable income for employees. Often these decisions are made in the short-term by slightly tweaking plans year over year, but it’s important that financial executives look at the big picture and realistically consider, and communicate, the long-term implications to their employees,” said John Turner, president and CEO of Corporate Synergies Group.
Some Benefits Are Sacrosanct For Now
The survey found that there are some benefits items that most senior financial executives have not yet considered “on the table.” Only 9% have reduced non-medical benefits and only 2% have eliminated dependent coverage. While voluntary benefits are slowly catching on, only 4% of those surveyed have shifted from employer-paid policies to voluntary policies for medical coverage and only 3% have shifted to voluntary policies for non-medical benefits.
Financial Executives Entrenched In Benefits Decisions
Final benefits decisions are split almost evenly between the executive team/board of directors and human resources (HR). Among the companies surveyed, 48% said the final decision was made by the executive team or board of directors, and 44% said it was made by HR. Senior financial executives are the final decisionmakers in 28% of companies. While 83% of respondents say that the final decisions have been made consistently by the same group at their organization, there does seem to be a slight shift to the executive team. Of those who said that the decisionmaker had changed in the last three years, almost half (44%) responded that the medical benefits decision was now led by the executive team. Yet, despite the finance department’s common role in employee benefits decisions, just 47% say that they are very informed about their various options and feel comfortable making the decisions.
“Employee benefits represent a major portion of total compensation costs—47% of companies said that providing employee medical benefits for the most recent fiscal year cost more than 10% of their total compensation costs. Yet, with less than half of financial executives saying that they are very informed about various benefits options and therefore comfortable making the decisions, it’s clear that the complexity of these decisions is weighing on the minds of senior financial executives,” said Tom Thompson, research associate with Financial Executives Research Foundation, Inc. (FERF).
HSAs, Cost Reduction Programs Adopted But Met With Skepticism
According to the study, 60% of companies have switched to higher deductible plans in the last two fiscal years, while half (51%) of businesses currently offer a health savings account (HSA) to their employees. Financial executives see a number of advantages in offering HSAs, most often citing the tax deductible contributions (76%), allowing employees the flexibility to decide how to spend their medical dollars (62%), giving employees more control over individual health care decisions (60%), and the offsetting of high deductibles (58%). Among the companies that do not currently offer an HSA, 32% believe that they need more education about the benefits of HSAs, and 30% say that their employees need more education about the advantages of HSAs. Nine percent of financial executives that do not offer HSAs believe that their employees think negatively about them.
“Despite the cost savings, many financial executives said that they believe their employees would not accept HSAs. Underscoring that concern, many companies that have offered the plans have seen fairly low enrollment rates. But this apprehension is keeping employers from reaping the myriad advantages of HSAs,” added Andrew Bloom, executive vice president of operations for Corporate Synergies Group. “Therefore, both thoughtful communication and appropriate benefit structure are keys when it comes to the adoption of these programs. To fully embrace HSAs and high deductible plans, employees need to know more about how the programs work and what costs they can expect, and the benefits need to be priced and configured attractively for employees’ adoption.”
Many companies are also turning to cost reduction programs—65% have offered wellness programs to their employees, such as weight loss programs, smoking cessation programs, on-site gyms, and/or nutritional seminars and services, 28% have offered disease management programs and 15% have put a greater emphasis on claims profiling. Nonetheless, 52% of financial executives have not yet seen a return on their investment for these programs. Of the 35% of companies that have seen a return on investment for these programs, 42% said that it took over two years to realize.
For more information, visit http://www.corpsyn.com.
For more information on this and related topics, consult the CCH Pension Plan Guide, CCH Employee Benefits Management, and Spencer's Benefits Reports.
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