How flexible are you when it comes to benefits? February 2011
1. How flexible are you when it comes to benefits by Toronto Training and HR February 2011
2. Contents 3-4 Introduction to Toronto Training and HR 5-8 Types of flexible benefits plan 9-11 Implementing and structuring flexible benefits 12-13 Gauging employee feedback 14-15 Drill A 16-17 US changes for 2011 18-20 Section 125 (US) 21-24 Case studies A & B 25-26 Drill B 27-28 Administration systems 29-31 Advantages of flexible benefits 32-34 What problems exist in setting up and running flexible benefits? 35-37 How do employers believe the flex system has been effective? 38-39 Will flexible benefits work for us? 40-42 Selecting a provider 43-44 Drill C 45-50 Case studies C, D & E 51-52 Conclusion and questions Page 2
8. Page 6 Types of flexible benefits plan 1 of 3 A premium-only plan allows an employee to choose between salary and payment of the employee’s premium contribution to participate in the employer’s medical plan via tax-free salary reduction
9. Page 7 Types of flexible benefits plan 2 of 3 A Flexible Spending Arrangement (FSA) allows an employee to elect to have a certain amount of money withheld tax-free from the employee’s salary and to use the dollars to reimburse qualified health care, dependent care, or adoption assistance expenses
10. Page 8 Types of flexible benefits plan 3 of 3 Under what is sometimes referred to as a flexible benefits plan, the employer may offer a menu of qualified tax-free and taxable benefits that the employee may elect to purchase with a combination of flex credits (employer contributions) and employee contributions
12. Page 10 Implementing and structuring flexible benefits 1 of 2 Carry out a feasibility study to ascertain how a flexible benefit scheme could best work for the organization Survey staff to find out what benefits they would most like to receive through flex and balance these with perks that best fit in with the business strategy Issue employees with total reward statements so they know exactly what their benefits are and how much they are worth
13. Page 11 Implementing and structuring flexible benefits 2 of 2 Communicate the scheme properly to staff so they know exactly what benefits are on offer and how to sign up tor them Build up a flexible benefits scheme gradually-it might be best to add benefits to the scheme at intervals so employees are not overwhelmed by a large choice of options
15. Page 13 Gauging employee feedback Focus groups can provide in-depth qualitative data, but employers need to ensure good facilitation of discussions to ensure they produce the right results Surveys can reach a large number of people, but tend not to yield as much in-depth data A blend of focus groups and surveys can work well Conjoint analysis asks employees to rank benefits against one another to provide an idea of which options they value
19. Page 17 US changes for 2011 Must eliminate reimbursement of non prescription medications (other than insulin) from health flexible spending accounts May expand the dependent child definition for purposes of health flexible spending account reimbursements Should ensure that the definition of dependent child under the pre-tax premium payment plan is consistent with the newly expanded definition of dependent child under the medical plan
21. Page 19 Section 125 (US) 1 of 2 A specific description of all benefits offered under the plan A description of the requirements for eligibility and participation The procedure by which participants elect among the available benefits A statement that participant elections are irrevocable, except in limited situations A description of how contributions are made to the plan
22. Page 20 Section 125 (US) 2 of 2 Any annual dollar limitations on plan contributions The plan’s annual non-discrimination testing requirements A designation of the relevant plan year If flexible spending accounts are used, a description of the “use-it-or-lose-it” and uniform coverage rules
30. Page 28 Administration systems What are they? What are the origins? How much does it cost? Who are the market leaders? What are the legal implications? What are the tax considerations?
32. Page 30 Advantages of flexible benefits 1 of 2 It recognises the diverse needs and values of the workforce It improves image of employer It promotes employee understanding/appreciation of benefits It helps improve retention It reinforces the concept of total reward It communicates the value of benefits It helps improve recruitment
33. Page 31 Advantages of flexible benefits 2 of 2 It makes the most of tax breaks It helps improve motivation It helps improve engagement It is valued more highly than traditional benefits It reinforces corporate culture/objectives It helps reduce/control costs It assists with the integration of businesses
34. Page 32 What problems exist in setting up and running flexible benefits?
35. Page 33 What problems exist in setting up and running flexible benefits ? 1 of 2 Complexity of administration Cost of administration Cost of implementation Getting approval for the business case Updating existing technology (such as HR or payroll systems) Potential removal of tax breaks by HM Treasury It is confusing/difficult for staff to make informed decisions Internal resourcing constraints
36. Page 34 What problems exist in setting up and running flexible benefits ? 2 of 2 Impact on internal HR and processes Not enough benefits that can be flexed Lack of employee interest Amending staff contracts Integration with current benefits, such as different contract periods National insurance and tax issues Finding providers for the different benefits Adverse selection and the impact on the cost of benefits Unions/works councils
37. Page 35 How do employers believe the flex system has been effective?
38. Page 36 How do employers believe the flex system has been effective? 1 of 2 Showing employees the value of their benefits Increasing the employee perception of the package Aiding recruitment Improving retention Harmonising benefits Reinforcing company culture Improving the image of the organization Making you an employer of choice
39. Page 37 How do employers believe the flex system has been effective? 2 of 2 Improving/maintaining staff motivation Reducing/containing the cost of reward Removing/reducing status symbols/hierarchy improving/maintaining staff engagement
41. Page 39 Will flexible benefits work for us? Employers can identify whether a flexible benefits scheme will be right for their organization by assessing its financial feasibility and determining whether it fits into their business culture They should also meet key stakeholders in the organization to find out whether they are all on board of if they are aware of any potential issues that may mean flex should not be introduced Employers should also fully consult with their employees
43. Page 41 Selecting a provider 1 of 2 Is more effective and/or cost-efficient flex software available? Can employee engagement be improved by restructuring the scheme, changing the benefits, or simply by communicating better? Could savings be made or benefits improved by implementing salary sacrifice arrangements? Can money be saved by rebroking benefits (without compromising the integrity of the scheme or incurring extra costs further down the line)?
44. Page 42 Selecting a provider 2 of 2 Can operating costs be reduced by outsourcing administration? Would integrating the flex system with HR and payroll improve efficiency? Can business objectives be better met without incurring extra costs? Has the provider made clear the true cost of the arrangement and how these costs are recouped, especially if offering 'flex for free'?