Monday, March 8, 2010

WHAT IS A "BENEFIT CREDIT" EMPLOYEE BENEFIT DESIGN STRATEGY & WHAT IS THE VALUE?

At our weekly meeting with affiliates that included - Vesta WorksiteVesta h&l, and Vesta p&c - we continued our ongoing discussion about "Benefit Credits" also known as "Defined Contribution (Def-Con)" Plan Design strategies.  Def-Con is the name we coined for these Employee Benefit Plan Strategies in a "Think Tank" we co-sponsored in the 19090s.

Most attending our weekly meeting had little experience with a Def-Con strategy and had not participated in the "Think Tank".  To gain a more equal base of knowledge with in our group, we decided to begin with the basics.  In addition, we decided to continue in depth discussions during ongoing meetings and share the discussions in our Blogs.

For the remainder of this meeting we discussed the features and benefits of  Def-Con Plan Designs.  These include:
  • Def-Con is a strategy implemented by Employers, generally working with informed Brokers and Consultants, Allocating "Benefit Credit Values" to the actual "Premium Cost" of plans offered to the Employees.  It must be emphasized that the Premiums and the Credits are not necessarily equal!  This differential provides an opportunity to encourage Employee participation in one plan over another, ie. one health plan choice over another.
  • Employers select a Menu of "Best-in-Class" Carriers and Plans to offer Employees with an emphasis on "Choice".  The "Choices" permit Employees to select plans from a variety of categories that best meet their individual and family's budget and needs - with a combination of the Employers credits/dollars and their own contribution.
  • Def-con is an exciting methodology, that is not new and untested, for Brokers and Employers to implement that can have a dramatic impact on:the benefit plans offered to Employees.
  • The strategies provide Employers the ability to Budget the Cost of Benefits in current and future years.
  • Plans will generate Cost-Savings for the Employer and Employees - if carefully designed.
  •  Def-Con can be implemented with Fully Funded and Self-Funded Groups - self-funded groups provide the ideal setting.
  • Employees participate in the allocation of the Employers and their own dollars and credits while determining what benefits related programs, products, and services they can afford and need.
  • Employers can offer a broader menu of "Benefit Choices" to better meet the Employee's needs.
  • Employee can select from a broader menu of "Benefit Choices" to meet their Individual and Family's needs and budget.
  • Both the traditional core benefits, ie. Health, Dental, Vision, Term Life, etc, as well as a menu of Worksite/Voluntary Plans, ie. STD, Critical Illness, UL, LTC, HI, GAP, etc. can be offered and integrated in the Employee Benefit Choices.       
  • The strategy can reduce waste - Benefits that Employees do not want or need - with incentives to avoid unneeded coverages.
  • The plan can be integrated with existing "Tax Advantaged Plans" including: Premium Conversion, Medical Medical Reimbursement, Dependent Care Transportation & Parking, HSAs, 401(k), etc.
  • Brokers and Consultants are positioned to assist in the menu building process for the selection of "Best of Class" Carriers and Plans in the first and subsequent years.  Meeting the needs of the Employer and the Employees with a selection of programs, products and services becomes the primary activity.  While comparing the cost of plans remains a factor, the plan's features and benefits become primary.  A choice of plans and premiums with different benefit levels can be offered to meet specific levels of need.  For more information about Benefit Choices click on: BenefitPlace!   
  • Delivery of the strategy requires a well-planned Employee Education, Communication, Enrollment, and Data Management process.  Each year, and with the addition of new eligible Employees, the Broker is positioned to assist the Employer and Employees with the decision-making process.         
In future meetings we agreed to discuss details of each of the above, and additional, features and benefits of Def-Con Strategies and Plans.  As mentioned above, we will include these discussions in future Blog postings.

If you have any questions in the interim, please give us a call: 216.921.1583 or Email: max@benefitplace.biz.

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