Employee Benefits 2011: Fewer Guarantees

By Stephen Miller, CEBS Jun 27, 2011

Organizations are managing ever-increasing costs amid the uncertainty of the U.S. economy and the complex health care reform law, according to the SHRM 2011 Employee Benefits survey report, released on June 27, 2011.

In February 2011, SHRM conducted its annual survey (sponsored by benefits provider Colonial Life), listing 284 benefits and asking HR professionals which ones their companies offer or plan to offer. A sample of HR professionals was randomly selected from SHRM’s membership database of about 250,000 individual members.

A key finding: Employers continue to remodel their benefits plans so employees are given greater responsibility to manage their health care costs, retirement and financial security, and leave.

“We have seen many cuts to HR benefit budgets over the last three years,” said Mark J. Schmit, director of research at SHRM. “Organizations have had to be creative to find ways to compensate for the loss of benefits with hard cuts in order to stay competitive in the recruitment and retention of top talent.”

Health and Welfare Benefits

The most frequently offered type of health insurance in 2011 was a preferred provider organization (PPO) plan, offered by 84 percent of respondents’ companies. One-third (33 percent) offered health maintenance organization (HMO) plans, and 22 percent offered a point-of-service (POS) plan.

A sign of the changing landscape is the shift toward consumer-directed, account-based health plans, in which employees are given a financial incentive to make cost-effective spending decisions. Health savings accounts (HSAs), in particular, are becoming more prevalent and are now offered to employees by 35 percent of organizations, up from 29 percent in 2007.

Health reimbursement arrangements (HRAs) were offered by 21 percent of respondents.

Retirement Benefits

Employer-sponsored retirement plans continue to shift away from defined benefit pension plans with guaranteed payout amounts toward defined contribution retirement savings plans. Defined contribution plans, such as 401(k) and 403(b) plans, were offered by 93 percent of respondents (and 70 percent of organizations provided an employer match on some or all of employees’ contributions), while traditional defined benefit plans open to all employees were offered by only 22 percent.

In addition, organizations offered financial planning benefits such as individual investment advice (42 percent) and retirement preparation planning advice (37 percent). While these programs do not directly contribute to employees’ retirement savings, they can help employees plan for a financially sound retirement.

Retirement Savings and Planning Benefits (by Year)

2007

2008

2009

2010

2011

Defined contribution

retirement plan

83%

84%

90%

92%

93%

Employer match for defined contribution plan

74

75

72

72

70

Defined contribution plan loans

69

69

69

69

Individual investment advice

42

40

38

40

42

Automatic enrollment into defined contribution plan

32

32

35

39

41

Retirement preparation planning advice

37

38

35

39

37

Roth 401(k) plan

16

21

24

28

31

Defined benefit pension plan (open to all employees)

40

33

29

27

22

Source: SHRM 2011 Employee Benefits survey report.

Workplace Flexibility

After gradual declines over the last five years, a number of flexible working benefits, such as flex schedules, experienced positive gains over 2010.

More than half of surveyed HR professionals (53 percent) said their organizations provide flextime as a benefit, up from 49 percent in 2010. Twenty percent offer telecommuting on a full-time basis, an increase from the 17 percent of employers that offered it last year.

“The addition of workplace flexibility programs has been one of the primary tactics organizations are using to offset the benefit losses,” Schmit said. “These programs can have positive outcomes for both the employees and the organization.”

Additional Highlights

Among other noteworthy 2011 findings:

Over the last year, there was a slight increase in the percentage of companies offering health care premium discounts for employees who had an annual health risk assessment, participated in a weight loss program, participated in a wellness program and/or had not used tobacco products.

Financial and compensation benefits have experienced considerable declines throughout the last five years. The most significant decreases were to educational assistance programs, incentive bonus plans for executives, life insurance for dependents and undergraduate educational assistance.

Housing and relocation benefits have experienced significant declines over the last five years.

Employee Benefits Strategies

An analysis included in the report offered the following recommendations:

Monitor legislation and its potential impact. The health care reform law in particular will affect how all organizations administer health care benefits. HR professionals will be relied on to lead their organizations through this complex legislation.

Assess your benefits program. An organization’s benefits program should be evaluated not only to monitor associated costs and compliance with governmental requirements, but also to evaluate the competitiveness in the marketplace. More than three-quarters of organizationsin this study (88 percent) reviewed their benefits programs at least once a year.

Communicate with employees.A disconnect exists between the dollar amount organizations spend on benefits and employees’ perception of the value of their benefits package. Total compensation statements, benefits workshops, employee meetings and social networking tools are communication methods that can help ensure that the benefits program is valued, understood and used by employees.

Adopt flexible workplace practices.Well-implemented workplace flexibility options, including paid leave, lead to increased employee commitment and engagement, greater productivity, reduced turnover, reduced stress, and increased profitability.

Benefits Spending

Employer spending on employee benefits remained stable this year. Organizations spent an average of 19 percent of an employee’s annual salary on mandatory benefits, like Social Security and workers’ compensation. Employers spent an additional 19 percent on voluntary benefits and 11 percent on leave pay benefits. Larger organizations spent more on voluntary benefits than organizations with small staff levels.

Stephen Miller, CEBS,is an online editor/manager for SHRM.

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