An increasing number of employers expect to move to an “employee choice” benefits model over the next two years, giving employees greater responsibility for choosing the types and levels of benefits selected, according to a report prepared by CFO Research Services in collaboration with Prudential Financial Inc. titled “The Future of Retirement and Employee Benefits: Finance Executives Share Their Perspectives.”
“This year’s study shows a continued evolution in benefits strategies,” Sam Knox, senior vice president and director of research at CFO Research, said during a Prudential media event detailing the survey results.
The 2012 survey shows that controlling employer costs for health care benefits remains finance executives’ top priority by a wide margin (70%), but for the first time, reducing the cost of employee benefits other than health care benefits was among the top three benefits priorities (33%). In response to these concerns, many respondents said they will be looking to their employees to take on more costs.
The vast majority of respondents (79%) said employee benefits are critical for attracting and retaining employees. Seventy-six percent of respondents agreed that employee satisfaction with benefits is important for their company’s success.
The survey suggests finance executives are striking the balance between cost and benefit by considering or implementing “employee choice” models for their benefits packages. In an employee choice model, each employee is provided with a fixed amount of funding for benefits, and employees select their benefits using those funds, as well as their own funds.
These benefits can include an include anything from life insurance to dental, disability and long-term care, James Gemus, Prudential’s senior vice president, Life/ADD&D Products, Non-Qualified Benefits and Voluntary Benefits, told PLANSPONSOR.
The survey shows a gradual movement to employee choice in benefits programs. Only 15% of respondents described their company’s current strategy as an employee choice model, but 29% expect their companies to adopt this strategy within two years. “The rate of change is accelerating,” Gemus said.
The communication surrounding how benefits are presented is changing—messages are increasingly personalized and targeted, he added. For example, a life insurance message for a 25-year-old participant would be communicated much differently than to a 55-year-old participant. “Satisfaction is related to communication,” he said, adding that plan sponsors can play a big role in effectively delivering these benefits messages to participants.
Overall, Knox said he finds it “pretty encouraging” that company executives are finding ways to help participants prepare more effectively for retirement.
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