A unique self-insured option for employers

It’s no secret that health care pricing varies widely and has a direct impact to the bottom line for employers of all types and sizes.

As health care costs continue to increase, employers have sought innovative and creative strategies to lower expenses. One strategy, which has gained momentum, is referenced-based pricing (RBP). The RBP approach typically doesn’t involve a traditional insurance company or provider network negotiating covered services for the health plan. Instead, RBP sets limits on the amount a plan will pay for certain medical services.

Smart Business spoke to Michael Galardini, director of sales at JRG Advisors, to break down how RBP works and whether it might be right for you.

How does RBP work with health plans?

RBP sets limits on the amount a health plan pays for procedures or services performed in hospitals and free-standing surgical centers without the use of a PPO network. For physician charges, a national PPO platform is utilized. The limits are based on a percentage above the amount that Medicare pays, which is based on the cost that each facility files with the U.S. Department of Health and Human Services.

The limits are selected by employers in consultation with their benefits advisor, to provide a reasonable and fair profit to the provider. A good RBP model considers both Medicare reimbursement and the actual cost to deliver the service; and adds a fair profit margin for the provider.

If the employee is balance billed for the difference, the RBP provider assigns legal counsel to the employee, at no cost, including defending the RBP payment in court.

Employers often partner with a third party administrator (TPA) to establish the best limits for a given medical procedure. The TPA helps conduct market research and negotiate the most appropriate deals with providers. Finding a reliable TPA, which works well with your company and the RBP provider, is crucial for negotiating the best price for your employees.

What are the advantages of using RBP?

Because there is no assigned network for hospitals and surgical centers, covered individuals may seek treatment at any facility they desire. RBP generally provides anywhere from 60 percent to 70 percent savings from billed medical charges. Typical PPOs only provide 40 percent to 50 percent from billed charges.

Hospital billed charges are taken from a charge master that each hospital maintains. The charge master is a list of the retail price of services that the facility charges for patients without insurance, or network discounts. The charge master changes from time to time, however, generally the charges are about 800 percent to 1,000 percent above the amount that Medicare pays the facility. Even after PPO discounts are applied, employer health plans are paying 400 percent to 500 percent above the amount that Medicare pays.

Are there any drawbacks to RBP?

Given the complexity of RBP, employers and employees need to carefully consider a number of things and be properly educated on how RBP will work for their employees. It is vital to work with a trusted partner that is reliable and experienced in the RBP process.

Furthermore, not using an experienced partner (and its legal advocacy) could potentially leave you and your employees vulnerable to providers attempting to balance bills. While the potential for payment disputes between employers, participants and health care providers always exists over RBP, there has been little RBP litigation to date. Litigation is always a potential threat to both the employer and employees, but disagreements over these issues are typically resolved by negotiation.

RBP can be an innovative strategy for lowering health care costs. As the market continues to evolve, employers are seeking cost reductions. The RBP option is unique in its ability to potentially reduce costs and create informed consumers. Is your business ready to investigate this innovative approach?

Insights Employee Benefits is brought to you by JRG Advisors

Beware of these five common blunders when contracting with a PBM

Pharmacy benefit managers (PBMs) manage the pharmacy benefits for 266 million people in the U.S., but PBM contract language has become increasingly complex.

“The terms laid out in most contracts — not to mention the pricing — can be mind-boggling,” says Gannon Murphy, Ph.D., area vice president of Pharmacy Benefit Consulting, Gallagher.

More than half of employers that responded to a recent Gallagher Benefit Services survey said their PBM contract is too complicated and often benefits the PBM at their expense. And only 30 percent understand the details of their contract.

Smart Business spoke with Murphy and Joe Roberts, area vice president of Benefits & HR Consulting, Gallagher, about five mistakes to avoid in a PBM relationship.

What’s the underlying issue?

There is a fundamental difference between price and cost when contracting with PBMs. Price is what is printed on a page — usually in the form of percentage-based discounts off of average wholesale price (AWP), dispensing fees and any administrative fees, and then offset by applicate rebates. Cost is what the PBM actually pays in hard dollars.

What are the five challenges and how can employers sidestep them?

  1. Fuzzy math — Guaranteed AWP discounts are established in each PBM contract for brand drugs, generics and specialty medications, but there is no regulation that governs AWP. Some PBMs use a recognized, objective and independent source to establish AWP; others follow a proprietary algorithm with AWP amounts that make drug discounts look better than they really are.
    So, ensure the contract states both the PBM price quotes and its reconciliation of guarantees will be based on an objective, independent source.
  2. Differing definitions — The definitions of brand, generic and specialty medications differ among PBMs. Some PBMs redefine a portion of the generic drugs, known as single-source generics, as brand drugs. Therefore, the PBM appears to have improved the discounts to both the generics and brand drugs.
    To avoid this, PBM proposals and contracts should use an objective source for the definition of brands, generics and specialty medications.
  3. Transparent-lite — With the demand for greater transparency, many PBMs offer pass-through pricing. PBMs pass through the same discount they negotiate with their pharmacies to their customer and apply an administrative fee. However, many transparent contracts are as murky as traditional ones, and some are worse.
    To get a clearer picture, have the numbers independently modeled and compared by a qualified professional. This will help establish whether the terms are really transparent or transparent-lite.
  4. Inflation games — Prescription drug costs are outpacing overall inflation, and some drug prices have tripled or quadrupled. PBMs attempt to fight this by negotiating with drug manufacturers through rebates and other means. Not all payers, however, get the full benefit. Most PBMs have inflation cap guarantees but don’t always pass along all the money. PBMs also try to tamp down costs and inflation through utilization management programs. They screen the appropriateness of medications before they’re dispensed. But what if the approval rate is 90 percent? That’s not a good use of the plan’s money. It’s also not uncommon to find PBMs preferring certain medications over viable, lower cost alternatives.
    Make sure the PBM incentives are aligned with those of the plan. The contract should secure a benefit to the plan from inflation caps and guarantees that drive sound clinical decisions.
  5. Not-so-guaranteed — PBM contracts often state a shortfall in a particular guarantee can be made up by overperformance in a different guarantee, a practice known as offsetting. Certain guarantees may look good on the surface, but if the contract language that undergirds them is adverse, the value of those guarantees can be feeble or meaningless.

So, before signing anything, ensure that any offsetting by the PBM is clear and equitable and protects the plan’s interests.

Insights Employee Benefits is brought to you by Gallagher

HIPAA laws: What employers don’t know can hurt them

When it comes to the issue of privacy concerning employees and their health care benefits, the Health Insurance Portability and Accountability Act of 1996 (HIPAA) is one of the most misunderstood and miscommunicated laws for both employers and employees alike.

“HIPAA can seem unclear, and when coupled with an employer’s health care plan, it can further create confusion and frustration for employers, HR managers and employees,” says Keith Kartman, client advisor at JRG Advisors.

Smart Business spoke with Kartman about what employers need to understand regarding privacy laws and health benefits.

What is HIPAA?

The HIPAA Privacy Rule, as outlined by the U.S. Department of Health and Human Services, establishes national standards to protect medical records and personal health information. It applies to health plans, health care clearinghouses and health care providers that conduct certain health care transactions electronically. Specifically, the rule requires appropriate safeguards to protect personal health information privacy, and sites limits and conditions on the uses and disclosures that may be made with this information without patient authorization.

In addition, the rule provides for patients’ rights concerning their health information, including the right to examine and obtain a copy of their health records, and to request corrections. The types of patient health care information that must be disclosed to be considered ‘protected’ by HIPAA includes date of birth, full name, diagnosis and medical record number.

How does HIPAA affect employee benefits?

As an employer, you are considered a health plan if you pay for a portion of the cost of medical care. If you pay for a portion of an employee’s health plan or have a self-funded medical insurance plan, you fall under the HIPAA Privacy Rule and compliance.

HIPAA mandates how a health plan or covered health care providers disclose protected health information to an employer, including managers or supervisors. As an employer, you have access to health care information that falls under HIPAA, such as benefit enrollment, benefit changes, the Family and Medical Leave Act of 1993 (FMLA) and any wellness program information. Conversely, employees who pay for a portion of the total cost of an employee health insurance plan are also required to comply with HIPAA.

Under HIPAA, employees must first provide authorization to health care providers before they can disclose any health care related information to an employer. This is why employees must complete Family Medical Leave Forms authorizing the release of their health care information before granting them FMLA leave.

Under HIPAA, how are employers required to protect an employee’s health information?

Employers are required to protect sensitive health care information and changes to benefit paperwork and any associated plan changes that include any information that comes from an electronic health record.

Employers are also required to protect Flexible Spending Account (FSA) and wellness program information. This means program administrators and other involved employees are provided with HIPAA training to ensure employee health care information is protected.

Occupational Health Records concerning employee physicals, workers’ compensation or workplace injury under the Occupational Safety and Health Administration are also required to be protected under HIPAA. This information should be stored in a secure location. As an employer, you should provide on-going HIPAA training to any and all employees who may have access to sensitive employee health information.

Lastly, employers are required to display HIPAA privacy laws in the workplace and notify employees of any company-specific privacy policies. As an employer, you should have a clearly defined privacy violation policy that outlines the process for notification and investigation of any potential privacy violations.

HIPAA laws regulating the privacy of protected health information are complicated and ever-evolving, so employers need to stay up to date on the latest developments and seek the guidance of knowledgeable benefits professionals or their legal counsel to ensure compliance.

Insights Employee Benefits is brought to you by JRG Advisors

Benefits open enrollment 2019: What you need to know

Open enrollment can be a complicated process, especially if decisions surrounding the employee benefits plan selections are delayed. To make matters more interesting, there are legal changes affecting the design and administration of benefits for plan years beginning on or after Jan. 1, 2019, says Aaron Ochs, managing consultant at JRG Advisors.

In addition, if any changes are made to your company’s health plan benefits for the 2019 plan year, those changes should be communicated to plan participants through an updated Summary Plan Description or a Summary of Material Modifications. Employers should confirm that open enrollment materials contain the required participant notices, when applicable. Some participant notices also must be provided annually or upon initial enrollment.

With the assistance of a knowledgeable benefits professional, employers should thoroughly review plan documents to confirm they include any required changes in adherence to the Affordable Care Act (ACA).

Smart Business spoke with Ochs about a few important plan design considerations to carefully review at open enrollment.

What’s important to understand about grandfathered status, the ACA affordability standard and out-of-pocket maximums?

Grandfathered plan status — If an employer has a grandfathered plan, it needs to determine whether it will maintain its grandfathered status for the 2019 plan year. A grandfathered plan’s status affects its ACA compliance obligations from year to year. If an employer’s plan will maintain its grandfathered status, then the Notice of Grandfathered Status should be provided in the open enrollment materials. If the plan is losing its grandfathered status, the employer should confirm that the plan includes all of the additional patient rights and benefits required by the ACA.

ACA affordability standard — Currently under the ACA, an applicable large employer’s health coverage is considered affordable if the employees’ required contribution does not exceed 9.5 percent of their household income for the taxable year. For plan years that begin on or after Jan. 1, 2019, the affordability percentage is 9.86 percent. Employers should ensure that at least one of the health plans offered satisfies the ACA’s affordability standard. Since the percentage increases from 2018, employers could have additional flexibility to increase the employee share of the premium while still avoiding a penalty under the pay or play rules.

Out-of-pocket maximum — Employers should review the out-of-pocket maximum of their health plan to ensure that it complies with the ACA’s limits for the 2019 plan year. The limits for 2019 are $7,900 for self-only coverage and $15,800 for family coverage.
It is important to remember that a high deductible health plan (HDHP) must be compatible with a health savings account (HSA), and the out-of-pocket maximum must be lower than the ACA’s limit. The out-of-pocket maximum for HDHPs beginning in 2019 is $6,750 for self-only coverage and $13,500 for family coverage.

If the employer’s plan utilizes multiple service providers to administer benefits, it should ensure that the plan coordinates all claims for essential health benefits across the plan’s service providers, or that the plan divides the out-of-pocket maximum across the categories of benefits, with a combined limit that does not exceed the maximum for 2019.

How are the HDHP and HSA limits changing?

The IRS limits for HSA contributions and HDHP cost sharing are increasing for 2019. The HSA contribution limit increases from $3,450 to $3,500 effective Jan. 1, 2019. Effective for plan years beginning on or after Jan. 1, 2019, the HDHP maximum out-of-pocket limit increases from $6,650 to $6,750 for self-only coverage and from $13,300 to $13,500 for family coverage. Employers should review their HDHP’s cost sharing limits and determine if an adjustment is required to meet the 2019 limits.

If an employer communicates HSA contribution limits to its employees as part of the open enrollment process, the enrollment materials should be updated to reflect the increased limits that apply for 2019.

Insights Employee Benefits is brought to you by JRG Advisors

New health plan option for small businesses

Employers with 50 or fewer employees have wrestled with rising health care costs and the Affordable Care Act (ACA) reforms for several years. While small employers recognize that health insurance is a critical benefit to attract and retain a workforce that builds a successful business, many have opted to forgo offering benefits altogether due to affordability and administrative burdens.

On June 19, 2018, the Department of Labor (DOL), after much debate, finalized a new rule that small businesses have been waiting for — the ability to again purchase health insurance in a more effective way, as part of an Association Health Plan (AHP).

These arrangements can pave the way for access to more affordable health insurance. In addition, with AHPs, small employers can avoid certain ACA reforms that apply to the small group market. According to the DOL, this will also provide small employers with more affordable health insurance coverage options.

“Small employers joining together to purchase health insurance is not a new concept to the industry. Under current restrictive regulation, however, these types of plans are not considered a single ERISA (Employee Retirement Income Security Act) plan,” says Ron Smuch, insurance & benefits analyst at JRG Advisors. “Each employer is separately responsible for compliance requirements relating to group health plans to include HIPPA (Health Insurance Portability and Accountability Act of 1996), COBRA (Consolidated Omnibus Budget Reconciliation Act) and the ACA. Furthermore, under current regulations participating employers with 50 or fewer employees are required to comply with additional requirements under the ACA.

“Most notable are the requirements to offer ‘essential health benefits’ and to comply with restrictive community rating rules when calculating premiums. The combination of additional complex administrative burden and continued increased premium costs have made today’s fully insured association health plan less attractive for small employers,” he says.

Smart Business spoke with Smuch about how AHPs could work for your organization.

Why is the new AHP ruling a win-win?

The passage of the DOL’s new association health plan ruling is a win-win and without a doubt will be a more advantageous option for small employers, their employees and sponsoring associations going forward.

For employees, AHPs will be an attractive, more cost-effective alternative to ACA plans. Small employers will now have the ability to join together and take advantage of economies of scale to reduce administrative costs while also offering coverage that is more affordable to employees. Furthermore, the employer will be exempt from some of the burdensome ACA requirements. For the sponsoring associations, offering health plans will prove to be a valuable tool for attracting and retaining employer members.

When does the new rule take effect?

The final rule includes a ‘phased’ applicability date.

  • Fully insured plans were allowed to begin operating under the new rule on Sept. 1, 2018.
  • Existing self-insured AHPs can begin operating under the new rule on Jan. 1, 2019.
  • New self-insured AHPs can begin on April 1, 2019.

What should small employers consider?

Small employers should exercise a certain level of caution when considering an AHP. While this new ruling and benefits arrangement may yield reduced health insurance premium costs, some AHPs may actually cover fewer benefits. Most AHPs will not be subject to the ACA’s requirement for group plans to include coverage for the 10 core ‘essential health benefits.’

Employers should carefully review the benefits design with an experienced professional to ensure the plan is adequate for their overall benefits strategy and workforce coverage needs.

Insights Employee Benefits is brought to you by JRG Advisors

How to ensure HR and benefits technology work together

Many human resource leaders have a conflicted relationship with HR and benefits technology. And it’s only growing more complicated as employees demand easy-to-use technology and a personalized experience, and telecommuting and the gig economy gain popularity. Companies must also cope with the threat of cybertheft, and a surge of new vendors and products that touch every facet of the employer-employee interaction.

In light of these developments, the strategic management of HR and benefits technology has become essential.

Smart Business spoke with Gallagher’s Joe Roberts, area vice president of Benefits & HR Consulting, and Rhonda Marcucci, vice president of HR & Benefits Technology Consulting, about how to blend HR and technology.

What are the key workforce trends?

Employees are increasingly working from home and elsewhere. They expect HR systems and processes to accommodate their demands, and many want applications to be easy to use and personalized at a level that’s similar to smartphones. That’s especially true of millennials. Also, employers that participate in the emerging gig economy may hire temporary or part-time employees, even for core enterprise functions. To make sure these workers don’t cross eligibility thresholds for mandated benefits, employers must track contractors’ availability, schedule their work and support time-keeping.

How should employers navigate the proliferation of HR and benefits technology?

When salespeople push innovative products, employers must keep their underlying business objectives in mind. Advanced tools that streamline and enhance processes can certainly help engage, support and manage employees, from hire to retire. However, staying current on new capabilities and their potential value for HR operations is difficult. One risk is vendor updates to installed systems (often automatic) that deliver new and unknown functionality. This can lead to underutilized or duplicated capabilities.

Integration remains a challenge with no right answers — just trade-offs that should be carefully weighed. Even best-in-class solutions with better functionality may bring integration complications. Employers are purchasing an ongoing relationship with their service providers. Getting to know the company and its support philosophy — before committing — is a sound approach.

What can be done to protect employee data?

HR information systems are vulnerable to cyberthreats, and unfortunately no employer is free of this risk. Data loss can range from a misaddressed email that exposes one person’s information to breaches affecting thousands.

Investing in enterprise-wide technology is critical to identifying and stopping cyberattacks, but it’s just as important for HR leaders to work with corporate IT on safeguards. They should have clear sight into how data is collected, held and classified, who has access and which laws apply. In many cases, the greatest vulnerability is the HR team itself. Highly sophisticated phishing and other social engineering techniques may trick unwary employees into divulging information that enables access to sensitive data. One of the best protections is continual and thorough training.

If there’s a breach, a forensic analysis will determine its nature and extent. Companies may be reluctant to inform employees, but an apparent lack of transparency can be damaging when rumors circulate. To minimize fallout, employers need to engage a cybersecurity lawyer who is an expert on personnel data breaches.

What are the steps to better align technology with strategy?

Before decision-makers can align HR and benefits technology with the organization’s human capital management strategy, they need to clearly define that strategy. Next, they should window-shop to understand the range of available technology options. The last step is creating an HR technology governance committee to maintain the strategy, which includes staying on top of current technology releases.

Employers should also implement cybersecurity and incident response plans. These will train HR staff on phishing tactics and other risks, lay out the required internal responsibilities and sequence of necessary actions, and identify external management experts and their roles.

Insights Employee Benefits is brought to you by Gallagher

Could self-funding be the strategy for you?

Self-funding is not a new strategy. But while historically utilized for large employer groups, its availability for medium and small employers is new. And the concept is showing impressive results when it comes to giving employers greater input in health plan design and more control over rising medical benefit costs.

Smart Business spoke with Domenic Pascucci, consultant at JRG Advisors, about the benefits of a self-funded health plan.

Why is control of a health plan so important?

Employers need to focus on where their medical dollars are spent to accurately implement and assess a benefits strategy that stabilizes costs. Employers that cling to their fully insured plan must face the reality that they have no control. They wait until 60 to 90 days from their renewal, hoping for a favorable renewal offer, but they’re often slapped with an increase. And so, the last-minute scramble begins — they modify their plan design, switch insurance companies and shift costs to employees.

These methods are a temporary solution at best. They never serve as a long-term strategy to effectively or efficiently manage an employee benefits program. In a self-insured or self-funded health plan, the employer takes on direct financial responsibility for employees’ health care costs. Rather than being in a large, fully insured risk pool, the self-funding employer takes on the risk for its group.

Why do some employers hesitate to switch?

Self-funding has grown in popularity and proven to save money, but ‘taking on risk’ can be an uncertain and intimidating concept. Many employers are misinformed and hesitate to make the leap from fully insured plans. A Sun Life Financial study found that nearly 50 percent of employers were skeptical of self-funding because of the fear of financial risk and 40 percent were fearful of incurring catastrophic claims.

Most self-funded employers, however, purchase stop-loss insurance to cover catastrophic claims, which protects the employer and caps the financial risk exposure. Furthermore, self-insured health plans are exempt from most state insurance laws and mandates. Not having to pay regular premiums to an insurance company can produce substantial savings. An employer is only paying for claims that actually occur in the self-funded model.

How do employers know if their organization is a good candidate for a self-funded plan?

Self-funding is not the right fit for every employer. Some careful research and analysis should be conducted by an experienced consultant that specializes in this type of funding arrangement. Identifying an employer’s financial situation, risk tolerance, cash flow, historical performance of claims and coverage needs are all factors that will help an employer decide.

What do employers need to know about setting up a self-funded plan?

If employers are viable candidates, their broker should guide and educate them on making the transition. Once an employer is committed to a pre-determined strategy that meets the company’s needs and affordability, a financial model should be developed. It will help identify potential outcome scenarios that will not only reduce the employer’s concerns, but also reduce the risk of incurring a large financial pitfall from a costly claim. Various stop-loss deductibles and their impact should be modeled out.

Once the financial model is set up, the broker can examine plans and benefits to find those that best suit the needs of the employer and employees. This is also a good time to review the responsibilities for managing the cost and affordability of the self-funded plan. To make the transition as smooth as possible, the self-funded plan should be similar to the fully insured plan. Finally, employers need a clear understanding of a third party administrator’s role, the various levels of insurance, network availability and which networks are best suited for them.

What’s the takeaway for employers?

If your goal is to take control of your benefits program and rising costs, it’s worthwhile to examine if self-funding is a solution for you. Seek the guidance of an experienced insurance professional who can provide a detailed analysis of your liability — only then will you be informed and ready to decide whether this strategy is for you.

Insights Employee Benefits is brought to you by JRG Advisors

The advantages of taking work breaks to boost productivity

Many of us spend our work time sitting at a desk, staring at the computer screen, straining our eyes and wondering why we have a nagging ache in our neck and shoulders.

“We are all guilty of not taking enough breaks at work — or any at all,” says Doug Fleisner, sales executive at JRG Advisors. “A workday without breaks drains our mental capacity and lowers productivity; while taking breaks throughout the day is extremely beneficial, both physically and mentally.”

Smart Business spoke with Fleisner about the benefits of stepping away from your office or workstation to take a breather and recharge.

What impact can short breaks have on employees?

  • It promotes creativity and passion. Even if you do not think of yourself as the meditating type, studies have proven that breaks during which meditation and mindfulness are applied lead to a boost in creativity, both in and out of the office. Mindfulness and meditation also increases your compassion and reduces your stress level, which could play a major factor in getting through your work day without flying off the handle at a co-worker, depending on your office environment.
  • It re-focuses your attention and concentration. Did you know that the average attention span for adults ranges from 15 to 40 minutes? Everything that you do throughout the course of a day subtracts from your cognitive resources, which can leave you feeling like you are running on empty at times. Your attention span and concentration need to be rebooted at several points throughout a day. Simply stepping away from your desk to take a walk can actually help the brain regroup, get back on track and focus better.
  • It trims the waistline. Who isn’t looking to trim a few inches from their waistline, right? Turns out a fancy gym membership isn’t the only solution. The Centers for Disease Control and Prevention recommends getting up and moving around for five minutes every hour, which can lower your body mass index and help your waistline, too. Although it’s not rigorous exercise, getting up to stretch and get a glass of water for a few minutes is body movement and every little bit helps.
  • It improves brain function with lunch. Remember mom preaching that breakfast was the most important meal of the day? A midday meal is equally as important. While taking time out for lunch increases productivity, it is important to remember to choose foods that don’t make you feel tired and sluggish. Recommended foods include fish, vegetables, fresh fruits, nuts and even dark chocolate.
  • It protects against job-related accidents. Exhaustion and fatigue are the two main causes of on-the-job accidents. Keeping yourself mentally refreshed and alert with regular breaks can help prevent clouded judgement and keep on-the-job accidents to a minimum.
  • It promotes healthy and happy eyes. Constantly staring at a computer screen for prolonged periods of time can lead to a condition called Computer Vision Syndrome (CVS). Symptoms of CVS include eye strain, blurred vision, and neck and shoulder pain. Taking your eyes away from your computer screen, phone or tablet every two hours for 15 minutes, and looking into the distance for 20 seconds will help keep your eyes, head, neck and shoulders feeling great.

What else should employees expect from taking regular breaks?

It keeps your stress at a minimum. Overloading your brain with continuous thoughts and concerns is not healthy. According to the American Psychological Association, taking time to step away, recharge and relax has a major impact on lowering stress and preventing work burnout.

Developing a ‘break routine’ will force you to stick to a schedule and improve your work effectiveness and productivity. Our thought process isn’t built to be continuous; it needs a breather as much as the rest of our body.

Insights Employee Benefits is brought to you by JRG Advisors

How to develop a strategy to compete effectively for key employees

Business owners and top executives are responsible for developing, nurturing and maintaining the crucial relationships, proprietary processes and valuable assets that make an organization successful and sustainable. Often these key personnel are integral to your competitive advantage. And, knowing today’s increasing competition for talent, it’s important to have the right strategy to attract, retain and engage key personnel and set your organization as a destination employer.

Rory Lough, area vice president of Executive Benefits Consulting at Gallagher, says, “It’s critical that employers evaluate their approach to executive benefits as it can lead to long-term sustainability and ensure the future of an organization.”

“Executive benefits help you invest in talent, in the hopes that talent will help grow the business and stay long term,” says Joe Roberts, area vice president of Health & Welfare Consulting and Key Accounts at Gallagher.

Smart Business spoke with Lough and Roberts about how executive benefits work.

How are executive benefits packages different than general employee benefits?

An executive benefits program is more individualized and flexible. Often, business owners like that flexibility because they can be creative, but so many options also can be a challenge. They need to find a plan that benefits the organization and speaks to the motivations of the key employees.

These plans typically aren’t publicized to the general employees. They may be in an employment negotiation contract or retention contract. Depending upon the type, IRS and Employee Retirement Income Security Act (ERISA) rules may or may not need to be followed. Non-qualified deferred compensation plans offer employers many advantages, such as the fact that the plan isn’t subject to these nondiscrimination rules and, therefore, can be customized for each participant. Employers can provide benefits in excess of the qualified retirement plan limits, create financial incentives (golden handcuffs), and supplement disability income protection and key man protection for the company and employee’s family.

What’s important to understand about developing an executive benefits plan?

It’s a good starting point to link executive benefits programs to organizational goals and objectives. It could be based upon performance, total years of service, total income, job title or even a combination.

You also need to decide which roles and employees are instrumental to the business’s growth. You don’t have to target executives alone. You can design a benefits package for top executives, and a second package for another tier of employees.

You’ll want a plan that addresses the underlying motivations. Why will they continue to work for your company? What attracts, retains and rewards one executive or key employee might differ. The art of designing executive benefit packages includes understanding and identifying those sticking points, the risk exposure, and the laws of taxation or power of tax deferral.

Each package has its tax advantages and disadvantages, so you need to understand all of the implications.
It’s a complicated arena, so make sure you work with a team that specializes in executive benefits strategy. There’s no right answer or perfect puzzle piece. That’s why an expert team can help you identity what will work best for your organization.

How often does a plan need to be adjusted?

Typically, when you implement a plan to make sure you’re accomplishing a certain goal, if that goal changes, then the plan needs to be adjusted. If there are tax changes, the plan needs to be adjusted. Every year, your employee benefits adviser will review the plan. The key is to continually keep this topic in mind when evaluating your overall approach to benefits and reward planning.

Insights Employee Benefits is brought to you by Gallagher

This material was created to provide accurate and reliable information on the subjects covered, but should not be regarded as a complete analysis of these subjects. It is not intended to provide specific legal, tax or other professional advice. The services of an appropriate professional should be sought regarding your individual situation.
Gallagher Benefit Services, Inc., a subsidiary of Arthur J. Gallagher & Co., (Gallagher) is a non-investment firm that provides employee benefit and retirement plan consulting services to employers. Securities may be offered through Kestra Investment Services, LLC, (Kestra IS), member FINRA/SIPC. Investment advisory services may be offered through Kestra Advisory Services, LLC (Kestra AS), an affiliate of Kestra IS. Certain appropriately licensed individuals of Gallagher are registered to offer securities through Kestra IS or investment advisory services through Kestra AS. Neither Kestra IS nor Kestra AS are affiliated with Gallagher. Neither Kestra IS, Kestra AS, Gallagher, their affiliates nor representatives provide accounting, legal or tax advice.

What your employees really want in their benefits package

In today’s job market, employers are finding it increasingly difficult to offer their employees what is of top importance to them — money. This results in the need for employers to get creative when it comes to recruiting and retaining top-notch talent. Where salaries fall short, many employers bolster their benefits packages in conjunction with other incentive-based offerings, says Rob Higginbotham, finance and HR director at JRG Advisors.

Here’s the million-dollar question: What matters most to employees?

Smart Business spoke with Higginbotham about the key areas where employers should pay attention in their employee benefits.

How much does money matter?

Probably without question, the most important factor for any employee is salary. After all, we all want to be paid what we are worth, right? The reality is we are all worth more than simply what a dollar amount reflects, but salary negotiations are a big component to attracting and retaining quality employees.

As an employer, you must pay your best and brightest, and give no reason for these employees to polish up their resumes. Pay attention to the compensation standard in your industry and region. Know what your competitors are paying. And by all means, do not hesitate to proactively talk about compensation with transparency and clarity.

What needs to be included in a comprehensive employee benefits package?

Providing access to a good benefits package that meets the needs of your employees is a worthwhile investment that pays dividends. Although health insurance ranks as the primary concern for employees, providing added benefits to your program goes a long way to strengthening the overall compensation package. Consider including short- and long-term disability insurance, life insurance, dental, vision and voluntary benefits like critical illness, cancer riders, and tuition savings and reimbursement plans. Sponsoring a retirement savings plan is a benefit that can separate your company from the competition, too.

A well-rounded benefits program fosters healthy and productive employees. It bolsters employee morale and demonstrates that you care about your employees’ health, well-being and future potential.

Where does work-life balance come into play?

Your employees’ work-life balance is a crucial factor when it comes to accepting a new job or leaving a current job. Plain and simple, overworked employees develop resentment and that can lead to burn out. There are only so many hours in a day. The more time an employer demands, the less quality time an employee has to spend with his or her family or to pursue interests or hobbies that are critical to his or her well-being.

The balancing act for employers is enabling employees to have lives outside of the workplace, while ensuring that the job gets done. More companies are beginning to offer flex-time schedules, job sharing and unique paid time off plans to help employees achieve the proper work-life balance.

What’s important to understand about career development and providing purpose?

Employees need to know they have opportunities for advancement within a company because it increases the likelihood of loyalty and dedication. If an employee feels stagnant, bored, overlooked or underappreciated in their position, chances are they will actively seek a job opportunity elsewhere. Provide on-going training programs and help employees further develop their skills. Senior management can motivate employees with open dialogue, a chance to work on a new project and constructive feedback, too.

Employees want jobs that provide them with a sense of purpose. In other words, a company’s goals and its measurement of success must be defined by more than financial earnings. Many employees find a great deal of satisfaction working with a company that aligns with their own values, a company that is socially responsible and aims to have a positive impact on society.

Employers can also foster a sense of purpose by taking the time to acknowledge employees, celebrate their achievements and reward hard work. After all, we all want to grow personally and make a meaningful difference.

Insights Employee Benefits is brought to you by JRG Advisors