2012 Voluntary Benefits Special Report
Voluntary benefits, financial education play a bigger role
HR & financial executives collaborate in an era of rising costs
By Len Strazewski
Who feels more insecure? Employers facing increasing health care
costs and the confusion of health reform? Or their employees, facing less
lucrative health plans, fewer rich retirement benefits and fewer employer-paid
The recession of 2008 forced both employers and their employees
to make difficult financial decisions—and four years later, the decisions
haven't gotten easier. Employers continue to struggle with rising employee
benefits costs, and employees with the erosion of their employer-paid benefits
and retirement savings.
Recent industry research paints a picture of increasing anxiety
over benefits costs and financial security and a growing need for more flexible
and voluntary benefits to fill the gaps left by cuts in employee health and
retirement savings benefits. Financial education and retirement planning have
also become important tools to help employees make the most of their choices.
One of the first indicators of increasing corporate concern is a
change in the way benefits decisions are being made, leaning more toward
dealing with cost concerns and less toward recruitment and retention
strategies. When money was easy, human resource directors and their employee
benefit managers controlled the budget for group benefits, which paid for a
diverse package designed to help them recruit and retain top performers. When
money got tight, financial executives began to intrude more aggressively into
the budget process, and the benefits that once were standard became
voluntary—and paid for all or in part by employees. Now, as health reform
legislation poses both financial and regulatory changes, corporate financial
leadership is playing an even greater role in benefits decisions.
Towers Watson, a New York-based risk management and employee
benefits consulting company, now reports a tighter-than-ever partnership
between human resource executives and financial executives in employee benefits
decision-making, driven by concerns over health reform and increasing costs.
Survey documents changes in thinking
In September, Towers Watson and Forbes Insights, a division of
Forbes Media, conducted a survey of more than 300 human resource executives and
financial executives at U.S. companies. Respondents came from employers ranging
in size from 1,000 to 25,000 employees and a broad range of industries. The
participants identified a series of changes in employee-benefit
decision-making, primarily driven by health reform and economic issues.
While a majority of executives in both areas of management agreed
that human resource executives still took a lead in benefits strategy, about
half of respondents said they saw financial executives making more decisions
about benefits budgets and calling for more flexibility in shaping rewards and
"Companies are just beginning to grapple with the complex set of
decisions triggered by the new health reform law—decisions that will have
a direct impact on their broader set of employee rewards," noted study author
Randall Abbott, senior health and group benefits consultant at Towers Watson.
"The fact that both finance and HR leaders see a role for each other in
developing reward strategy and budgets in the future suggests a powerful
framework for joining forces at a time when the stakes for close collaboration
have never been greater.
"Health care reform is a significant business issue that has the
potential to test the relationship between human resources and financial
executives. And with so much change quickly approaching, it highlights the need
for both groups to start working more closely now to leverage their respective
expertise and knowledge."
The survey found that in addition to regulatory concerns,
benefits costs has become the single biggest decision driver for both sets of
respondents. About 82% of human resource executives emphasized cost concerns
and 69% of financial executives highlighted cost issues.
While both sets of respondents still predicted increases in
benefits spending as health care costs continued to increase, more than half of
the financial executives said they expect their reward programs to be more
flexible in the future, compared with about one-third of human resource
The survey also revealed that a small but significant portion of
both sets of respondents was also concerned that their benefits spending may be
making them less competitive in recruitment and retention. Another small but
significant percentage said they believed they were spending too much on
"environmental" rewards, such as career management and flexible work
arrangements compared to traditional health benefits.
Health benefits aren't the only concern that employers and
employees have noticed. Income security and pre-retirement financial well-being
are also waning in the post-recessionary economy, industry experts say. As a
result, agents, brokers and insurers that specialize in voluntary benefits
report an increase in employer interest in income protection benefits such as
short- and long-term disability, critical illness insurance and, to a lesser
extent, long-term care insurance.
Their goal, employers say, is to provide opportunities for
employees to relieve their anxiety with benefit choices.
is a relatively new but growing concept, and there is an increasing
recognition, across the globe, of the negative impact of financial distress on
employee health and productivity," says Michael Malouf, senior vice president
of global strategies and sales at MetLife in New York.
General financial stress contributes to both employer and
employee anxiety. According to MetLife's Ninth Annual Study of Employee Benefit
Trends, 58% of employers say financial "illness" plays a role in employee
absenteeism, and 78% say that concerns over financial problems while at work
can affect employee productivity.
Late last year, the
insurer published a white paper, "The MetLife Study of Financial Wellness,"
researched in coordination with the Boston College Center for Work and Family.
The study combined previous reports on financial wellness with interviews with global
benefit executives in China, Hong Kong, India, Ireland, Japan, Mexico and the
Netherlands, as well as the United States.
The study indicated:
—Financial difficulties have a direct impact on employee
health and well-being—which can increase absenteeism and reduce
—Consumers are generally poorly prepared to make good
investment choices. While most people recognize that government will not
provide them with adequate retirement income, the understanding doesn't
translate into more savings.
—Financial education can have a beneficial effect on
employee wellness and offset the issues that affect productivity and
The study also highlighted some multinational employers that have
responded to the financial malaise with voluntary income security and
retirement benefits, including expanded financial education and increased
savings opportunities. American Express Corp., for example, introduced
financial education programs and personal financial planning services designed
to encourage employees to better manage their short-term and long-term savings
In the study, Barbara Kontje, American Express director of Global
Retirement, noted: "We believe that the program has had a positive impact on
their financial wellness, and we are very pleased with the results we've seen.
Since the launch of Smart Saving, there has been a 71% increase in calls to the
financial planning counseling service and an 8% increase in 401(k)
Len Strazewski has been covering employee benefits issues for
more than 30 years. He has an M.S. in Industrial Relations from Loyola
University in Chicago.