Archive for the 'Benefits' Category

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Rethinking the 401(k) Pitch

Published by JS Wolff on September 14, 2009 in Benefits, Economy, Financial Wellness and Investment. 0 Comments Tags: , , , .

For nearly 30 years, employees have been coached that the best way to save for retirement is to take advantage of tax deferred investing, most prominently through their 401(k) plans. This strategy has always been anchored in the hope that lower tax brackets await us during our retirement years. But current economic realities are causing many in the financial community to question whether tax deferred saving remains a healthy long term strategy for employees.

When 401(k) plans were first rolled out in 1981, the income tax rates and bracket structure were very different than today.    The top federal tax rate was nearly 70% and there were 15 different income tax brackets separated by just a few thousand dollars of income (See Tax History).  Given those conditions 401(k) contributions presented a great opportunity to both avoid high current rates and reduce W-2 income in the contribution year just enough to move into a lower bracket.  So it seemed like a double win, lower taxes in the contribution year and in the future, when the Plan was accessed during retirement.

Since 1981 the sustained effects of “Reaganomics” led to a steady decline of both tax rates (highest federal bracket from 70% to 35%) and the number of brackets (from 15 to 6). During this period, with few exceptions, the US economy experienced robust economic growth.  401(k) Plans got even better as a result. To attract and retain employees, employers with healthy bottom lines began to offer generous matching incentives linked to 401(k) participation.

But the length and depth of the current recession is now changing the outlook for today’s 401(k) savers in two significant ways. First and most importantly, the government funded stimulus packages and propensity to grow overall government spending must be paid for at some point. This future “balance due” can only offset by higher taxes or a devaluing of the dollar (inflation).  The second effect of the current recession is that many companies have cut back or eliminated matching 401(k) contributions.

So the question for the employee now becomes, “if I no longer receive any company matching, and I may have to pay higher taxes on withdrawals in the future, is the 401(k) still the right way to save?”

Enter sound savings principles and the Roth 401(k) to the rescue.  Match or no match, automation and consistency are two key factors in any saving’s strategy.  401(k) plans are still great because the money is automatically deducted from every paycheck before it can get spent.  The recently introduced Roth 401(k) addresses the more daunting issue of higher taxes in the future by allowing after tax contributions now and tax free retirement withdrawals in retirement.

So rather focusing on the now suspect virtues of tax deferral, maybe it’s time to pitch the 401(k) as primarily a great way to save, period.  Wise portfolio allocations and a balanced approach between the Traditional 401(k) and the Roth 401(k) will address the constant winds of change that remain outside of the investor’s control.

The Health Wellness – Financial Wellness Connection

Published by JS Wolff on September 1, 2009 in Benefits, Financial Wellness and for Employers. 0 Comments Tags: , , .

It’s been well documented that effective corporate health wellness programs have produced positive results for employees and employers over the past twenty years. Probably the most studied, extensive and longest running program is Johnson and Johnson’s “Live for Life”(now called the “J&J Health Wellness Program”) which was rolled out in 1979. Incredibly, due to both financial incentives and a corporate culture that actively promotes healthy behavior, 90% of J&J’s US employees have participated. And considering this includes a pool of 45,000+ employees, the statistics derived from the study are significant.

Defining that a successful health and wellness program, “…must demonstrate that they can improve the risk profile of employees as a whole, and, in particular, those employees at highest risk.”, the study found that J&J’s program has done just that.  Additionally, as I’m sure they had hoped, helping their workforce become healthier also helped J&J’s bottom line. Overall it was calculated that their Health & Wellness program saved J&J $38 million from 1995 – 1999.

When they detailed where the savings was realized, which approximated $224 per employee per year, over $70 of that figure was due a reduction in mental health visits.  Certainly, a significant portion of these mental health visits were stress related. A Yale University Study cited on the National Institute of Occupational Safety and Health(NIOSH) website found that 29% of employees “feel quite a bit or extremely stressed at work”.

Apparently the J&J health wellness program did a good job addressing stress related issues. And they probably picked up a bonus here as well. While more difficult to measure, it’s not hard to imagine that someone who is less stressed is also likely to be a more productive employee.

But there’s good reason to believe that health wellness programs alone are not dealing with the primary root causes of stress. According to a 2007 survey by the American Psychological Association 73% of the respondents cited money as a significant source of stress in their lives. And a recent WebMD article cited an AP-AOL study which revealed that “debt-related stress was 14% higher in 2008 than in 2004. Those who report high levels of debt stress suffer from a range of stress-related illnesses including ulcers, migraines, back pain, anxiety, depression, and heart attacks.”

When law enforcement officials are trying to track down criminal activity, their first step is often to “locate the money trail”.  Similarly, I’ve found that for employees, their personal money trail is the source for all kinds of self defeating, stressful behaviors. While the term “work-life balance” implies a healthy lifestyle, gaining a “money-life balance” provides a vital dimension in the process toward personal wholeness and health.

The right Financial Wellness program can help your workers achieve this vital balance, while complementing and driving enhanced returns for your existing Health Wellness initiatives.

Here’s what to look for as you consider this critical addition:

- Its best to select a provider that is not associated with a financial provider even though it may be tempting to default to your 401(k) vendor. Trusted information is paramount here.  If someone has something to gain by selling more mutual funds, there is reason to suspect the objectivity of the education.

- You’ll want a program that reaches employees in multiple ways including leveraging current web trends. New “Web 2.0” formats are being introduced to deliver financial education in engaging formats that deliver lots of information in just a few minutes.  Blended with onsite workshops and personalized, education-only money coaching, employees can interact with the information however they feel most comfortable.

- And finally, to get buy-in from other key decision makers, look for a financial wellness program that provides the methodology, metrics and reporting tools to document year over year financial health improvement. While some measures may not be as direct as the Johnson and Johnson study, measuring a reduction in personal financial stress is doable.  In fact, there is a well researched assessment tool called the “Personal Financial Wellness Score” which measures personal financial stress and compares an individual’s results to national averages.

GuideSpark Announces New Hire Training and Open Enrollment Modules

Published by JLarocque on August 31, 2009 in Benefits, Financial Wellness, Solutions and for Employers. 0 Comments Tags: , , , .

Today, GuideSpark announced two new modules for its Benefits Learning Center solution.  These modules automate and streamline New Hire Training and benefits communications for Open Enrollment.  As companies continue to prioritize doing more with less, many employers are looking for more efficient and effective ways to deal with these resource-intensive processes.

Consider for a moment the staff time and dollars go into facilitating New Hire Training and Open Enrollment each year.  Many companies we’ve met with offer half-day New Hire orientations on a near weekly basis.  Not to mention the time and effort that goes into the creation of the stacks of paper that employees receive on their first day.  Open enrollment presents a similar situation.  Each year, HR staff offer a collection of live seminars to explain benefits changes, often preceded by brochures, mailers and the like.  Despite all of this effort, nearly 80% of employers believe that their employees do not have a good understanding of their benefits.

Many employers have asked us how they free up their valuable, and in many cases shrinking HR staff to work on strategic projects while improving rates of benefits understanding among employees.  In addition, finding ways to communicate effectively has become an even higher priority as employers prepare to make difficult announcements about cutting programs and/or asking employees to take on a greater share of health care costs.

Our answers to such questions naturally start with what we know to be true about today’s employees:

  • First, given the trend of increasingly distributed workforces and the importance of family decision makers, on-site seminars fail to provide reach
  • Next, given the explosion of web multimedia and sites like YouTube, employees have become accustomed to rich, short-form content.  The busy professional of today simply does not have the attention span to thumb through lengthy benefits documents.

GuideSpark’s Benefits Learning Center modules embrace these trends to provide a modern and engaging multimedia solution capable of reaching your distributed workforce and their families.  This online solution automates open enrollment and new hire training workflows to free up valuable resources.  Employees have on demand access to a library of multimedia benefits presentations, allowing them to direct and personalize their learning experience.  In addition, these modules offer custom checklists for open enrollment and new hire on boarding, so that employees can conveniently track their progress.

Please take a look at the New Hire Training and Open Enrollment demonstrations on our site to better understand the power of these new modules.

BEWARE: Usual, Customary and Reasonable Charges

Published by JLarocque on August 19, 2009 in Benefits. 1 Comment Tags: , .

I visited my childhood pediatrician until age 28.  Why?  Well, I trusted his judgment and there was just a huge amount of peace of mind that came with dealing with a physician who had first-hand experience with just about every entry in my medical history.  Dr. Blair was never once in the network of doctors offered by my medical plans and therefore I had to pay 20% more for care.  Fortunately for me, it was only 20%.

What you may not know is that each year Americans incur significant unexpected charges when they pursue out-of-network care.  The issue is that your insurer will pay only a percentage of what they deem to be “usual, customary and reasonable” for the services provided.  So, while the insurer will provide 70% coverage of the medical test you had done as promised, it may only be 70% of the “usual, customary and reasonable” or UCR amount of $300 vs. 70% of the $500 your physician has charged for the test.  And yes, that’s right, you are stuck with the difference.  You can imagine how, in the case of major procedures, you may be responsible for thousands of dollars in unexpected medical bills for utilizing that highly recommended surgeon who happens to be out-of-network.

So, if you’re utilizing out-of-network care, experts recommend you take the following steps for ensuring that you aren’t surprised by UCR charges and optimize your plan benefits:

  1. Talk to your doctor and get the charges and procedure codes for your insurer
  2. Provide the codes to the insurer and understand how much they will pay
  3. Negotiate with your doctor, particularly if his/her cost for the procedure is more than the UCR amount.  It is often effective to agree to pay your portion of the services up-front so that they can avoid lengthy waiting periods from your insurance company.
  4. Utilize flexible spending accounts.  Many times the types of procedures or tests that involve large out-of-pocket expenses can be foreseen and planned for.  If this is true in your case, be sure to take advantage of FSA programs that allow you to pay your portion with pre-tax dollars.
  5. If you’re a member of a high deductible health care plan, be sure to tap into your employer provided health savings account or health reimbursement arrangement to pay down the amount that may be due.

This is a great plan in theory but unfortunately you may be challenged to complete steps 1 and 2. While codes and costs are critical to understand up front, they are very hard to get.  The reason is, insurers consider their negotiated rates to be proprietary.  They negotiate with each doctor and facility individually to minimize their costs and therefore it is to their advantage to maintain confidentiality.  However, that does not mean that you should not ask for this information and continue to ask for it until you get it.

The good news is that there is pending legislation for more transparency when it comes to costs.  Earlier this year, UnitedHealth agreed to pay hundreds of millions of dollars to settle class-action lawsuits brought by the American Medical Association and other groups on behalf of patients and doctors who claimed to be shortchanged for services provided out of network.  Some health care insurers such as Aetna and CIGNA have taken the lead on transparency, publishing the negotiated rates of tens of thousands of physicians in their network.  And with high deductible health care plans becoming more popular, the need for transparency is becoming ever more critical.

For years, patients have avoided asking about the cost of services, physicians don’t volunteer it and members find out what their ultimately responsible for after the fact.  Don’t be surprised by health care costs, be proactive.

I visited my childhood pediatrician until age 28.  Why?  Well, I trusted his judgment and there was just a huge amount of peace of mind that came with dealing with a physician who had first-hand experience with just about every entry in my medical history.  Dr. Blair was never once in the network of doctors offered by my medical plans and therefore I had to pay 20% more for care.  Fortunately for me, it was only 20%.

What you may not know is that each year Americans incur significant unexpected charges when they pursue out-of-network care.  The issue is that your insurer will pay only a percentage of what they deem to be “usual, customary and reasonable” for the services provided.  So, while the insurer will provide 70% coverage of the medical test you had done as promised, it may only be 70% of the “usual, customary and reasonable” or UCR amount of $300 vs. 70% of the $500 your physician has charged for the test.  And yes, that’s right, you are stuck with the difference.  You can imagine how, in the case of major procedures, you may be responsible for thousands of dollars in unexpected medical bills for utilizing that highly recommended surgeon who happens to be out-of-network.

So, if you’re utilizing out-of-network care, experts recommend you take the following steps for ensuring that you aren’t surprised by UCR charges and optimize your plan benefits:

1. Talk to your doctor and get the charges and procedure codes for your insurer

2. Provide the codes to the insurer and understand how much they will pay

3. Negotiate with your doctor, particularly if his/her cost for the procedure is more than the UCR amount.  It is often effective to agree to pay your portion of the services up-front so that they can avoid lengthy waiting periods from your insurance company.

4. Utilize flexible spending accounts.  Many times the types of procedures or tests that involve large out-of-pocket expenses can be foreseen and planned for.  If this is true in your case, be sure to take advantage of FSA programs that allow you to pay your portion with pre-tax dollars.

5. If you’re a member of a high deductible health care plan, be sure to tap into your employer provided health savings account or health reimbursement arrangement to pay down the amount that may be due.

This is a great plan in theory but unfortunately you may be challenged to complete steps 1 and 2. While codes and costs are critical to understand up front, they are very hard to get.  The reason is, insurers consider their negotiated rates to be proprietary.  They negotiate with each doctor and facility individually to minimize their costs and therefore it is to their advantage to maintain confidentiality.  However, that does not mean that you should not ask for this information and continue to ask for it until you get it.

The good news is that there is pending legislation for more transparency when it comes to costs.  Earlier this year, UnitedHealth agreed to pay hundreds of millions of dollars to settle class-action lawsuits brought by the American Medical Association and other groups on behalf of patients and doctors who claimed to be shortchanged for services provided out of network.  Some health care insurers such as Aetna and CIGNA have taken the lead on transparency, publishing the negotiated rates of tens of thousands of physicians in their network.  And with high deductible health care plans becoming more popular, the need for transparency is becoming ever more critical.

For years, patients have avoided asking about the cost of services, physicians don’t volunteer it and members find out what their ultimately responsible for after the fact.  Don’t be surprised by health care costs, be proactive.

White Paper: Five Ways to Leverage Web 2.0 to Transform Benefits Communications

Published by JLarocque on July 14, 2009 in Benefits, Solutions and for Employers. 0 Comments Tags: , , .

Today, GuideSpark announced availability of a new white paper on the ways to leverage Web 2.0 to transform benefits communications.

It may surprise you to learn that over 50% of employed Americans received a majority of their financial and health products from their employer, making employer-sponsored benefits a critical aspect of an employee’s overall financial wellness.

If there is one statistic that encapsulates the problem that GuideSpark is attempting to solve with our Benefits Learning Center solution, it is this one: “4 out of 5 employers believe that their employees don’t have a good understanding of their benefits.”

Amazing, isn’t it?

U.S. employers spent approximately $1.5 trillion on benefits (18.6% of total compensation) in 2007 and yet only 21% believe that they have been effective in educating employees on this key element of compensation.

So, the question becomes: with all that’s at stake, how do employers like you fix this problem? Well, the first thing to do is to admit that the benefits handbook and other text-heavy approaches to communications are failing you, your benefits investment and your employees. Now, accept that the way that employees learn and get information has fundamentally changed and in a Web 2.0 world, benefits communications must be:

  1. Accessible. Workforces are becoming more and more distributed each day and an employee’s family makes up 60-70% of an employer’s health care cost and are often the ones making the decisions.
  2. Engaging. The attention span of the busy professional is short and shrinking. Short-form, interactive education is what an employee expects in this world of YouTube and Twitter.
  3. Collaborative. The web has become a marketplace of ideas and experiences. Provide your employees with opportunities to understand what decisions colleagues are making and allow them to learn from one another.
  4. Ubiquitous. Stay in front of your employees by leveraging the latest forms of communications including blogs and micro-blogs (Twitter).
  5. Personalized. Integrate planning tools and calculators that allow employees to take what they’ve learned and apply it to their situation. Provide an easy on-ramp to personalized support from experts.

If you follow these principles and put together a highly effective benefits communications strategy, studies show that you can reduce the cost of benefits by 10-20% and significantly improve productivity and retention. To learn more about how to leverage Web 2.0 techniques at your company, please download our white paper.