Millerwood Communications

More Benefits, No Added Cost

Question:  How can employers improve benefit plans in spite of increasing health care costs?

Answer: Voluntary benefits.

Often overlooked by many employees, voluntary benefits may help improve their financial security, especially in these economic times.

Voluntary plans, such as disability, life, accident and long-term care benefits, can be offered to employees as part of their benefit options. Typically, employees pay 100% of the premium through payroll deductions, but they get the cost benefit of being part of a group plan.

Some employers offer voluntary benefits, but miss an opportunity to communicate the value of the plan to their employees. If plans are currently offered, employers should market plan benefits to employees so they understand how these plans can contribute to their overall financial health.

Enrollment can usually happen at any time of the year, so communications can happen outside of the typical annual enrollment cycle. This can give employers the opportunity get the message out without the "clutter" of annual enrollment activities.  

If not currently offered, employers should consider adding voluntary benefits to their program. It's an opportunity to increase benefit offerings, while other health care cost-containment decisions may be increasing employee medical costs and decreasing benefits.

In addition, employees may not have the savings they once had to cover them through a life-changing event, such as a long-term illness. Adding short- and/or long-term disability options go a long way in giving employees peace of mind should they become ill and are unable to work for a period of time.

Voluntary benefits are portable. Employees can continue coverage if they lose or change jobs. Critical illness and hospital confinement coverage, for example, can provide benefits in the event there is a lapse in health care coverage. Long-term care coverage can save an employee from the very high cost of long-term care facilities for themselves and family members.

Employers need to get creative in how they view and offer benefits. Many employees are used to robust, reasonably priced benefit plans. But the landscape for employer-sponsored health insurance is changing.

Costs continue to rise and employers should look to take steps to improve benefit programs with other plans and benefits.

Top 10 Employee Benefits Omissions

Once a year many employees have the opportunity to elect their benefit plans for next year. How benefits communications are handled can be found all over the communication spectrum.

Some employers provide pre- and post-communications, as well as detailed personalized enrollment materials. Employers less communication-savvy send an email reminding employees that they have until the deadline to make any changes.

But most employers land somewhere in between.

No matter how the annual benefits enrollment is communicated, there are key details that often get overlooked but can be critical to a smooth transition into the new benefits year.

Here is my top 10 list of most missed items:

1. When to elect a PCP. If you are changing to a new HMO Health Plan, you must elect a Primary Care Physician (PCP). Many times, employees check to see if their doctor is on the new plan, but they don't officially select them with the new health plan. Doctor's visits are not covered by the new plan until the PCP has been selected.

2. Major coverage changes for health plans. Employees need to be aware of any major changes to covered services so they can make an informed decision for themselves and their family.

3. Coverage tier rules for life insurance changes. Many plans only allow you to move up one tier at a time when increasing life insurance coverage. If the new election skips a tier, the employee may be contacted at a later date to drop their coverage down.

4. Dental coverage election rules. Many plans do not allow employees to drop dental coverage for less than two years. For example, an employee cannot elect to have dental every other year. Once they opt out of dental, they have to be out of the plan for two years until they can elect to get back in. Someone who has opted out for one year may be surprised when they go to enroll the following year.

5. Maximums for FSAs. Although there are federal guidelines, each employer can set their own maximum for dependent care and health care flexible spending accounts, as long as it does not exceed the federal maximum.

6. Rates for benefit plans by pay period. Employers communicate new annual rates, the cost the employer and employee pay together, and percentage increases. To be the most clear, the new employee cost should be indicated in dollars by pay period.

7. The cost savings associated with pre-tax benefits.Many employee-paid costs are pre-tax including health care plans, dental plans and FSAs. Employees can really benefit from knowing how they can save in taxes by making appropriate benefit elections.

8. When you can change coverage other than annual enrollment. Many plans do not allow changes during the year unless there is a qualified change in family status. Usually an employee has 30 days after the event to make the change. Annual enrollment is a good time to reinforce this regulation.

9. Which benefits require an enrollment. If no election defaults to current benefits, clearly state that "if no action is taken, benefits will continue." If flexible spending accounts require re-enrollment, that must be communicated also.

10. Who to contact with questions. In all annual enrollment communications, there should be a phone number or email for someone to address questions.

New Employer IRA Legislation

There is proposed legislation that would require any business with more than 10 workers to provide an employer-sponsored IRA (Individual Retirement Account) to employees.

The legislation also includes an automatic deduction of wages to go into the plan. Employees can then opt to increase or decrease the amount that is deducted. When a certain amount is accumulated, the funds are rolled over into a target fund, based on retirement date.

The theory behind the requirement is that many employees do not plan appropriately for their retirement and fall very short in their savings when they retire. 

While I agree we need measures to get people to save wisely for retirement, I'm concerned of the burden this will place on small businesses that do not currently offer a plan.

If companies are currently using an outside vendor for payroll, this will probably only be a small additional administrative expense. 

But the communications necessary to accompany a 401(k) offering can be substantial.

If an employer is going to be the plan sponsor, it has the responsibility to provide training and education on how best to save and invest. There are enrollment materials to be produced and there has to be some kind of internal administration for new hires, terminations, etc.

My experience with automatic deductions is that many employees do not understand that a 2 or 3 percent automatic deduction will not keep up with the rate of inflation and will not help them reach an appropriate savings retirement goal.

Employees need to understand how much to save. Without the communication, employees can be lulled into thinking this is all they need to do to be prepared.

This expense could outweigh the employer tax benefits, if applicable with this type of plan.

Maybe a mandate is not the way to go on this.

Perhaps more business incentives to encourage employers to offer a savings plan would be the more responsible approach.

NEEBC Trade Show: Communications Now

On May 14, we joined about 50 other service providers at the New England Employee Benefits Council Annual Benefits Fair and Trade Show. The theme this year was "Successful Strategies for Tough Times."

Despite the economy, this professional and well-coordinated event was well-attended and we were kept busy most of the day addressing questions.

Like the previous day at the Route 2 Expo in Fitchburg, Mass., most, if not all, of the topics of conversation were focused on the economy. Sample questions included:

• What strategy do we use when talking to our employees about investing in a 401(k)?

• How best do we keep our employees updated on the status of company financials?

• How can we improve our internal communications on a smaller budget?

• How do we prepare our employees for increases to health care plans?

In each case, we talked about strategy and planning. For communicating changes, plan to get messaging out way in advance of the change. Communicate the changes several times so people understand what they need to do and when they need to do it by.

When planning the message, put yourself in the receiver's shoes. "What do they want to know?" "What are their biggest concerns" Then proceed to address those questions. 

Across the board, we talked with people who are adapting their business for the changing economy. Communications is a vital part of those changes.  

 

Lucky winner (right) of a Legal Seafood gift certificate from the Millerwood treasure chest. Pictured with Christine Miller.

401(k) Dilemma - Talking to Employees

As employers, we need to educate employees on how to plan for their retirement and invest wisely in their 401(k). At the same time, we need to be careful not to give financial advice.

One way to do this is to encourage employees to read the communications put out by 401(k) administrators. For example, today on fidelity.com, you can read articles on the "5 Steps to Rescue Your Retirement" and "How Not to Panic Over Your Portfolio." You can access fidelity's home page even if they are not your 401(k) plan provider.

Many times, you can find articles that offer insight into the current economy and what steps to take. These are difficult economic times and 401(k) communications are changing. The old messages of "save as much as you can" and "savings will increase over time" don't resonate with many employees.

There are new trust issues with how Wall Street operates and increased uncertainty about the future of investment savings.

In spite of the reluctance many people have, there are still benefits to saving in a 401(k). There are employer matches, pre-tax savings and, hopefully, a market recovery that will gain the confidence of investors.

If you're searching for the words, tap into resources that are just a URL away. 

Celebrate National Employee Benefits Day

 

Today is National Employee Benefits Day and the International Foundation of Employee Benefits (IFEB) is encouraging employers to use this day to focus on retirement planning. 

Since only so much can be done in a day, it's a good time to plan a communication strategy for the education of all employes, including HR professionals and managers. To get started, go to the IFEB link and view free videocasts on retirement security and the economy.

Workers Don't Understand Benefit Plans

When employees maximize their employee benefits, they can choose the best medical plan, save tax dollars and improve overall financial security.

But that may not be happening for most workers.

According to the Metlife 2008 Employee Benefits study, only one in four employees thinks benefits communication is effective. In focus groups conducted by by communications firm Davis & Company, employees confirmed MetlLife's results. Samples of comments include "There's too much jargon" and "I often don't understand what im supposed to do differently."

The MetLife survey also showed that only 44% of workers are satisfied with their benefits and 55% don't fully understand critical details about their insurance coverage.

In a time when people want to reduce costs and save as much as possible, benefits can play a big role. Pre-tax benefits, flexible spending accounts and health savings accounts can all help. With a little boost to employee communications, employees may find the savings they need right now.

In a Crisis, Manage the Grapevine

Reaching out to employees to communicate the importance of managing their 401(k) savings can be difficult when there is widespread panic. All anyone has to do is turn on the news to be reminded of the volatility in the market right now.

But there are steps employers can take to educate employees on how to manage their savings and alleviate some fears.

In addition to manager and general employee communications programs, you can use the grapevine.

The drivers of the grapevine are opinion leaders. These are the employees who have emerged as leaders within the organization, drive the culture and are well-connected with employees. These people can be found at all levels of the organization.

An effort can be made to identify this group and target messages with the intent that the information will informally get out to the masses.The group can be equipped with information on how to deal with  emotions that are running high and how to help employees seek additional resources and information.

And with tact, there is no need to create the medium. The grapevine already exists. It just needs the right message injected into it. 

Employee 401(k) Dialogue in a Wild Market

Today, employees are seeing the value in their 401(k) plans decreased by 20%, 30% or even 40% from just a month ago.

How do you address the fear this has created? 

To get employees thinking constructively about saving again, communications can begin to focus on three main areas:

• Think Before You Take. Thoroughly evaluate the benefits and consequences of taking money out of the 401(k) plan. First, all withdrawals are subject to income tax and possibly a 10% early withdrawal penalty. Saving in a 401(k) is intended for use during retirement when income is reduced and tax brackets are lower. Second, when you take out money, you are selling stock, which means most likely you bought high and are selling low at a loss. 

• Consider Changing Your Asset Allocation for Future Contributions. Asset allocations should be based on years from retirement and the level of risk you want to take. If you feel that you are taking too much risk (investing in higher risk stock funds), then consider putting future allocations into a more conservative mix. You can always change your allocation in the future, as the plan allows. 

• Look at Your Personal Situation and Timing. When do you need your money? Is retirement only one or two years away? If you don't have time in the market to regain your losses, you need to make decisions on your current investments. The option is to wait it out in the market, or cut your losses and move existing savings to more conservative funds in the plan.

You want your employees to sleep at night, and directing them to take a role in their savings may empower them and remove the helpless feelings this economic crises has created.

Stick to the Basics on 401(k) Education

It's important for organizations to provide employees with investment education if they are offering a 401(k) plan.

But here's a key point: When employers offer employee-directed retirement plans, the education should be simple and not perceived as advice.

To educate employees, employers shouldn't endorse any type of investment strategy or product. The helpful information to provide is:

• The benefits of participating in a 401(k) plan (for example, pre-tax contributions and an employer match).
• The benefits of increasing contributions to the plan. Focused communications on compounding over time can show a potential significant increase a small increase can make.
• General financial investment concepts such diversification. Explain how asset allocation may protect savings from market ups and downs.
• Tools to help determine a retirement goal and how much to save to help meet that goal. 

The best way to deliver the information is in a forum where participants can ask questions like seminars, small group meetings and one-on-one sessions. Programs don't have to be limited to just employees either. Spouses and other family members can be invited to help the employee with retirement planning.