In the past year, the business world has been marked by significant change. Legislative reforms have forced us to shift our approach to the administration of benefits and how we view wellness and employee involvement in benefit choices. The international financial crisis has left businesses struggling to regain profitability, reduce costs and realign talent to maximize productivity.
“Organizations have had to constantly adjust courses to be mindful of their corporate balance sheets and human capital returns,” says Chet Rhoads, vice president, business development, Aon Risk Services Central, Inc.
For the fifth consecutive year, Aon Consulting surveyed employers across the United States to examine the strategies and tactics their organizations are employing.
Smart Business spoke with Rhoads about the survey and the shifts in employers’ attitudes towards their benefit programs.
What high-level findings were gleaned?
- Recession-driven change. The majority of respondents altered their human resources practices to mitigate the recession. Reducing or realigning work forces (84 percent) and adjusting cash compensation generally by freezing or reducing base pay (77 percent) and incentive compensation (90 percent) were the most common actions. Some 54 percent reduced health benefits or increased employee costs, another 9 percent closed their defined benefit plan for participation or future accruals, and 22 percent suspended or reduced their contributions to plans.
- Shift toward consumer-focused, total rewards packages. Nearly half of the respondents indicated they had already moved, or are moving, away from a paternalistic role toward a consumer-focused approach.
- Need for formal metrics on rewards and retirement programs. There is a strong desire to better align total rewards programs with the company’s financial objectives and employee values and preferences. However, only one-quarter of respondents have formal metrics in place to measure the impact of benefits and policies on their business.
What did the survey say about the specifics of the employer’s total rewards policy?
Survey respondents rated medical care coverage for active employees/families and base compensation as absolutely critical or very important, 78 percent and 79 percent respectively. Incentive compensation was rated behind retirement programs in terms of importance 53 percent rated incentive compensation as absolutely critical or very important, while 62 percent rated retirement plans similarly. Regarding career development, it was rated as highly important by 44 percent.
What did the survey indicate on the subject of new benefit plan realities and legislation?
The survey indicated that the challenges and opportunities presented by the new landscape of health care are being addressed with uncertain or insufficient action and, in some cases, only haphazard success. Cost challenges remain, while benefits and health care remain important to both employers and employees. Beyond employers calculating pure cost, few employers have robust systems to demonstrate benefit plan effectiveness.
What about the 2010 employer subsidy for the most prevalent medical plan?
Forty-five percent say that for their most prevalent medical plan for ‘employee only’ coverage, they subsidize 75 to 84 percent, while 43 percent subsidize 75 to 84 percent for the most prevalent ‘family’ coverage. Respondents use cost-sharing subsidy differentiation between ‘employee only’ and ‘employee +’ coverage.
Which initiatives have employers implemented, or are planning to implement, to reduce costs or improve the quality of health care?
Forty-three percent plan to measure program success in 2011 or beyond, compared to 19 percent currently implemented. Forty-three percent plan to measure/require/reward employee changes in healthy behaviors in 2011 or beyond, compared to 26 percent currently implemented, and 36 percent plan to measure/require/reward dependent changes in healthy behaviors in 2011 or beyond, compared to 13 percent currently implemented.
What type of wellness incentives do employers anticipate introducing?
Combined financial and plan design incentives to promote utilization of disease management and ‘value-based’ services are reported to be introduced by 45 and 47 percent, respectively. These types of incentives can range from pure monetary incentives to reductions in employee contributions.
What are employers doing with defined benefit retirement plans?
Over one-third of respondents continue to sponsor defined benefit pension plans for all employees. Nearly 30 percent either closed or froze their defined benefit plans in the last two years, and another 20 percent are considering such changes over the next two years.
What did the survey reveal on defined contribution retirement plans?
Ninety-six percent sponsor some type of defined contribution plan. However, in response to the economic downturn, nearly one-quarter of survey respondents reduced or suspended their defined contribution plan 15 percent completely suspended and 7 percent reduced their contributions during 2009.
How did respondents feel about an employee’s ability to achieve retirement security?
Sixty-two percent feel at least some responsibility to help employees achieve retirement security. Almost half are concerned about the business outcome of employees working past their productive years because they are unprepared for retirement.
Chet Rhoads is the vice president of business development for Aon Risk Services Central, Inc. Reach him at email@example.com or (412) 594-7596.