Vol. 46, No. 2
Connecting employees with benefits information online can save HR money and time while giving employees more control over personal data.
For the first time last November, the 140,000 employees of IBM Corp., based in Armonk, N.Y., received all of their benefits enrollment materials online.
Through an interactive question-and-answer tool on the company’s intranet, employees logged on to the system’s "Plan Finder" to weigh the merits of different benefits and criteria, such as cost, coverage, customer service or performance. The tool sorted through dozens of different health plans offered by the company, used data and choices supplied by the employee and then returned a view of preferred plans, ranked and graphed.
"We had an overwhelmingly favorable response," says Glen Brandow, an IBM spokesman, noting that more than 80 percent of employees enrolled via the intranet system. "It allows employees to personally model the information that’s most important to them in order to make better benefits selections."
Web-based enrollment was just as attractive to the company, which saved about $1 million last year in costs associated with delivery of benefits information, Brandow says.
The move by traditional companies such as IBM to paperless benefits enrollment reflects the way online "employee self-service" is reinventing conventional HR functions. Applications that allow workers to see and manage their own information about benefits, payroll deductions and career changes are having a major impact on both employee satisfaction and the corporate bottom line, according to a 2000 survey by The Hunter Group, an international consulting firm based in Baltimore.
More than 90 percent of 342 companies surveyed—representing some 6 million employees—reported "successful or somewhat successful" self-service systems, as marked by such measures as increased employee satisfaction and as much as 100 percent return on investment within just one year.
"The numbers present an extremely compelling business case, particularly given the importance of employee satisfaction and retention in the current hiring climate," says Alexia Martin, who directed the survey and is a principal consultant at Hunter. "Not surprisingly, most respondents plan to expand their offerings."
Rules, Laws Ease Online Delivery
That expansion, driven by the business case Martin cites, will take place with or without government’s help, but new laws and rules could make online delivery of benefits information easier.
Employers soon will have long-awaited guidance on how to use electronic means, such as corporate intranets and Internet-based sites, to deliver and record employee benefit information without running afoul of the Employee Retirement Income Security Act.
Current regulations permit employers to use electronic means for distributing summary plan descriptions (SPDs), summary annual reports and summaries of material changes to plans. Employers can transmit this information to employees electronically if the employers meet certain requirements, including applying the same formats to electronically delivered notices as to paper documents and informing employees of their right to receive paper copies of any document.
The U.S. Department of Labor’s Pension and Welfare Benefits Administration (PWBA) is considering proposed changes to the current regulations. PWBA’s proposed rules would allow employers broader use of ever-changing—and cost-saving—technologies. While the agency still is reviewing comments from employers, it says it intends to get final regulations in shape by this spring, according to a Labor Department spokesperson.
Central to PWBA’s proposed changes are lingering questions about how employers can guarantee that all employees have access to benefits plan information. PWBA also is considering whether to expand online benefits communication to other benefits information, such as COBRA notices, and whether paper backups always should be required.
Also fueling the move to online benefits technology are two federal laws—already in force—that affect how information is maintained or transmitted electronically.
Administrative simplification requirements in the Health Insurance Portability and Accountability Act of 1996 require most employer-provided health benefit plans to begin conducting health care transactions and exchanging coverage information electronically later this year. The Electronic Signatures in Global and National Commerce Act, signed into law on June 30, 2000, generally gives electronic signatures the same legal standing as ink-on-paper signatures—a standing that may enable HR to place more transactions online.
Add the expected PWBA regulations to those laws and the stage is set for "a revolution" in online HR practices, says Gaelyn Mitchell, senior vice president at the New York office of Chicago-based Aon Consulting.
The electronic signatures law "will make more employers more comfortable with their online communications," says Arabella Hallawell, senior analyst at Gartner Group, a technology consulting firm in Stamford, Conn. "And there is already a significant amount of benefits information online."
"The legislation legitimizes where employers have been going all along," Mitchell adds. "And it will validate and enhance what many already know from a logical perspective as what’s really the only way to go."
Employers Move Ahead
The absence of final guidance on some important issues hasn’t prevented employers from making online benefits delivery a reality. Many companies are moving full-speed ahead with increasingly sophisticated, legal and successful methods.
"The reality is that we as employers are not waiting for someone to tell us how to do this—everyone is moving ahead on it," says Mary Ann Crowley, vice president of global benefits for Nortel Networks Corp. in Alpharetta, Ga. "You cannot be left behind."
Employers seem to agree. Brampton, Ontario, Canada-based Nortel, with 80,000 employees in 150 countries, does all its benefits enrollment online.
Crowley estimated that just 5 percent of the workforce signs up for benefits on paper.
Nortel isn’t alone. Last year, 76 percent of 295 companies surveyed by Washington, D.C.-based HR consulting firm Watson Wyatt reported using a variety of technologies for benefits information delivery, including intranets, the Internet, interactive voice response systems (IVR) and call centers. Sixty-six percent of respondents said their companies already are using such technologies for benefits enrollment as well as information.
A survey of 92 large companies by consulting firm Towers Perrin of New York also mapped a dramatic rise in the number of companies using the Internet to deliver HR information. From 1999 to 2000, the proportion of firms providing annual benefits enrollment on the Internet increased from 10 percent to 39 percent. Those offering the ability to track 401(k)s and make changes online nearly tripled from 12 percent to 35 percent.
Towers Perrin also asked companies that have put HR transactions on the web to evaluate those transactions against the old paper-based methods in terms of timeliness, accuracy and workload.
Among companies that allowed employees to make family-status changes via the web, for example, 100 percent said timeliness improved, 38 percent said accuracy improved and 50 percent said HR’s workload decreased. For companies that allowed web-based open enrollment, 90 percent of the survey participants said timeliness improved, 65 percent said accuracy improved, and 39 percent cited a reduced workload.
Get Started Gradually
So where do most employers start and what methods do they use to deliver online benefits?
The Hunter Group says the most common choices are benefits inquiries and management applications, including open enrollment and 401(k) and pension plan services.
Also high on HR managers’ most-wanted lists are applications allowing employees to take control of their personal data, changing their own family status information online, registering for training and accessing paycheck services.
So is there any benefits information that employers don’t put online? As of now, about the only answer seems to be certain forms, such as beneficiary designations, that still require ink-on-paper signatures. And that may change once employers and their technology vendors get to know the new digital signatures law better.
"Companies will begin where their greatest level of pain is," says Mitchell. She suggests introducing online benefits communications one step at a time, identifying the highest-cost or highest-value benefit and putting that online first. If HR can demonstrate savings and employee satisfaction up front on a high-profile benefit, it will smooth the way for management approval to add other benefits to online communications and enrollment systems.
For example, Schlumberger Ltd., a global oilfield services and technology testing company in New York, first rolled out its Schlumberger Automated Benefits Link system, or SABL, in May 1998, giving employees access to profit-sharing and savings account data. Next came pensions, stock purchases, and health, life and disability plans.
Last year, employees enrolled online, and, in January this year, the company planned to launch an interactive wellness feature, through which employees can ask medical professionals questions and receive responses, such as inquiring about prescription interactions.
As part of this latest addition, employees will have the option of placing their own physical exams on an encrypted area they can download at any time—"like if they’re traveling on business in another country and need medical attention," says Lillian Petty, Schlumberger’s manager of benefits for North America. "They’d have access to this critical information right away."
Schlumberger took a creative approach to getting the word out to employees’ spouses—who are typically dependents and beneficiaries of company benefit plans. It built a "Spouses’ Association" web site, partly, says Petty, to help employees’ mates become more knowledgeable about the company and its benefits so they can "share in the choices together."
Simple but Comprehensive
Another employer moving ahead with online benefits communication is Lucent Technologies Inc., headquartered in Murray Hill, N.J. In 1996, Lucent launched its "Benefit Answers" web site, where U.S.-based employees can learn about their benefit plans by clicking through extensive pull-down menus of options that point employees to the answers they need.
Essentially a giant but highly organized destination containing SPDs, the site is segmented into what Barbara Hockfield, director of HR compensation and benefits communication, calls "logical buckets" of information:
- "Health and wellness," where employees can pick a plan, ranging from company offerings in life insurance to vision care, and select specific topics from pull-down menus.
- "Earnings and savings," which describes 401(k) and employee stock ownership plans, among others.
- "Life@work and home," which deals with work and family benefits.
- "Changing needs," which directs employees through benefits changes caused by events such as getting married, becoming a parent, taking a leave of absence, changing job status or dealing with elder care.
- "Benefit links," which puts employees in touch with Lucent’s benefits providers and other programs.
Hockfield believes that web benefits information must have a consistent onscreen look and feel and must be easy to use. "It’s very important that you ask as little as possible of the individual to get at what they’re after," she says. "The visual organization factors into building our brand and recognition. In many cases, that means less versus more."
For example, putting a 40-page SPD online could equate to 400 screens of information. The company shaved the amount of information appearing per page to create more readable fact screens. The online version is designed for fast navigation, with employees averaging only three clicks to get the answers they seek.
"We really went for simplification," Hockfield says. "It’s kind of like building a Lego system." The site allows employees to print out any SPD information at any time. To ensure that everyone, with or without a computer, is alerted to changes in the benefits plan, HR notifies all employees by e-mail or postal mail of SPD changes. The company estimates it saved $1.2 million the first year it put SPDs online.
A key difference between Lucent’s system and some others: Lucent communicates benefits information via the Internet, not just the corporate intranet. In other words, Benefit Answers is available for viewing by anyone via the Internet—it’s not just residing behind Lucent’s secure computer "firewall," though outsiders cannot see Lucent employees’ personal data.
"We want to reach new recruits, new hires and re-tirees," explains Hockfield. "To go forward profitably, productively and competitively, making this information widely available gives us an advantage overall."
The Cost Question
Another advantage for large employers like Lucent and Schlumberger is they can afford comprehensive self-service systems. For others, the main barrier to online delivery of benefits information is cost.
Last year’s survey by The Hunter Group found that the average company polled spent about $1.5 million on employee self-service systems, with per-employee costs ranging from $35 to more than $1,600, depending on company size and the type of solution used.
Implementation times for online benefits delivery ranged from three months to two years, although the survey found that time and associated costs were reduced by up to 20 percent when application service providers handled the project.
Using service providers is one way that smaller firms can take advantage of online benefit communication. These providers can host and supervise clients’ web sites, customizing the content, plans and programs, and handling employee transactions such as enrollments or pension calculations, usually on the providers’ own computers rather than the client company’s computers.
There are other differences in how small and large firms approach online HR functions, according to the Watson Wyatt survey.
Large companies reported using a combination of their company’s intranet (85 percent of those polled), the Internet (72 percent), interactive voice response systems (63 percent) and call centers (43 percent). Smaller firms are more likely to use the company intranet (74 percent) and public Internet (68 percent) for HR service delivery, the survey showed.
Keeping the Human Touch
Overall, most companies—79 percent—choose a company intranet as their primary method for delivering HR-related services to employees and managers, up from 50 percent just two years ago, according to Watson Wyatt. The use of interactive voice response (IVR)—those familiar "press one for benefits information" phone systems—has declined from 71 percent in 1998 to 46 percent today.
Even so, the need for the human touch can’t be overstated. More companies also are combining web-based solutions with live assistance via employee service centers, according to the Hunter Group’s Martin.
"The best systems marry high tech with high touch," she says. "Employees benefit from the web’s one-click efficiency but can also speak with a specialist when they have additional questions."
Putting benefits information and transactions online helps employees by pushing information out to them, letting them click directly to what they need, rather than making them wade through documents or wait for HR to return calls.
"The biggest gain is that employees can have access when they need to make a decision," says Petty. "There’s a difference between pushing information to employees or letting them pull out what they want."
Susan J. Wells is a business journalist based in the Washington, D.C., area with more than 16 years of experience covering business news and workforce issues.