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CCH® BENEFITS — 10/20/09

Frozen Or Trimmed Benefits Budgets Spur Interest In Efficiency, Employee Health

From Spencer's Benefits Reports: A recent study conducted by Prudential Financial revealed that employee benefits budgets have been frozen or trimmed during these difficult economic times. Fewer than half of benefit plan sponsors said that their benefits budgets increased in 2009, compared with two-thirds of those surveyed in the prior two years, according to Prudential’s study, A New Day in Employee Benefits: A Companion Report to the Study of Employee Benefits: 2009 & Beyond. The study reflects responses from plan participants, plan sponsors, and benefits brokers and consultants.

About one-third of companies are maintaining their 2008 budget levels, while another 15% said that their budgets have decreased by an average of 16% over last year. More than half (53%) of benefits brokers and consultants said that their business has been negatively affected by the recent economic conditions, compared with 68% of plan sponsors.

Benefits cost containment strategies have become an even more important necessity as employers cope with the economic downturn. Nearly three in five plan sponsors consider as top objectives by 2014 “using Internet technology to reduce costs/increase efficiency” (59%, compared with 32% for 2009) and “attempting to control benefits costs by addressing work force health” (57%, compared with 34% for 2009). Also rising in importance is shifting more costs to employees through implementation of high-deductible health plans with health reimbursement arrangements or health savings accounts (44% of respondents) and higher cost sharing (42%).

“Despite being optimistic about their company’s ability to prosper after the recession [69% expect to do at least better in 2010], most plan sponsors are less positive about the short-term prospects for their benefits staffing levels and benefits budgets,” the Prudential report noted. “Apparently, companies see benefits cost management as a longer-lasting reality and, perhaps, a necessary concession on the road to recovery.”

“Employee benefits are especially crucial in uncertain times,” said Lori High, president of Prudential’s group insurance business. “Plan sponsors need to make the most of both the company’s and the employee’s premium dollars to ensure the benefits can be maintained.”

For more information, visit http://www.news.prudential.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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