Be prepared for unexpected shocks that can affect benefit programs
|By Joanne Sammer
Apr 14, 2017
HR benefits managers face a world of change and adjustment. Economic pressures, industry challenges and new compliance burdens can severely disrupt employee benefit programs, requiring new offerings or rendering existing benefits too expensive for an organization's bottom line.
"The key to managing employee benefit plans during a period of uncertainty is to plan ahead," said Rosemary Hughes, a principal with EPIC Insurance Brokers and Consultants in Stamford, Conn. If developments could result in a loss of jobs—perhaps a merger is in the works—or if an economic downturn would depress the organization's revenues, it could be time to negotiate with vendors to allow your company to end the contract early.
Uncertainty may also result from legislative or regulatory changes—as when the Affordable Care Act (ACA) expanded employee health coverage or with state and municipal lawmakers trying to mandate paid leave. New laws on pay equity also may affect benefit plans tied to salary levels, such as stock options and retirement plans.
Employers will need to "think through the potential impact on their programs while still complying with current law," Hughes said. Organizations should create contingency plans to upgrade HR or benefits management software and should postpone altering any affected employee benefit plans until there is more certainty about what will happen.
In most cases, "employees will be concerned, so it may be helpful to let them know the company is keeping an eye on the situation and will keep them posted as to the next steps," she advised.
Building a Framework for Uncertainty
Employers can develop a framework for responding to uncertainty, keeping these considerations in mind:
Know where you are going. For the most part, employers cannot control what's happening outside the organization. What they can control is how they deal with it. That is why is important for employers to have an overarching philosophy about employee benefits. With a set of guiding principles in place, organizations can make decisions based on those guidelines.
"Without this, things become more complicated and company leaders may not be on the same page" when it comes time to make decisions, said Jackie Breslin, director of human capital services with TriNet, a HR consulting firm, in San Francisco.
"As federal regulations are weakened and rolled back, state laws may compensate to protect the workforce," Breslin said. That could bring greater uncertainty for organizations with operations in multiple states as they try to comply with a wide range of different laws and regulations.
Having a strong benefits philosophy can help guide multistate employers in this situation. Such a philosophy, for example, could call for consistent treatment for the full workforce no matter where employees reside. That, in turn, could lead the organization to adhere to the requirements of the most generous state in each circumstance.
Know where the organization stands. An internal audit of benefit plans can show exactly what the organization is offering, to whom and at what cost. "When it comes time to make a decision, having this information allows employers to react faster to new developments because they already know where they are," Breslin said.
Know when to act. Most employers will want to avoid concrete action until a given change is certain. "There needs to be a balance," Hughes said. "Most employers cannot afford to spend resources planning for everything that could occur, so they need to consider the probability of something happening." If that probability is high, HR and benefit executives can spend some time and energy sketching out a "Plan B" for how to react.
For instance, if a company is in danger of losing its largest and most important customer, Plan B could include a checklist of steps the company could take to mitigate the financial damage, including potential actions involving benefit plans.
Get the executive team involved. Uncertain situations are times when having close working relationships in place between HR executives and other departments can pay big dividends. The CEO, general counsel, finance and operations executives will all have important input to provide when planning for uncertainty. The CEO can lead overall policy discussions, the CFO can clarify financial implications, operations executives can help front-line managers and employees understand the changes, and the general counsel can disclose the legal requirements and ramifications.
Communicate with employees. Communicating with employees about potential changes is crucial. Even if a a situation is uncertain, such as with possible repeal of the ACA, employees may still have related questions and concerns. "They will want to know, 'what does this mean for me?'" Hughes said. "Employers need to have a communication strategy to deal with this and ways to make sure front-line managers have the information necessary to help employees."
Joanne Sammer is a New Jersey-based business and financial writer.
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Source: The Society for Human Resource Management (SHRM)