Benefits Choices: Educating the Consumer

Consistently demonstrate how your benefits help employees reach their goals.

By Drew Robb Mar 1, 2011
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Even if a company has the best benefits package in the world, it won't get a return on that investment if the employees don't know what's offered and how the benefits can help them.

For example, "Companies offering a 401(k) or pension plan have found that they are not getting the value that they should out of the retirement plan," says Craig Johnson, a principal in Mercer's workforce communications and change business. "Employees need to understand that the company gives them a better total rewards package than one of their competitors."

It isn't enough just to communicate what benefits the company offers. HR professionals need to show how those benefits will meet employees' needs and help them reach their personal goals.

"If you don't take the time and effort and spend a little money upfront to do that communication, you won't get the payoff from employees utilizing the services and the plans," says Ira P. Finn, benefits manager for Komatsu America Corp., a construction and mining equipment manufacturer based in Rolling Meadows, Ill., and chairperson of the Profit Sharing/401k Council of America's board of directors. "It is about engaging the employees, making them know that you are trying to take care of them."

Here are some suggestions on information to include in your benefits messages year-round—not just during open season.

From Providing to Planning

Google earned a reputation as a generous employer with the stock options it gives employees and for benefits such as haircuts, dry cleaning and massages. Boeing offers travel services and elder care.

But benefits won't be of value unless employees know about and use them. Sending brochures detailing all the medical plan options employees can choose from isn't enough. Employees need to identify the choices that best meet their individual needs, and reading through a list doesn't help them do that. They need help planning how to use the benefits—and it must be done one-on-one.

"Virtually all major companies are somewhere in that spectrum of going from benefits communication to benefits planning," says Liz Davidson, founder of the financial education firm Financial Finesse and a columnist for Forbes magazine. "Those within five years of retirement have different issues than those starting out. You have to look at the employee base from a demographic basis and deliver the communication that is relevant to them."

Long gone are the days when employees could expect a defined set of hiring-to-grave benefits. Employees and employers now are developing partnerships to match what the employee needs to what the company offers.

"The buzzword is 'consumerism,' which is another way of saying 'personal accountability,' " Johnson says. To empower employees as consumers of benefits, make sure they "don't just understand how the benefits work, but how to best use them for their own situations."

In most cases, suppliers of health care and financial services are more than willing to help educate employees about how to best use their benefits.

Such education doesn't require major expense. In most cases, suppliers of health care and financial services are more than willing to help. In addition, most insurers and 401(k) and health care providers offer online tools such as retirement calculators or health care assessments for employees.

In addition to offering employees pensions as well as 403(b) supplemental retirement plans similar to 401(k)s, New Trier Township High School District in Illinois brings in financial advisors. "Employees have access to third-party financial planning and retirement planning," says George Sanders, director of human resources. "We bring seminars in-house for those who are getting ready to retire or even our junior employees who are thinking ahead."

The quarterly seminars from financial planners are free to attendees, who can arrange for initial one-on-one consultations as well as further assistance.

Staying Healthy

Employers and employees view health care planning from different perspectives. For employees, it can mean identifying the benefits they should sign up for. For employers, it often includes wellness programs that will cut their expenses. These two aspects of health care planning frequently are promoted together at wellness fairs where biometric screenings are offered along with information on staying healthy and what health care benefits are available.

Barbara Kelly, vice president of human resources for Blue Cross Blue Shield of South Carolina, says that during the past three years her company has concentrated on building participation in wellness programs for employees. Incentives for participation include a $20 monthly discount on insurance premiums if they receive an annual checkup.

Komatsu has its own wellness programs and offers free annual physicals, flu shots and mammograms. "The wellness benefit is paying off, keeping our claims down for future reoccurring instances," Finn reports. "We also find that it has cut absenteeism."

When holding wellness fairs and offering biometric screenings, employers should tell employees why they are being tested. Employees need to know that the information is not going to be conveyed to the company or used in making any personnel decisions. "Any reporting should only be done on an aggregate basis so the employer can identify interventions to be made on a companywide basis," Johnson advises. If the reports identify an issue with diabetes or smoking, for example, the company can provide smoking-cessation or weight-management programs.

In addition to promoting good health, such wellness fairs, checkups and screenings are a first step in health care benefits planning. Without an assessment of employees' health status, it is harder to know how much coverage to purchase. With an assessment, employers and health care providers can offer tools and programs that help employees select plans and forecast how much they should put into health savings accounts.

When employees understand retirement benefits and how those benefits affect them personally, they are more likely to participate in the plans.

Informed Decisions

To make the best health care decisions, employees need to know their individual health care needs and how much treatments cost. In a market dominated by third-party payers, price information can be hard to come by. Employees usually know how much their monthly deductions and co-pays are, but not what it costs to purchase medical treatment. HR professionals can steer employees toward more information.

"It can be daunting to make a decision when you don't know what the average cost of the office visit is," says Jennifer Calhoun, a principal in Mercer's health benefits consulting business.

But now that more employers offer consumer-directed health plans, that type of information is becoming more available on insurers' websites. Using these tools, an employee can see what it would cost to get a knee replacement, compare the price of getting 20 stitches at a hospital emergency room vs. at an urgent-care center, or compare the cost for similar service at two hospitals.

"The more aware you are, the more appropriate actions you can take," Johnson says. Armed with such information, employees make "better decisions about which hospitals to visit, which doctors to use and what is the appropriate use of an emergency room."

In addition to determining initial cost, however, consumers should identify doctors or hospitals with the best outcomes. That information affects patient health and the final expense because fewer complications or side effects mean lower total costs. Some carriers are starting to provide this information.

"There is some complexity to these tools—and it is not a perfect science," Calhoun says. "The medical carriers have improved their ability to provide all that information, and they are much further along than they were five years ago."

A Secure Future

Employers that provide retirement benefits face challenges and potential pitfalls. HR professionals must be careful about how they provide access to financial planning. It's important to avoid any appearance of a fiduciary relationship with employees, so use third-party providers that workers can engage on their own for advice.

HR professionals "can't deliver advice," Davidson says. They have to "communicate and answer questions, but not guide people toward investments or plans. If they do too much, they will cross that legal line."

Komatsu sponsors defined benefit plans and two defined contribution 401(k) plans for its employees. "We take a paternalistic approach to helping our employees understand and meet their needs," Finn explains.

Prudential is a plan administrator for Komatsu, and employees use Prudential's online retirement planning tools. Last year, Finn hired Financial Finesse to conduct financial seminars for employees. "The education is not just about retirement, but to help them if they are in debt, need to save for college or need to do estate planning," Finn says.

Komatsu's employees have been very satisfied with the financial education they've received, according to Finn. This satisfaction shows up in 401(k) participation levels: "Enrollment has continued to increase, even during the downturn," he says. "There haven't been a lot of loans or hardship withdrawals in our 401(k) plan."

When employees understand retirement benefits and how those benefits affect them personally, they are more likely to participate in the plans, Davidson says. When employees have secure plans for their futures, they are less likely to have to defer retirement.

Helping employees plan to use available benefits improves morale, participation and retention.

"You want to recruit, retain and develop the best employees, and benefits are a very big part of that," Davidson says. "Seeing their retirement account balances swell over time, seeing the impact the benefits have over time, keeps them there."

The author is a California-based freelance writer who specializes in technology, engineering and business.

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