Communication Evolution

September 1, 2015 | ebn.benefitnews.com

JILLIAN HENDERSON

SERVICESMANAGER

MARGARET KEARNSACCOUNT MANAGER

DANISH HAIDERTECHNICIAN

MICHAEL CRAMERACCOUNT MANAGER

AMIR NASSERACCOUNT MANAGER

CHRISTOPHER URENADIRECTOR

GENNITH JOHNSONASSOCIATE DIRECTOR

COMMUNICATION EVOLUTIONUSING DIGITAL TECHNOLOGIES, ASHA’S HR AND BENEFITS DIRECTOR JANET MCNICHOL PIONEERS WAYS TO BETTER ENGAGE EMPLOYEES – AND MEASURE THE RESULTS

HOW THE IRS’ ‘CADILLAC TAX’

PROPOSAL COULD AFFECT

EMPLOYERS

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Employee Benefit News September 1, 2015 3

CONTENTSSeptember 1, 2015

VOL. 29, NO. 11

FEATURES16 Communication evolutionHow digital tools are helping employers measure the effectiveness of their benefits communications.

20 The total packageNext-generation total compensation statements meet employees’ demands for real-time benefits information.

24 Driving retirement outcomesAutomatic enrollment gets a lot of attention but 401(k) plan sponsors are exploring other auto features to help boost employee savings.

STRATEGY SESSION10 IRS issues ‘first taste’ of Cadillac tax implementationThe IRS continues to seek industry input on the Affordable Care Act’s excise tax on high-cost employer-sponsored health plans.

HEALTH CARE12 Drug plan tiers rise to address specialty drugsWith pharmaceuticals consuming more and more of their benefits spending, many employers are adding drug-plan pricing tiers.

12 SAS sees savings from on-site clinicSoftware provider SAS and Duke University release data from their study of the financial effects of SAS’ on-site health clinic on benefit claims costs.

VOLUNTARY14 How vision, medical plans can work together to improve wellnessHealth data collected by vision providers is quickly becoming the next frontier in comprehensive health care.

RE:INVENT RETIREMENT27 Annuities meaningless if savings ‘practically zero’An interview with Doug Fisher, SVP of thought leadership

24

On the Cover: Art by Jonathan Thorpe

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Employee Benefit News, ISSN#1044-6265 Vol 29 No 11 is published monthly with additional issues in April, June and September by SourceMedia, Inc., One State Street Plaza, 27th Floor, New York, NY 10004, 212/803-8200. Periodicals postage paid in New York, NY, and additional offices. Subscription Rates: $109 for one year in U.S.; $119 for one year in Canada; $165 for one year in other countries. Single copies and back issues $8.50 domestic, $18 international. Change of Address: Notice should include both old and new address including ZIP code. Postmaster: Please send all address changes to EBN/SourceMedia, Inc., P.O Box 530, Congers, NY 10920. Printed in U.S.A. EBN is intended only for employee benefits professionals. The publisher does not perform due diligence on the companies or products discussed or advertised in EBN. ©2015 EBN and SourceMedia, Inc. All Rights Reserved.

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4 September 1, 2015 Employee Benefit News ebn.benefitnews.com

CONTENTSSeptember 1, 2015

IN EVERY ISSUEand policy development for retirement, health and welfare benefit issues at Fidelity Investments.

28 Financial focus a pillar of wellnessAddressing employee financial stress can lead to increased productivi-ty and help an employer’s bottom line.

29 IRS curtails lump-sum DB payoutsPlan sponsors exploring de-risking strategies for their defined benefit plans will have to keep the new rules in mind.

29 PSCA asks for model languageThe Plan Sponsor Council of America asks the Department of Labor for more clarification of the proposed fiduciary rule.

6 On the WebWhat’s new on our blog and slide show channels, plus how to reach us via social media.

7 Private benefit exchange indexA new feature tracking the monthly growth in covered lives across eight private health insurance exchanges.

8 Editor’s DeskBenefit professionals need to be selfish about implementing new communication technologies.

34 Laws & RegulationsBest practices for compliance with the Americans with Disabilities Act.

35 CommentaryBetting on self-funding health insurance plans can have a big payoff but it’s not the right move for everyone.

42 By the NumbersNearly 70% of parents say the cost of child care has influenced their career decisions, according to data from Care.com.

Editorial Headquarters4401 Wilson Blvd., Suite 910, Arlington, VA 22203Fax 703-527-1791

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Editorial AdvisersKay R. Curling, SPHR, senior vice president, human resources, Salient Federal Solutions, Inc; Keven Haggerty, human resources manager, CRV Electronics Corporation; Mike Hauer, benefits man-ager, Cincinnati Board of Education (Cincinnati Public Schools), 1993-2002; John Powers, senior vice president, human resources, Equity Residential, Chicago, IL; Doug Reys, manager of compensation & benefits, Franklin International; Paul Wong, staff salary and benefits manager, International Mission Board

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6 September 1, 2015 Employee Benefit News ebn.benefi tnews.com

FOLLOWUS

READ

PARTICIPATE

VIEW

THIS MONTH AT BENEFITNEWS.COM// //

September’s don’t miss, Web-only content at ebn.benefi tnews.com

FOLLOW US GET LINKED LIKE IT!

➜

➜

This month on EBN’s slideshow gallery:

9 things that make good employees quitBenefi ts can play an important role in retaining quality employees, but if workers aren’t being well-managed then good benefi ts might not make a big diff erence. Travis Bradberry, pres-ident of TalentSmart and co-author of Emotional Intelligence 2.0, shares

some avoidable things managers may be doing that are pushing top talent out the door. View his suggestions at http://bit.ly/1NaGyK0.

9 questions to ask your wellness technology vendorIs it possible to break down the wall between engagement and wellness? Yes, says Henry Albrecht, CEO of Limeade. Just make sure to ask these nine questions before you select a wellness technology partner. View Albrecht’s key questions at http://bit.ly/1JOjhZ4.

10 factors to consider in dependent eligibility auditsWhat are the important questions benefi t managers should ask when crafting a communications strategy for dependent eligibility verifi cation audits? Find out at http://bit.ly/1Pj0YQo.

An excerpt from our blog, Employ-ee Benefi t Views, written by Brian Menickella, co-founder and manag-ing partner of Th e Beacon Group of Companies, a fi nancial services fi rm:

Th ere’s a perfect storm brewing in the 401(k) spaceWith employees fi ghting back and winning against high fees and a new fi duciary standard on the way, we’re on the cusp of some radical changes to the corporate retirement land-scape.

Landmark rule changes such as the Department of Labor’s proposed fi duciary rule and court cases such as Tibble v. Edison, are steadily altering

how 401(k) plans are delivered. Many providers, like Fidelity, are already changing their platforms as a result.

Other providers such as retirement plan giant Vanguard, whose plat-form never worked with brokers or permitted retail mutual funds or revenue-sharing arrangements, are now focusing on the smaller plan market, bringing the benefi ts large plans have enjoyed to employees at smaller companies.

Th ere is clearly a perfect storm brewing, and employers need to be put on notice. Th eir responsibility to be aware of these new laws and prod-uct changes will be overwhelming as the margin for error dramatically narrows.

Do you agree? Join the discussion at http://bit.ly/1TxjSDt.

On Twitter, you can follow us at @EBNmagazine, and Editor-in-Chief Andrea Davis @ebn_Andrea. To follow other EBN editors, visit our staff list @EBNmagazine.

Join our group on LinkedIn, where you can exchange ideas and best practices, suggest story ideas and chat with our editors and your benefi ts colleagues.

Like our Facebook page at facebook.com/EBNmag-azine. Post questions and feedback on our wall or comment on content you see in the magazine or in our newsletters.

➜

LETTER TO THE EDITOR➜I read your editorial (Momentum building for paid parental leave, http://bit.ly/1f9Nf0Y) in the August edition of EBN. I have seen some press on the subject, but have not noticed any momentum.

As a CFO, I can tell you that HR costs are rising signifi cantly faster than [the] consumer price index. Th is is unsustainable. ... where [is] the

money coming from to pay for all of these wonderful ideas? It certainly is not coming from the employees; U.S. productivity growth has been nonex-istent for quite awhile.

Anyone can suggest increasing benefi ts will attract potential employ-ees, but it takes more than wishing to pay for those costs. I also question [whether] a person has a great value

if they can be gone 14 weeks and not be missed. I would argue if a company got by for 14 weeks without someone, they are not needed.

Steve HolupchinskiChief fi nancial offi cerImpressions IncorporatedSaint Paul, Minnesota


BY JOHN MCCORMICK

THE PRIVATE BENEFIT EXCHANGE INDEX ticked up last month, but the feeling among operators is that the pace of enrollment will pick up soon as employers put their 2016 benefit plans in place. Also bolstering the belief of increased exchange activity is ADP’s entrance into the market. The company launched last month a private ben-efits exchange offering that is targeted at employers with more than 1,000 lives.

Currently, one in five employers are on an exchange, in the process of moving employees to one or consider-ing the option, according to the most recent SourceMe-dia Research findings.

Since the June posting of the Private Benefit Exchange Index, the eight participating exchange operators report that more than 335 employers have moved to an online

benefits marketplace. This, in turn, has led to an increase of 63,000 employees and 88,000 more lives now being cov-ered by insurance plans sold through those exchanges.

Employee Benefit News and Employee Benefit Advis-er’s Private Benefit Exchange Index tracks the growth of the online benefit marketplaces.

To compile the PBE Index, EBN and EBA collect from eight leading exchange operators the number of employ-ers using each platform, the number of employees en-rolled in benefits through each platform and the number of lives covered by the policies sold through each plat-form. Every month, the editors aggregate and update the operators’ numbers.

The eight exchanges selected by the editors to partic-ipate in the PBE Index are a representative cross-section

of the operator market and include benefitsCONNECT, bswift, Hanna, Lockton, Medica, Simple Insurance, Sof-theon and Solstice. The information provided by these brokers, insurers and technology-platform companies is self-reported and rounded.

The PBE Index is complemented by a number of other EBN and EBA private exchange content offerings, includ-ing a series of SourceMedia Research reports on the ben-efit marketplaces, a directory of exchange players, a ded-icated web channel and a weekly newsletter featuring the latest benefit exchange news and analysis.

The PBE Index is the first attempt to regularly track the growth of private exchanges and the editors expect the numbers to generate a fair amount of discussion. Feed-back is welcome. ■

PBE Index activity picks up

Source: SourceMedia Research. The PBE Index is a tracking index. Data is supplied by eight leading

private exchange operators — BenefitsCONNECT, bswift, Hanna,

Lockton, Medica, Simple Insurance, Softheon and Solstice — and

compiled on a monthly basis.

EMPLOYEES

2.87M2.82M 2.91M

LIVES

Number of employees enrolled through

PBE Index exchanges

Number of lives covered by plans sold through PBE Index exchanges

JUNE JULY AUG

3m

1m

2m

0

15,500 15,800 15,900

Employers using PBE Index

exchanges

EMPLOYERS

1.46M 1.49M 1.53M

3m

1m

2m

0

0

5000

10000

15000

20000

ebn.benefitnews.com8 September 1, 2015 Employee Benefit News

EDITOR’S DESK

Be selective when choosing communication technology

Like Amy Schumer’s mom, sometimes my knee-jerk reaction to technology is

that it just doesn’t “work around me.”

THE VERY FUNNY AMY SCHUMer did a bit on her Comedy Central show last year about the challenges of helping her mom learn how to use the computer. “I honestly don’t think I can do this. It’s too hard,” she tells her therapist (played by the also very fun-ny Kathy Najimy), who encourages her to confront the issue in order for her to move on with her life.

It resonated with me on a few lev-els. I, too, can identify with the slight frustration of talking to one’s mom about technology (Gmail is not that hard?) but I’ve also been on the re-ceiving end of some not-so-subtle digs (and eye rolls) from my 14-year-old because I’ve yet to master the art of picture collages on Instagram (I’m sure all 20 of my followers are on the edge of their seats.)

The skit also made me think about how employers communicate ben-efits information. It’s increasingly clear that employers must deliver a consumer-grade experience to em-ployees on many levels, including benefits communication. With such a big chunk of compensation tied up

in benefits, being able to measure the effectiveness of your benefits com-munication is a valuable tool to have in your back pocket for those conver-sations with the CFO.

And yet who hasn’t been confront-ed with the sometimes time-consum-ing task of learning a new technology or system? Like Amy Schumer’s mom, sometimes my knee-jerk reaction to technology is that it just doesn’t “work around me.”

As Vlad Gyster, founder and CEO of Airbo, an employee communica-tion and engagement platform, notes in this month’s cover story by Nick Otto, it’s important to keep in mind the everyday environment benefit managers are operating in. Benefit and HR departments are lean enough — communication technology ven-dors must make their products and systems as easy to use as email. So take advantage of digital tools that will help you gain communications insight, but be selective about choos-ing ones that will also make your job easier.

On a different note, I’m thrilled to

be stepping into the Editor-in-Chief’s chair here at EBN. Since I joined the staff several years ago, so many peo-ple — benefit decision-makers, con-sultants, vendors and my colleagues at EBN and our sister publication Em-ployee Benefit Adviser — have been incredibly generous with their time and insights and I am so grateful for their guidance. It takes a village to raise a child, as the saying goes, and the same is true of editors so I extend a big ‘thank you’ to my village of read-ers, benefit industry practitioners and mentors.

I look forward to continuing the legacy of this great brand and invite you to reach out at any time. ■

Send letters, queries and story ideas to Editor-in-Chief Andrea Davis at [email protected].

ANDREA DAVISEDITOR-IN-CHIEF

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STRATEGYSESSION

In this section:>ACA excise tax

When 2018 rolls around, who will be respon-sible for paying any “Cadillac” excise

tax duties? The insurance carrier? Third-party administrator? The em-ployer? And what employer entities and benefit plans will have to be com-bined for purposes of determining any excise tax liability?

These are a few of the practical questions that the regulation writ-ers at the IRS are grappling with. The agency recently issued Notice 2015-52, “intended to continue the process of developing regulatory guidance

regarding the excise tax on high-cost employer-sponsored health cover-age.”

“This is our first taste of the nuts and bolts of implementing the tax,” says Adam Solander, a member of the Epstein, Becker & Green law firm. “The Cadillac tax could get even more expensive,” he warned, for scenarios in which the TPA winds up being the taxable entity.

That’s because in reimbursing TPAs for the excise tax liability they might sustain on the employer’s be-half, the reimbursement itself would be taxable income to the TPA, sub-jecting the TPA to additional tax. Thus employers will need to “gross up” the reimbursement amount to offset that

incremental tax liability, Solander says.

The tax code section added by the Affordable Care Act containing the Cadillac tax provision, §49801, states that the “coverage provider” is the en-tity responsible for paying the tax. For fully insured plans, the health insur-ance issuer is that provider.

The employer is deemed to be the coverage provider with respect to contributions it makes to HSAs and medical savings accounts. For oth-er applicable coverage, the coverage provider is “the person [a legal entity] that administers the plan benefits,” according to Notice 2015-52.

The IRS is considering two ways of determining which entity is the cov-

erage provider. Under one approach, the provider would be the entity “re-sponsible for performing the day-to-day functions that constitute the administration of benefit plans, such as receiving and processing claims for benefits, responding to inquiries, [and] providing a technology plat-form for benefits information.” For self-insured employers that would generally mean the TPA.

The other approach would be to define the coverage provider as “the person that has ultimate authority or responsibility … with respect to the administration of plan benefits … regardless of whether that person routinely exercises that authority or responsibility.” That is, the employer.

Are all divisions of a company combined for purposes of assessing the excise tax liability? The general answer is yes. But Notice 2015-52 asks for comments “on practical challeng-es presented by the application of those aggregation rules.”

For example, companies with many employees in high-cost areas could effectively be penalized if they offer the equivalent health benefits to other employees elsewhere where costs are lower. Would it be fair, the IRS is asking, that the same benefit is given Cadillac status in one region but not in another due to varying costs?

The ACA included a general mech-anism to allow Cadillac tax thresholds to be adjusted according to plan age and gender demographic variations. The idea is that, for example, an em-ployer with an older-than-average workforce — and thus higher health benefit costs — could have its excise tax threshold adjusted upward to avoid an otherwise disproportion-ately high Cadillac tax bill. The notice lays out various ways regulators are thinking about defining that adjust-ment mechanism. The IRS is accept-ing comments until October 1. ■

Richard Stolz is a freelance writer based in Rockville, Maryland.

ACA EXCISE TAX

IRS issues ‘first taste’ of Cadillac tax implementation

BY RICHARD STOLZ

The IRS continues to seek industry input on the Affordable Care Act’s excise tax on high-cost employer-sponsored health plans

A united frontBy Mike NespterBoth the public and private sectors, as well as Dem-ocrats and Republicans, have joined together in an effort to repeal the Afford-able Care Act’s excise tax on high-cost group plans. Set to take effect in 2018, the so-called “Cadillac tax” would force employers to pay a 40% tax on plans exceeding $27,500 for a family or $10,200 for an individual.

While the intent of the tax is to target only high-end plans, many plans that cover middle-class Americans will trigger the tax, Jim Klein, president of the American Benefits Council, said recently as he announced the creation of the Alliance to Fight the 40, a coalition of public and private employers, unions and other organizations dedicated to repealing the tax. Average plans would trigger the tax because it fails to consider factors such as age, gender and location, he said.

“This is not a tax on high-end health plans,” said Terry O’Sullivan, general president of the Laborers’ International Union of North America, “and it will lower the quality of health care for working families.”

The Cadillac tax gives public employers with fixed budgets three poor choices, said Brian Mar-shall, the superintendent of San Diego, Calif.-based La Mesa-Spring Valley School District. He said his district would have to decide between reducing benefits, raising employee contributions or decreasing student services.

In Congress, there is bipartisan support — both Reps. Frank Guinta (R-N.H.) and Joe Courtney (D-Conn.) have bills calling for a re-peal of the tax. Guinta said he wants a standalone bill so no one has a reason to vote against it. “We want it to be as simple as possi-ble,” he said.

The Cadillac tax has been controversial since its inception, Courtney said, and many ACA supporters,

like him, understand that “this is not an integral part of the law.”

Courtney also questioned the Congressional Budget Office’s scoring of the Cadillac

tax, calling it “highly specula-tive.” The CBO estimated the tax will raise $87 billion over a decade — with a quarter of the revenue coming from the tax and three-quarters from

higher income-tax revenue based on the assumption that employers who reduce benefits will increase wages. “That is a very unstable anal-ysis,” Courtney said.

The coalition is united behind a full repeal of the tax, Klein said. “We think it’s fundamentally flawed both in theory and in construc-tion,” he said.

PRUDENTIAL RETIREMENT

Twice since 2000, corporate pension plans have lost over 30% of their funded status in market downturns.1

Will it happen again? No one can predict the market’s future direction.

Now, when markets are recovering and business confi dence is relatively high, might be a smart time to de-risk.

In a recent survey,2 over 50% of fi nance executives said they will seriously consider transferring their defi ned benefi t plan risk to a third-party insurer over the next two years.

Prudential can design a pension risk transfer solution to help mitigate your future risks, allowing you to focus on your core business.

We have nearly 90 years of de-risking experience, grounded in sound risk management and core strengths in asset management and insurance.

To learn more, contact Glenn O’Brien, Managing Director, Pension & Structured Solutions Group, at 860-534-2440. Or visit prudential.com/smarttime

REMEMBER THE LAST TWO DOWNTURNS? YOUR PENSION PLAN CERTAINLY DOES.WHY NOW IS A SMART TIME TOADDRESS PENSION PLAN RISK.

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Insurance products and services are issued by The Prudential Insurance Company of America (PICA), Newark, NJ 07102. © 2015 Prudential Financial, Inc. and its related entities. Prudential, the Prudential logo, the Rock symbol and Bring Your Challenges are service marks of Prudential Financial, Inc. and its related entities, registered in many jurisdictions worldwide. 0264494 0264494-00003-00


HEALTHCARE

In this section:>Pharmacy

>On-site clinics

With the cost of phar-maceuticals con-suming an ever-in-creasing proportion

of health benefit expenditures, many employers are responding by adding pricing tiers to their drug plan de-signs. The move is being driven partly by the exorbitant cost and increasing utilization of specialty drugs.

“A few years ago pharma claims were around 10% of the claim total, and now it’s closer to 25% for many employers,” says Carol Taylor, employ-ee benefit adviser with Roanoke, Va.-based D&S Agency. D&S is a member

of the UBA network of benefit firms, which recently published pharma plan data from its latest health plan survey.

Specialty drugs, often adminis-tered by injection, cover such serious illnesses as hepatitis, cancer and mul-tiple sclerosis.

According to the UBA survey, last year about one-third of surveyed em-ployers offered four-tiered drug bene-fit designs, up from 14% in 2009.

Copays on the riseAlso, drug plan copays have been on the rise. Between 2012 and 2014, me-dian copays for tiers have risen by 25%, to $10, $35, $55, and $100, re-spectively, for each of the four tiers,

according to the survey.The proliferation of specialty drugs

costing thousands or tens of thou-sands of dollars for a monthly dose is spurring plan designs with six, or even seven, tiers. Under the four-tier mod-el, of course, copays rise as buyers

move up the scale from preferred ge-neric to nonpreferred generic to pre-ferred brand to nonpreferred brand. Some plans add two additional tiers: preferred specialty and nonpreferred specialty.

Taylor offers the following exam-ple of copay pricing for a 30-day sup-ply:

• Copays for preferred generics: $3.

• Moving up the six-tier scale: $10 for nonpreferred generic; $30 for pre-ferred brand; the greater of 20% of the drug price or $50 for non-preferred brand; $100 for preferred specialty; and $300 for nonpreferred specialty.

If there is only one source for a specialty drug, a typical plan design would categorize it as “preferred,” Taylor says, since the employee would have no choice in the matter.

The UBA survey found a pattern in which smaller — and thus, perhaps, more financially constrained — firms were more likely to offer four-tier plans than larger employers. For example, 35% of surveyed employers with 50-99 employees are using four-tier designs, versus 20% for employers in the 500-999 employee bracket.

However employers try to steer employees to the most economical drug choices, they are still constrained by the Affordable Care Act’s out-of-pocket limits for health benefits. For single plans, that limit will rise by 3.8% to $6,850 in 2016, from today’s $6,600 limit. That means that there is only so much employers can do to cushion themselves from the high cost and growing prevalence of specialty drugs.

A new specialty drug for people with high cholesterol due to genetic factors will be hitting the market next year, according to Taylor. About 1-2% of the population has that condition, and the drug is estimated to cost $12,000 for a one-month supply, she says. ■

Richard Stolz is a freelance writer based in Rockville, Maryland.

PHARMACY

Drug plan tiers rise to address specialty drugs

BY RICHARD STOLZ

With pharmaceuticals consuming more of their benefit spending, many employers are adding drug-plan pricing tiers

The proliferation of specialty drugs costing thousands or tens of thousands of dollars for a monthly dose is spur-ring plan designs with six, or even seven, tiers.

ON-SITE CLINICS

Software provid-er SAS and Duke University recent-ly published data

from a Phase I study on the connection between on-site health care clinic usage and claims costs, which show employer savings for on-site clinic users.

The study, recently published in The American Journal of Managed Care, fo-cused on three categories of SAS employees and their de-pendents: major users, who designate the on-site clinic as their primary care; casual users, who designate prima-ry care providers outside the clinic, but used other clinic services at least once; and nonusers of the on-site clin-ic.

According to the re-sults, primary care users of the clinic saved SAS close to $600 each in health plan claims costs over three years, according to SAS.

“Our goal was to find out if our primary care patients used fewer SAS health plan dollars than employees and dependents who use other providers,” says Gale Ad-cock, chief health officer at SAS. “The answer was a re-sounding ‘yes.’”

Interestingly, employ-ees and their dependents who were casual users of the clinic had the highest claims costs and use of out-side health care services, although the study authors said further analysis is needed to understand the extent of the clinic’s use.

Adcock believes SAS is “setting the standard for investing in employee health and well-being. The positive impact on employ-ee health and cost savings makes this a worthwhile investment. Add to that the employee time and pro-ductivity benefit of having

these services right on cam-pus, and there’s no question that worksite health care is a

powerful health and business model.” A Phase II study was completed examining wheth-

er the on-site clinic’s prima-ry care patients have fewer avoidable ER visits and hospi-

talizations. Results have been finalized and are expected to be published soon. ■

SAS sees savings from on-site clinicBY NICK OTTO

© 2015 Prudential Financial, Inc. and its related entities. Prudential, the Prudential logo, the Rock symbol and Bring Your Challenges are service marks of Prudential Financial, Inc. and its related entities, registered in many jurisdictions worldwide. Group Accident Insurance coverage is a limited benefit policy issued by The Prudential Insurance Company of America, a Prudential Financial company, 751 Broad Street, Newark, NJ 07102. Prudential’s Accident Insurance is not a substitute for medical coverage that provides benefits for medical treatment, including hospital, surgical and medical expenses and does not provide reimbursement for such expenses. The Booklet-Certificate contains all details, including any policy exclusions, limitations, and restrictions which may apply. If there is a discrepancy between this document and the Booklet-Certificate/Group Contract issued by The Prudential Insurance Company of America, the Group Contract will govern. Please contact Prudential for more information. Contract provisions may vary by state. Contract Series: 83500. This Accident coverage is not comprehensive health insurance coverage (often referred to as “Major Medical Coverage”). It does not satisfy the individual mandate of the Affordable Care Act. It does not meet the requirements of minimum essential coverage as defined by federal law. 0271418 0271418-00001-00

LIFE | DISABILITY | CRITICAL ILLNESS | ACCIDENT | AD&D

To learn more, talk to your Prudential representative or visit prudential.com/financialwellness

WE’VE ALL SAID “ACCIDENTS HAPPEN.” SO WHY DON’T MORE OF US PLAN FOR THEM?

Experience simplicity with Prudential Group Insurance’s new accident coverage.

From playground falls to slips on the sidewalk, we’re all at risk for accidents every day. Now, paying for the out-of-pocket costs they can generate may be easier than ever for your employees.

With our new Accident Insurance, you select what’s covered in your plan. Claims are paid to employees quickly, because they’re paid upon diagnosis of the accidental injury with no need to wait until treatment is performed and with fewer pieces of evidence required. And employees can use benefit payments however they choose.

Accident Insurance with a simpler claims process. It’s the newest way Prudential Group Insurance helps employees improve financial wellness. And makes benefits a better experience for everyone.


Voluntary In this section:>Vision

With eight in 10 adults needing some type of vision correction, employees are much

more likely to go for an annual vision exam than to schedule an annual physical with their primary care physi-cian. Over the years, study after study has shown numerous diseases can be detected through an eye exam. For example, a VSP study of 120,000 of its members found that, over a four-year period, eye doctors were the first to de-tect signs of diabetes 34% of the time. For hypertension it was 39%, and for cholesterol it was 62% of the time, ac-

cording to Dan Schauer, SVP and gen-eral manager at VSP Vision Care.

But what happens to all the health data collected by vision providers is quickly becoming the next frontier in comprehensive health care.

VSP will not only trade data with health plan partners, but also has reminder programs that encourage people who have shown signs of dia-betes, for example, to get their annual eye exam, Schauer says.

Shannon Enders, a founding part-ner at Lakeshore Employee Benefits in Norton Shores, Mich., has found that when he brings the idea of con-necting vision and health data to em-ployers’ attention, “they quickly be-come very interested.”

Naturally, Enders’ self-funded med-ical clients have always been more inter-ested in an overall return on investment but lately, that rule of thumb has applied to an increasing number of employers as the self-funded market goes down-stream to groups as small as five to 25.

“That’s a whole new pool of group-size organizations that all of a sudden are really interested in things like ‘what kind of ROI do I get by putting vision in or by putting dental in?’” says Enders.

Connection not developedHowever, Mark Abate, partner at Strategic Benefit Advisors in South-borough, Mass., cautions that the connection between vision data

and health data is underdeveloped. “There is not a lot of coordination between third-party vision programs and the national health plans,” he says. “Most of the national health plans offer a vision benefit that’s in-cluded as part of their health care benefit, so the capability exists. The pipes are all laid between the inde-pendent vision plans and the health plans.”

EyeMed Vision Care President Lukas Ruecker says the key is two-way integration with the medical provider. “You need both sides of the equation to work,” he says.

For EyeMed, it helps that a large percentage of the company’s business is with the largest medical insurance carriers in the country, which makes it easier to integrate the data on the medical side. Data is sent from the vision provider to the medical plan, but relevant medical information is also sent from the medical plan to the vision provider at the point of service, Ruecker explains.

Two-way integration“It’s a two-way integration where the vision plan not only feeds information into the wellness package, but actual-ly gets information from the wellness package to create an even better vision exam at the point of service,” he says.

At NextLogical Benefit Strategies in Westminster, Md., Lucille Listorti, VP of client services, says the firm regular-ly collects client medical data through VSP. “They’re identifying people who are diabetic, have glaucoma, hyper-tension, high cholesterol. And they’re feeding that information over to us so that we can evaluate medical manage-ment,” she says.

NextLogical also offers clients a comprehensive wellness program, and while vision exams are not a require-ment, employees do earn points for completing one annually, adds Dan-ielle Herndon, a registered nurse and VP of medical management at the brokerage. ■

VISION

How vision, medical plans can improve wellness

BY ELIZABETH GALENTINE

Health data collected by vision providers is quickly becoming the next frontier in comprehensive health care

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In a world of constant distraction, the barrage of emails and ever increasing social media chatter, employers are finding it harder than ever to con-nect with employees. But one thing is clear: When it comes to benefits, historical means of communica-tion no longer cut it.

Only 22% of HR professionals surveyed for a Society for Human Resource management study on communi-cating benefits said that they “strongly agree” with their organization’s employee benefits communication efforts. But with such a massive amount of compensation locked up in benefits — according to the Department of Labor’s most recent data, approximately 31% of compensation for employees in the private sector is spent on benefits — benefit decision-makers have a responsibility to en-sure employers’ investment is delivering value. And yet it remains incredibly difficult, particularly with an annual open enrollment cycle, to measure the effectiveness of benefit communications delivered through traditional means such as paper, or even email.

But organizations such as the American Speech-Lan-guage-Hearing Association are pioneering new ways of

communicating complex health care, benefits and other workplace information to employees and, more impor-tantly, measuring results.

For the past two years, ASHA, the professional associ-ation for speech-language pathologists, audiologists and speech and hearing scientists, based in Rockville, Md., has been using Airbo, an engagement and communica-tion platform that works much like Pinterest, only for em-ployee communications. Twenty-two percent of ASHA’s workforce is age 34 or under, and the organization’s hu-man resources director, Janet McNichol (pictured left, with some of her employees), was looking for ways to bet-ter engage and educate this demographic.

With Airbo, users create ‘tiles’, which are then posted

Communication

evolution

BY NICK OTTO PHOTOGRAPH BY JONATHAN THORPE

DIGITAL TOOLS ARE CHANGING THE WAY COMPANIES MEASURE THE EFFECTIVENESS OF BENEFIT COMMUNICATIONS


to a virtual bulletin board. An email gets sent to employees, alerting them a new tile’s been posted. Employees then visit the board on whatever de-vice they’re using, while employers can see metrics in real-time about how their employees are engaging in the messaging.

As employees work their way through the content, they’re guided to answer a question at the end, which is designed to gauge their understand-ing of the information.

McNichol says new content she posts on Airbo averages about 100 completions, meaning 100 of ASHA’s 275 employees have read the informa-tion and answered the question. “The same can’t be said for intranet mes-sages and emails,” she says.

Despite the rapid adoption of smartphones, many employers are still communicating through these mostly traditional means.

“I’ve seen large organizations where HR sends out a monthly email that’s five pages long,” says Keith Ki-tani, CEO of Guidespark, an employ-ee engagement and communication company that primarily uses video to help employers communicate about benefits. “How can any employee sort through all these [benefit] programs and figure out which ones to use and really connect with?”

When Jennifer Crick, director of human resources at Alta California Regional Center, a nonprofit organi-zation that serves developmentally disabled people in California, re-cently surveyed her workforce to ask them how they preferred to receive information, just one-third of the or-ganization’s 418 employees said they prefer email only.

“Emails go into a void,” she says. “You don’t know if people are reading them or paying attention to them or taking action on them.”

There is no one-size-fits-all way to communicate, but employee expecta-tions of benefits communications are being shaped by the seismic shift in people’s lives as consumers, says Kau-len Taylor, a partner with Aon Hewitt.

“The way we’re used to being communicated with as individuals in the consumer marketplace is vastly different than the way we’re engaged and communicated with in the em-ployee workplace,” she notes. “That disconnect between my life outside work and the way I’m engaged with

[at work] just widens … and I think employers are challenged to keep up with that.”

But benefit decision-makers also need be cautious when implementing new digital tools and platforms, says Vlad Gyster, CEO and founder of Air-bo, who believes the consumerization of employee communication should benefit HR managers just as much as employees.

“The risk is [these tools] could be perceived as making more work for [them] when there is not much capac-ity left,” he says.

As benefit managers evaluate new communication technologies and platforms, they should “almost be a little bit selfish about it because that is the best thing for employees,” he continues. “Find ways to implement these technologies that reduce your workload as well. It can’t just be about boosting employee engagement be-cause that’s not sustainable. It has to be about enabling HR to do more with dwindling resources.”

Generational challengesSome employers point to differences in generational habits being one of the bigger communication hurdles to jump when crafting benefits messag-ing and considering delivery strate-gies.

Traditional print communications are what baby boomers have grown up with, and they may be used to get-ting information that way, Kitani says. And yet, based on his experience, companies with employees whose average age is late 40s have reported seeing higher, if not the highest, en-gagement rates in video.

“It’s interesting we all jump to the conclusion that this is only for the young generation, but the 6 billion views on YouTube a month are not just by young people, they’re by ev-eryone,” he says.

ASHA’s McNichol admits she be-lieved Airbo would appeal primarily to the millennials at the organization but one of the tool’s biggest fans is set to become Medicare-eligible this year. “Sometimes I think we expect our younger staff to prefer those tools and that’s not necessarily the case,” she says. “We do try to put the infor-mation out there lots of different ways so we can meet people where they are.”

In addition, she’s taken a new ap-proach to the more traditional one-and-done communication strategy.

“People think something has been communicated — they check it off their list when it’s been posted or shared in some way,” she says. “The way we define it here is, it hasn’t been

communicated until somehow the person on the receiving end has ac-knowledged they’ve received it. We just keep putting it out there again and again in all these different ways until people are acknowledging that they’ve received it. When we get sig-nals that people have received the in-formation and made a choice about it, then I can check it off the list.”

Understanding the needs of the employee audience — their behav-iors, attitudes, and demographics and analyzing and segmenting that audi-ence appropriately “and being able to say ‘these are the people we need to engage in these programs or ac-tivities’ will be important to creating new communication strategies,” says Taylor.

“It goes back to the less of the one-size-fits-all in communication and more targeted, precise one-to-one level of interaction that we’ve come to expect in other aspects of our lives,” she continues. “If I log on to something online, [it] knows I’ve been here, knows what I’ve bought, knows way more information about me than I could ever imagine and I’m being set up and directed to the things that matter most to me based on the data points coming together.”

Replicating that kind of consumer experience in the workplace will help employers in their goal of getting peo-ple get to the things that matter most to them, and cut out the noise of the other things that don’t.

And as employers start to move toward more digital formats, measur-ing engagement levels will become easier. “We think that’s going to be a critical step for companies to think about when they try these new forms,” says Kitani.

The big takeaway is that the shape of communication has shifted and now is the time to make that shift in the benefits communications space, Taylor adds.

“Once size won’t fit all from a channel or message,” she reiterates. “Take baby steps to build out the ecosystem to be more dynamic and targeted. It’ll take a lot of change, but now is the time. I think we’ve been sitting back as HR and benefits com-municators. There’s no more waiting — we’re about to be completely left behind.” ■

With files from Andrea Davis.

Change managementParker McKenna, chief human resource officer for Springfield (Mis-souri) Public Schools, was recently at the forefront of a system-wide restructuring of the school system’s leadership team.

“Everyone was affected,” he said of the reorganization. And with more than 4,000 employees and 60 facili-ties, the task of effectively educating and communicating the company message was no small task.

“We tried not to differentiate, and we wanted one voice,” he says. “We started talking about the ‘why’ for the change, and working with the communications department, were able create a clear message from the executive level down.”

To be successful, employers must have their finger on the pulse of their employee population, McKenna advises. “Get that by asking, ‘how do you prefer to be communicated with?’

Second: It’s really important to understand the climate and culture of organization, says McKenna. “What’s helping or hindering your engagement? Once you know that, build your communication around those issues.”

For example, if employees don’t feel they’re being a part of the com-munication, you need to tackle that head on, he says.

“Think about things like blogs or town hall forums that can help specifically address gaps in culture or engagement,” McKenna adds. “Those I think are keys to helping organiza-tions communicate the right way and ultimately engage.”

Another tip Kitani suggests is to take an evolutionary approach in making changes to your communica-tions structure.

“Don’t think, ‘I’ve been doing my brochures, but now we’re going to strictly text messaging,’” he says. “Those kinds of dramatic things may not be the most effective. You evolve to that, and then you measure its effectiveness.”



There was so much anticipation surrounding Sedgwick’s first-ever total compensation statements that about half of the third-party administrator’s more than 11,000 full-time and part-time employees viewed them the day they were released in 2014.

“What is different about our statement and sets us apart is that we do a projection going forward from the current year saying ‘this is what you will prob-ably get if you stay with Sedgwick for the entire year,”’ says Tricia Enyart, VP of compensation and benefits for Sedgwick, noting that bonuses and overtime pay are not included in that mix.

She’s also grateful for the chance to monetize and highlight a generous paid-time-off program of 20 vaca-tion or sick days, plus holidays, to show the workforce that “there’s a lot of money that they earn when they’re not even working.”

The statements, which were mailed to all employees except for about 50 temps, include a brief description and monetary value of base salary, bonus and commissions, as well as health and welfare benefits, retirement savings, voluntary benefits, PTO and any other company-provid-ed programs.

Total comp statements represent a powerful conduit to assemble, at the very least, the financial components of the overall value proposition that an employer is pro-

viding to employees, according to Brad Wolfsen, SVP for bswift, a vendor of cloud-based technology and services for employee benefits and health exchanges that produc-es total comp statements for employers.

Burnishing the value propositionAnd while employees are paying relatively more for their benefits than in the past, he says these statements allow them to view incentives that cannot be calculated in a straightforward manner so that it’s “relevant and simple for them to understand.” As a result, they can develop a much better appreciation for the full value of their total rewards package.

Total comp statements have vastly improved over the years, according to Bruce Elliott, manager of compen-sation and benefits for the Society for Human Resource Management. Not only are they now more comprehen-sive than ever before, but he also notes that “the advent of real-time ERP/HRIS platforms such as OracleHR/Peo-pleSoft and SAP updates to total reward statements are much more current than they used to be.”

With an increasing reliance on smartphones, “every-body expects things in real time, and they want to find out about their benefits right away,” observes Karen Venson, client relationship manager for bswift.

The move away from paper-based communications to more of a real-time calculation mirrors the online bank-

THE TOTAL PACKAGE

BY BRUCE SHUTAN

NEXT-GENERATION TOTAL COMPENSATION STATEMENTS MEET EMPLOYEES’ DEMANDS FOR REAL-TIME BENEFITS INFORMATION


ing trend. “I don’t think anyone looks at their [bank] statement anymore,” Wolfsen says. “They want real-time information about their balances. To-tal compensation statements have to meet the same expectation.”

This is evident at MedAmerica Fi-nancial Services, Inc., which is poised to roll out a new-and-improved total comp statement to about 2,000 of its 4,500 employees. Katrina Tange, the company’s senior benefits manager, is enthused about the inclusion of a “candidate portal” that bswift devel-oped, allowing prospective new hires

to model their full compensation for an instant comparison to their cur-rent job. “That is a huge recruiting tool,” she says.

Brief and to the pointA shift in thinking about total comp statements now favors a more visual and relevant presentation that also values brevity over including too many details, observes Mike Kloss, a communications consultant at Aon Hewitt. He says there’s also a mix of paper-based and online formats that are turning a long-time annual event into a yearlong, real-time process that appeals to legions of millennials who are entering the job market.

But having said that, Kloss be-lieves paper is still king for such a high-level form of employee commu-nication. “Online usage is a lot lower than people realize,” he explains, “and I think one of the [reasons] we see a resurgence of print, even with total compensation statements, is the fact that you’ve got to get to people out there.”

This means it’s more important than ever not to rush through state-ments to meet certain timelines. “You don’t want to sacrifice quality for speed,” Kloss cautions, noting the all-important commitment to accuracy.

Total comp statements are a tre-mendous tool for promoting trans-parency in compensation, “so it’s important that you assemble the data

rigorously where you’re modeling the price of something and what the model is that you’re using,” according to Wolfsen.

Not a fit for everyoneDespite their value, total comp state-ments may not work for everyone — at least until a meaningful strategy can be formulated — and in cases where most of the workforce is part-time or seasonal, adjustments may need to be made if they’re deemed necessary enough.

One such organization is Regis

Corporation, whose workforce consists mostly of part-time hairstylists who work in salons, do not qualify for health benefits and instead are focused on their pay and work environment.

Drew Fesler, the company’s AVP of HR, says it’s important to first deter-mine a business objective associated with total comp statements before offering them. Since the value of this strategy is unclear to Regis, there have been no investments made in the technology, process or capabilities to present uniformed comp statements.

The biggest obstacles right now involve updating antiquated systems as well as targeting a workforce that consists of disparate segments. Fesler believes companies that are more ho-mogenous benefit from “the ease and simplicity of applying different types of philosophies to comp and benefits, and other aspects of rewards and rec-ognition, to their entire population.”

Roughly 17,000 of 50,000 Regis employees are eligible for health benefits, but if total comp statements are offered at some point, Fesler says they’d probably go to the entire work-force. Although it’s being discussed, such a move is still considered a low priority relative to other initiatives.

Another key determination in deciding on a total comp statement would be to craft compelling messag-es for employees.

“It could be increased awareness of the complete offering or a way to market underutilized aspects that

may require additional uptake or in-terest,” Fesler explains. “Certainly, there’s a heightened interest to be much more forthcoming in consoli-dating information about what em-ployees are earning and what they receive.”

More bang for the buckFesler has seen the benefits and com-pensation function evolve to accom-modate a broader view of rewards and recognition, such as learning and development, as well as “how the or-ganization is providing a complete

employment deal for employees.” Elliott says the value of adopt-

ing a total rewards strategy is that HR departments are able to achieve a significantly bigger bang for the company’s buck. There’s a tendency for employees to fixate on base sal-ary and relatively small pay increas-es, “but when you add in bonuses and employer-provided subsidies on benefits,” he observes, “the increase to total rewards can, and usually is, much more substantial than the 3% increase that the employee sees in their salary.”

Another key development is the emergence of creative campaigns that periodically focus on different aspects of the total rewards approach. “So maybe one quarter, it’s tied to the compensation area,” he notes. “The next quarter might focus on well-ness ahead of enrollment. In the next quarter, there’s a big push for career development.”

MedAmerica’s Tange says employ-ees don’t really know the cost of their medical care, “so when they see the employer portion that’s paid, I think that will be huge.” Another part of the proverbial “hidden paycheck” that she’s enthusiastic about revealing is a generous 11.2% retirement savings match, as well as any forfeited match-es on the first 6% of contributions.

Sedgwick’s senior leadership had long sought a total rewards approach to benefits and comp. A 2013 change in benefit administrators led to the

creation of Sedgwick’s first total comp statements. Enyart says the aim was to ensure that employees could do apples-to-apples comparisons of their entire benefits and pay package if they were thinking about leaving the company or if someone made them an offer.

“So from a retention perspective, we think it’s a valuable tool,” she adds.

Recruiting toolFrom a recruiting perspective, Kloss believes total comp statements can make all the difference in keeping top

talent from “going down the street for an extra $1,000” for the wrong rea-sons.

“If they knew some of the bene-fits and value that some of the orga-nizations have out there compared to their competitors, I think that there’s going to be an even bigger need for these things in the coming years as the economy starts to pick up.”

Of course, there are caveats to consider when embarking on total comp statements. For example, Elliott suggests that self-insured plan spon-sors steer clear from adding claims paid by the company on behalf of the employee. The reason: privacy and HIPAA issues. He says it’s better to “provide actual numbers, and not an-nualized figures, that reconcile with an employee’s W-2.”

He also recommends that these statements be simple to understand and read with a pie chart that shows the ratio of base to bonus to benefits as it relates to total compensation.

With all the time and effort that total comp statements require, it’s critical for employers to make sure the presentation is compelling. Oth-erwise, as Venson suggests, there’s a good chance that no one will read the statements, and therefore, employees will miss a tremendous opportunity to know and appreciate the full value of their benefits and compensation. ■

Bruce Shutan is a Los Angeles-based freelance writer.

“I don’t think anyone looks at their [bank] statement anymore. They want real-time information about their balances. Total compensation statements have to meet the same expectation.”

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When it comes to automat-ic features in retirement plans, automatic enrollment gets the most attention, but plan sponsors are exploring many other automatic options to help employees do a better job of saving for retirement, including auto esca-lation, auto rebalancing, model portfolios and qualified default investment alternatives.

“We’ve seen a fair amount of plans adopting auto enrollment, especially when they are coming on board, a startup plan or converting from a prior recordkeeper. That seems to be a good turning point to affect change,” says Geno Cufone, senior vice president of retirement administration at Ascensus in Dresher, Penn.

About 16% of Ascensus’ plans have automatic fea-tures, which may seem small but the majority of the company’s plans are under $5 million and serve 25 to 75 individuals.

“The plans that offer auto enrollment have greater participation rates and employees are starting to [save] at a much earlier age than we’ve seen in the past,” Cu-

fone says. “The millennials are getting the benefit be-cause more plans are adopting these automatic features early on in their lifespan.”

Pirie McIndoe, vice president and defined contribu-tion director at Sibson Consulting, says that automatic enrollment has become a really key part to getting peo-ple to start saving.

“What we all know is the greatest force in business in the universe is inertia. Once something is in motion, it tends to stay in motion. Once you get someone to start contributing, generally they will continue to contribute,” he says.

If businesses can get employees to begin contribut-ing at an early age, they will see a benefit, says McIndo, pointing out that those early contributions, along with employer matches and compounded interest, make up the bulk of the assets available to participants upon retirement. More than half of the wealth that comes in comes in during the last 10 years before retirement, he says, primarily on the underlying accumulation an em-ployee creates by the time they turned 55.

Many companies that use auto enrollment are only using it for new hires. Many retirement experts recom-mend that companies apply auto enrollment to current employees who previously opted out of the plan as well. They have the opportunity to opt out once they have been opted in, but that classic inertia can work in their

Drivingretirement

outcomes

By Paula Aven Gladych

Automatic enrollment gets a lot of attention, but 401(k) plan sponsors are exploring many other auto features to help boost employee savings



own favor as well. Only about 2% of employees who previously opted out elect out of that auto enroll-ment, Cufone says.

The majority of plans that are using automatic enrollment are defaulting employees in at a 3% de-ferral rate, but in the past year, Cufone says he has seen more plans adopt a higher initial default defer-ral rate.

“If you are auto enrolling at 3% and the majority of those employees are not highly compensated em-ployees, it could drive your average deferral percent-age down, which could cause you to fail nondiscrim-ination testing. If you set it at 6% or a higher deferral percentage, you have a greater opportunity to influ-ence passing nondiscrimination,” he adds.

The added benefit is that employees who are de-

ferring at a higher rate are much better prepared for retirement.

Auto escalationAbout half of plans that adopt auto enrollment also adopt auto escalation, which automatically in-creases an employee’s retirement plan deferral rate by 1% annually until it reaches a target number like 12%, Cufone says.

“We recommend if you are going to adopt a lower initial deferral rate because you don’t want to be too aggressive about how much is automati-cally taken out of a paycheck, having auto increase is ideal,” he says.

Carolyn Wood, director of retirement for Bim-bo Bakeries USA in Philadelphia, Penn., said earli-

“Once something is in motion it tends to stay in motion. Once you get someone to start contributing, they will... continue to contribute.”

er this year that Bimbo was working with Fidelity to im-plement an easy enroll pro-gram that uses anchoring to get employees to not only

opt in to their retirement plan but to do so at a high-er allocation rate than the typical 3%. Easy enroll gives employees three allocation

choices: 6%, 8% or 10%.When given a choice,

plan participants will most likely choose the lowest opt-in amount.

Auto rebalancingHaving an automatic rebal-ancing feature is helpful in ensuring plan participants keep the investment alloca-

tions they’ve chosen as the market moves up and down. The feature allows plan par-ticipants to set an auto rebal-ance once a quarter, annually or semi-annually.

“We have the ability to set it at the plan level or set it so each participant can set auto rebalance as part of their portfolio,” Cufone says.

Model portfolios Many plans are moving to some sort of model portfolio that employees can be de-faulted into.

“That is a trend we are starting to see more and more of and also having a qualified default investment alternative that is set with a specific allocation to go hand-in-hand with automat-ic enrollment,” Cufone says.

Model portfolios are created by investment pro-fessionals out of the invest-ment options that already are available in a compa-ny’s retirement plan. Each model appeals to different types of investors, like those with a conservative mind-set who want less risk, those who take a more moderate approach to investing and those who are more aggres-sive and want to pursue real growth in their portfolios.

It makes it easy for in-vestors who aren’t as savvy to end up with a diversified portfolio at the risk tolerance that fits best with their per-sonal retirement goals. Most plans that offer model port-folios expect that employees will place 100% of their asset allocations into this portfolio.

Many plans have started offering target-date funds as their qualified default in-vestment alternative to help employees who don’t know anything about investing save for retirement. The goal of these is to move invest-ments into less risky options as a person nears their target retirement date. ■

Paula Aven Gladych is a free-lance writer based in Denver.

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WHILE SOME RESEARCH SUGGESTS employees are willing to give up some fi-nancial rewards today in exchange for a secure retirement income tomorrow, few plan sponsors offer annuities or guaranteed income options within their 401(k) plans. EBN spoke to Doug Fisher, SVP of thought leadership and policy development for retirement, health and welfare benefit issues at Fidelity Invest-ments to explore this apparent lack of interest on the part of plan sponsors and whether or not defined contribution plans can deliver on long-term financial security for workers.

Can DC plans deliver on the promise of financial security in retirement for the majority of participants, the way defined plans did?

I believe we are at an inflection point. We’re moving into the third gener-ation of DC plans. The ability to use data and analytics to analyze workforce behavior and incorporate the insights that come from that into plan design can help employees at all stages — pre-retirees, mid-career and the millennials — get on the right path to reach a reasonable level of financial security. Employers are shifting their focus from retirement asset accumulation to income replace-ment, which was the model for the traditional [DB] plan.

Is this leading many to incorporate annuity options into their DC plans? We’re not seeing employers in any great numbers saying, ‘I want an income

annuity or guaranteed income in the plan.’ That may happen later. What we are continuing to focus on is employee participation rates, contri-

bution amounts and the investment design to ensure that any kind of guaran-teed income will be meaningful. It doesn’t matter whether you have an annuity

Annuities of little value if savings are ‘practically zero’BY RICHARD STOLZ

FINANCIAL FOCUS A PILLAR OF WELLNESS

RETIREMENT EDUCATION

Addressing employees’ financial stress can increase productivity

P. 28

IRS CURTAILS LUMP-SUM DB PAYOUTS

DEFINED BENEFIT PLANS

Plan sponsors exploring DB de-risking options must keep new rules in mind

P. 29

MORE ONLINE Plan sponsors consider 401(k) reviews Does the DOL fiduciary rule favor fee-based brokers? Retirement savings shortfalls becoming state problem Retirement communications beyond the boomers How to maximize retirement ‘paychecks’

For these stories and more, go to ebn.benefitnews.com/

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Financial focus a pillar of wellness

or not if your savings are prac-tically zero.

Should regulators create de-tailed standardized defini-tions for specific investment choices that describe invest-ment goals and strategies, but also cost and transpar-ency features?

Simplicity drives under-standability, and any time we can simplify the names of things, that helps. [Plan] sponsors, especially those larger employers that do custom funds, can pick the names that they want. But as for cost, that is usually a pretty minor factor in how things work out for the average employ-ee, compared to whether they’re saving at the right level, and whether they are invest-ing well to meet their goals.

Many sponsors believe that defaulting par-ticipants into a target-date fund is the way to go. But is that always true?

That is the core strategy for employers whose employees don’t put the mindshare around investing. A lot of them just don’t want to become investment experts. Maybe they’d rather play golf or read books or pur-sue a different hobby, and that’s fine. But there’s more to decide upon than whether to use target-date funds as the default.

We talk to employers about where they should set the ini-tial deferral rate. Historically, many have set it at around 3%, but that usually is not enough when you do the math and project the income replace-ment ratios. So the first thing we do is ask employers to con-sider increasing the auto-en-rollment to at least 6%. We’ll say ‘Can [you] phase it in, or just move it to 6%?’ and always have a strong communication plan.

How do you set the glide path of your tar-get-date funds?

We have tens of millions of investors, and we look at their retirement spending behav-iors to help us make sure we have the right glide path. We can adjust it as needed based on what we see. For example, if participants aren’t where they need to be with the assets they have accumulated at a particular stage, we might be a little bit less conservative. Our glide path five years ago was different from what it is today; we have a higher equity allo-cation closer to the target date. We also incor-porate our presumptions on how the mar-kets will grow, changes in interest rates, and even mortality rates. Our asset allocation team looks at these and periodically makes adjustments to the glide path accordingly. ■

ADDRESSING EMPLOYEES’ FINANCIAL STRESS can lead to in-creased productivity and help an employer’s bottom line, just two of the reasons benefit advisers should be working with com-pany C-suites to implement a financial wellness program, says Jeffrey Tulloch, vice president of MetLife PlanSmart.

Many employees spend 12-20 hours per month on financial matters at work, costing employers thousands of dollars a year, he told attendees of Employee Benefit Adviser’s Workplace Ben-efits Mania recently. What’s more, employees without current access to financial education say they would be interested in ac-cess to it at their workplace, Tulloch says.

“Financial education needs to be a pillar of employee well-ness programs. Modern wellness programs have grown to in-clude many different components. We need to make sure finan-cial wellness is a component,” he says.

Implementing a successful financial wellness program requires four key pieces, Tulloch says, the first of which is ex-ecutive buy-in. “If we have the CEO active in the program and buying into it, promoting it, we’re going to get a different result,” he says

Second, employers must work to create a curriculum appro-priate to the employee base. “Financial education is not one-size-fits-all,” says Tulloch.

Education is valuable, but if employees aren’t encouraged to act upon their new knowledge, it’s useless, says Tulloch. That’s why employers should next facilitate one-on-one employee meetings with advisers to enable and encourage employees to take action toward financial wellness. Group meetings and classes provide valuable overall information, he says, but one-on-one meetings enable employee action.Lastly, every success-ful financial wellness program should have a strong internal communication strategy.

Employers should also evaluate whether a program is af-fordable, credentialed, available where employees reside, and whether the program execution will be easy, Tulloch advises. ■

BY MELISSA A. WINN

EDUCATION

PLAN SPONSOR PRIORITIESThe primary concern of retirement plan sponsors is ensuring the plan complies with regulations, according to a survey of 401(k) plan sponsors conducted by Cogent Wealth Reports. Here’s the percentage of plan sponsors who ranked the following concerns as their No. 1 focus:

Source: “Navigating Change in the 401(k) Market,” Cogent Wealth Reports, 2015.

5%

6%

12%

9%

16%

13%

20%

21%

Changes to plan design

Re-evaluating the plan provider

Adequately preparing participants for retirement

Enhancing participant education/support

Increasing enrollment/participation/deferral rates

Re-evaluating theinvestment menu

Reducing plan costs

Ensuring the plan is in compliance with regulations

Doug FisherSVP, Fidelity


THE INTERNAL REVENUE SERVICE and the Treasury Department have thrown a wrench into the pension de-risking plans of many corporations with new regula-tions aiming to eliminate the lump-sum payout option for retirees who already are receiving retirement benefits from their defined benefit plans.

“The regulations, as amended, will provide that qualified defined benefit plans generally are not permit-ted to replace any joint and survivor, single life or other annuity currently being paid with a lump-sum payment or other accelerated form of distribution,” according to the IRS and Treasury. The amendments took effect July 9.

What this means is that employers who are explor-ing de-risking options will have to keep these new provi-sions in mind when implementing a lump-sum window opportunity for former employees or those who are al-ready retired, says Anne Waidmann, a director in PwC’s human resource services practice in Washington.

The types of permitted benefit increases described in the regulations include only those that increase the on-going annuity payments and do not include those that accelerate the annuity payments, Waidmann said.

“In talks with IRS personnel, we have confirmed that there is no intention to prohibit plans from paying lump sums to participants upon plan termination, though that circumstance was not discussed in the notice,” she says.

Plans that already began de-risking proceedings be-fore July 9, or adopted an agreement with a labor union specifically authorizing a lump-sum window prior to July 9, are exempt from the new rules, as are those plans that were the subject of a private letter ruling or deter-mination letter issued by the IRS before July 9. If plan participants were officially notified about the lump-sum

risk-transferring program prior to July 9, those compa-nies are also exempt from the ruling, she says

A recent GAO report on lump-sum windows con-cluded that participants need better information when offered a lump-sum window and made recommenda-tions to IRS and DOL on ways to change their rules re-garding those situations.

The report found that participants “potentially face a reduction in their retirement assets when they accept a lump-sum offer. The amount of the lump-sum payment may be less than what it would cost in the retail market to replace the plan’s benefit because the mortality and interest rates used by retail market insurers are different from the rates used by sponsors, particularly when cal-culating lump sums for younger participants and wom-en.”

The GAO reviewed 11 packets of informational mate-rials provided by sponsors offering lump sums to thou-sands of participants and found that they “consistently lacked key information needed to make an informed decision or were otherwise unclear.”

Many of the packets were not clear about how the lump-sum value compared to the value of a lifetime monthly benefit. Others didn’t state the interest rate or mortality assumptions used, limiting participants’ ability to figure out how their lump-sum payment was calculated, the GAO said. One important omission was informing participants about the benefit protections they would keep by staying in their employer-sponsored plan. The Pension Benefit Guaranty Corporation insures DB pensions when a sponsor defaults. “This omission is notable because many participants GAO interviewed cited fear of sponsor default as an important factor in choosing the lump sum,” the GAO said. ■

DEFINED BENEFIT PLANS

PSCA asks for model language

IRS curtails lump-sum DB payoutsBY PAULA AVEN GLADYCH

BY PAULA AVEN GLADYCH

REGULATION

As the Department of Labor kicked off four days of hearings last month on its proposed fiduciary rule, the Plan Sponsor Council of America said that while it supports the goal of ex-tending ERISA’s fiduciary protections, it would like to see further clarifica-tion in the final rule.

Stephen McCaffrey, chairman of the board at PSCA, which represents employee benefit plan sponsors, said in his remarks during the DOL hearings that “PSCA supports the core goal and approach of the proposed rule in extending the protection of ERISA’s fiduciary standard. We believe our retirement system will be greatly strengthened by ensuring that investment advice is provided in the recipient’s best interest.”

He added that, “PSCA views the proposed rule as a means to protect pre-retirees and retirees as they approach the phase where they begin withdrawing retirement assets. However, after reviewing and discussing the proposed rule with a significant segment of our members, it is clear that additional clarification on many of these provisions is need-ed to avoid regulatory confusion.”

He recommended that the DOL’s final regulation include additional examples and model language to sharpen many of the definitions under the rule. PSCA’s main concerns with the proposed rule are that it would negatively affect employees’ access to balanced, factual invest-ment advice and that it would have an adverse effect on small plans.

It recommended that the DOL amend its rule so that investment education materials that include asset allocation models or interac-tive investment materials would be allowed to identify investment alternatives available under the plan without that identification being deemed as investment advice. ■


LAWS &REGULATIONS

Although the Americans With Disabilities Act has been in effect for 25 years, many employers

still struggle with how to comply with the law and how to best help employ-ees with disabilities perform their job duties. Adding to the challenge are the regulations passed by the Equal Employment Opportunity Committee four years ago to implement the ADA Amendments Act. These regulations significantly changed how a disability is determined and created new chal-lenges for employers.

It’s no surprise then that com-panies wonder if they are indeed in compliance with the law. Here are five suggested best practices that may help employers fulfill their responsi-bilities under the law:

1. Ensure that an interactive pro-cess is in place. This will facilitate communication and dialogue among everyone involved. When deciding how to best help a disabled employee continue to do his or her job, employ-ers need to evaluate the disability, the employee’s job requirements and pos-sible accommodations. A number of people should be involved in these dis-cussions, including the employee, the employee’s supervisor, the physician and the human resources department, among possible others. The purpose of this interactive process is to:

• Identify the accommodation request;

• Determine if the employee has a disability;

• Obtain the restrictions and lim-itations related to the employee’s es-sential job functions; and

• Identify and implement any rea-sonable accommodations, and moni-tor for success.

Because the interactive process is a requirement under the ADA, em-ployers will be better protected if they can show that they engaged in the process even if the end result is that no accommodation is possible. If an employer is unsure about what the process requires, it may be helpful to partner with a benefits carrier who understands the interactive process and who can offer advice and support in complying with the regulations.

2. Train managers and supervi-sors. Since managers are typically the first contact for an employee with a disability, employers should provide training for front-line managers so they can understand what the pro-cess requires. Failure to identify or provide reasonable accommodation is considered discrimination under the ADA. Managers who are not prop-erly educated regarding the ADA can create compliance issues for the em-ployer.

3. Have the right disability policies and practices in place. It’s important for a company to develop consistent and compliant policies and practices related to disabilities in the workplace and how they are accommodated. Em-ployers should realize that one “blan-ket policy” isn’t sufficient to deal with

all disabilities. Employers should be especially careful to avoid policies that require an employee to be 100% re-covered before being able to return to work or policies that specify automatic termination if an employee is unable to return to work after a specific peri-od of leave. In fact, the EEOC has col-lected multimillion-dollar settlements against employers because of these kinds of “inflexible” leave policies.

4. Identify ADA issues early on and recognize when there is a need for reasonable accommodation. With the revised regulations and the EEOC’s focus on enforcement, it is more im-portant than ever for front-line man-agers to identify potential ADA issues. Recognizing how a disability affects an employee’s ability to perform their essential job functions leads to the in-teractive process required under the law.

The recent EEOC focus on ADA enforcement has resulted in hefty fines for employers who are noncom-pliant. In 2014, for example, the EEOC obtained $95.6 million in total mon-etary relief through its ADA enforce-

ment program.5. Understand what medical in-

formation can be requested. As part of interacting with a disabled employee’s physician and health care providers, employers must make certain they are asking only for information that is “job-related and consistent with business necessity.” Some state dis-ability protection laws are even more restrictive regarding what informa-tion can be shared, so employers with multistate locations need to be aware of what each state requires. However, just because there are restrictions on what can be requested doesn’t mean employers should stop asking for doc-umentation. Collecting the appropri-ate medical information is critical for an employer to make a well-informed decision about the employee’s request for accommodation. ■

Daris Freeman is assistant coun-sel with Unum, a provider of group disability, life, accident and critical illness insurance. For an expanded version of this article, go to http://bit.ly/1U2rvUE.

Facilitating accommodations is an employer’s obligation under the law

Best practices for ADA compliance

ADA COMPLIANCE

BY DARIS FREEMAN


THE PRIMARY ADVANTAGES OF

self-funding your health insurance plan are the opportunity for cost sav-ings and plan flexibility. Very sim-ply, if an employer self-insures and claims come in under projections, the employer pays less for the coverage. Moreover, in regard to the Affordable Care Act, self-insured plans may not be subject to the essential health ben-efit, community rating and medical loss ratio requirements. Additionally,

self-funded plans avoid a portion of the health insurance tax that must be paid to traditional health insurers, as well as various state taxes.

That said, when an employer de-cides to self-insure, it is making a bet. So what are the factors you should consider when deciding whether to make this wager?

A key determinant is your claims experience. If history points to a lot of claims in the past, this could be a barometer that poor utilization may continue. Therefore, it’s important to understand your specific situation.

For example, we have a client with 84 employee lives on their insur-ance, and they decided to self-fund the plan. On the surface, that might seem risky, but it made sense to them because they understand their work-force. It’s a group of young employ-ees who are not heavy users of the insurance. Based on this knowledge, the company was willing to make the move to self-funding, and that move saved them 24% on their insurance costs over the last five years.

Generally speaking, self-insured plans work best for small to mid-

size businesses when they have very engaged employees, a younger or healthier workforce, and good well-ness plans.

A second consideration is risk tolerance. If you have a bad year and your employees use their insurance a lot, you’re going to feel the pain, as opposed to having a locked-in pay-ment to a carrier. This can be man-aged somewhat through a stop-loss policy, which puts a cap on out-of-pocket expenses.

Employers who go for a self-in-sured plan also have to be com-fortable with the ups and downs of monthly or more frequent payments. Unlike traditional insurance with 12 equal monthly payments over the year, self-insurers generally must pay claims as the bills come in. Therefore, it becomes important to budget con-servatively.

For employers who are intrigued by the concept of self-insurance but aren’t quite ready to take the leap, there are alternative approaches.

Minimum premium plans are a kind of hybrid. As in a self-insured plan, the employer pays administra-tive fees and claims, but a monthly cap is placed on out-of-pocket costs. Typically carriers charge a higher rate for these plans than for a fully insured plan, but if the program runs well, the employer could save by not paying to the maximum funding.

Some employers self-fund a por-tion of their coverage, such as pre-scription coverage. It’s a way to ease into self-funding while minimizing the downside risk. Even if things go awry, the total cost is not going to be as great as it would have been for self-insuring all of the medical. You can mitigate that risk by purchasing stop-loss on the self-funded pharma-cy plan. ■

John Crable is senior vice president with Corporate Synergies, an employ-ee benefits brokerage and consulting firm.

COMMENTARY

Betting on self-funding can have a big payoff but it’s not risk-free

SELF-FUNDING

Why small and midsize employers are looking at self-funding their health insurance plans

In this section:>Self-funding

BY JOHN CRABLE

36 September 01, 2015 Employee Benefit News






BENEFITS NETWORK

Classifieds Marketplace and Message Center,please contact

Michael Flynn, Sales ManagerTel: 480-754-9049,

[email protected]

SEPTEMBER 30 – OCTOBER 2, 2015HILTON ORLANDO BONNET CREEK | ORLANDO, FLWWW.EBASUMMIT.COM

Workplace Benefits Summit features the most robust program in the 2014 conference series. Taking place September 29 – October 1 in Boca Raton, Florida, the Summit is co-located with the Benefits Forum & Expo, presented by Employee Benefit News. This combined audience of nearly 900 professionals brings together both employers and advisers.

WORKPLACE

BENEFITSSUMMIT

JULY 28 - 30, 2015WYNN RESORT | LAS VEGAS, NVWWW.BENEFITSMANIA.COM

Workplace Benefits Mania, the summer conference in the 2014 series, takes place in Las Vegas, Nevada. This two day program brings together 650+ benefit professionals to discuss best practices, profitable sales strategies and updates on the ACA. The Renaissance and Mania events were added to the schedule in 2011 via the acquisition of Walt Podgurski’s Workplace Benefits Association.

WORKPLACE

BENEFITSMANIA


BY THENUMB3RS:

Nearly 70% of parents say the cost of child care has influenced their career decisions, according to data from Care.com. Other findings from the survey include:

The cost of child care


Source: Care.com 2015 Cost of Care survey.

5 MOST EXPENSIVE STATES FOR DAY CARE:1. New York

2. Vermont

3. Oregon

4. Nevada

5. Minnesota

5 MOST AFFORDABLE STATES FOR DAY CARE:1. Louisiana

2. Tennessee

3. South Dakota

4. Mississippi

5. South Carolina

60 3889

Percentage of parents who say their employer doesn’t seem to care about their child care needs

Percentage of parents who asked about maternity/ paternity leave or child care benefits when they inter-viewed for their last job

Percentage of parents who say thinking about the cost of child care stresses them out

Percentage of parents who don’t budget for child care costs

24

89 81PERCENT OF WORKING PARENTS WISH THEIR EMPLOYER OFFERED CHILD CARE BENEFITS

PERCENT SAY THEIR EMPLOYERS DON’T OFFER ANY CHILD CARE BENEFIT

28% OF PARENTS SPEND MORE THAN $20,000 PER YEAR ON CHILD CAREAverage weekly rates for child care:

Nanny for two children $488

Day care for two children $341.21

After-school sitter for two children $196.80

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©2015 WageWorks, Inc. All rights reserved.

Spending less, getting more.Real satisfaction comes from the highest level of care at the lowest possible cost. With VSP, you can bring your employees the #1 rated vision coverage with the lowest out-of-pocket costs.© Copyright 2015 VSP Vision Care

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