Sounding Board: Ground is shifting, benefits plans must focus on individuals

The pandemic changed our world and our jobs overnight and stretched compassion, empathy and flexibility to the limit. There has never been a better time to reconsider everything about employee benefits.

For me as a benefits consultant, the crisis has highlighted how unprepared the typical benefits plan is to truly support the needs of employees in crisis. As we look to the future, what can employers do to better support their people and give them the benefits they require at a particular moment in time? This is different from providing a benefits package that meets the needs of most employees, most of the time; it’s about providing individuals with choices, so they can navigate their day-to-day reality and adjust their benefits selections as circumstances change.

In mid-March, as employees were sent home, the needs of entire generations changed dramatically. They required reliable internet, laptop computers, reasonable space at home to facilitate work and furniture that wouldn’t leave them with repetitive strain injuries. Many also needed the time and space to homeschool their children.

Read: Benefits plan members nervous about in-person health care, finds survey

On the other hand, employees no longer required dentists, massage therapy, physiotherapy, chiropractors, acupuncture or travel assistance. In fact, claims dropped so dramatically that group insurers were providing credits to employers. That prized gym membership was suddenly worthless. And yet benefit plans remained unchanged.

So what if we reassessed our benefits plans with a focus not on what other employers are doing but on what each employee and their family really needs?

A human-centred total rewards strategy would support the individual needs of each employee. Suppose for a minute that benefits plans had no limitations, that employees could shop a virtual menu of choices and make selections that best aligned with their own goals, including their physical and mental health and their financial goals. If employees have the opportunity to maximize their compensation by allocating according to their needs, surely this would lead to more engaged employees. External factors competing for their attention would be more easily addressed. Should an employer limit the choices? Should an insurer limit the choices?

Let’s take a look at an example illustrated by three colleagues returning to work after the pandemic: Alex, Sam and Taylor.

Alex is 60 and in good health but concerned about the impact of the lockdown on retirement savings. Reduced earnings meant reduced savings and some creative shifting of money to cover the most urgent expenses, such as household bills.

Read: Five workplace changes that should stay post-coronavirus

Sam is 40 and caught in that squeeze affectionately known as the sandwich generation. Between looking after aging parents, home schooling two children and juggling a toddler, Sam experienced not only the financial challenges of the lockdown but also the stress of not enough hours in the day. But really, aside from home schooling and no summer camp for the kids, this is everyday life for Sam.

Taylor seems to have no worries at all. At 27, the lockdown caused a little financial discomfort, but those credit cards will be paid off eventually — no harm done, right?

Thankfully, the lockdown is behind them and they can get back to work. Their employer’s benefits plan is pretty typical, but nothing special. So how would these three colleagues prefer to fare under a revamped plan?   

Alex is looking to make up for lost retirement savings. While it isn’t a large amount, he’ll value additional dollars in a registered retirement savings plan more than a health plan he doesn’t need right now. Sam is in a different place in life and is using a virtual therapist to help manage stress, so the health plan is a must and the kids need dental coverage. And Taylor might be fine, but with no plans to see a dentist until there’s a vaccine for COVID-19 and no money for the co-pay anyway, she’ll prefer a cash injection over a bunch of meaningless benefits. And some money management tools could be just the right nudge down the path to long-term financial security.

Read: Financial wellness more important than ever during coronavirus

While this tale may be aspirational, sound rationale is required for a full-on post-pandemic plan revamp, especially if employees aren’t expressing dissatisfaction with the current plan. So here are some things to consider in relation to the benefits plan.

Trying to cram everyone into an inflexible benefits plan means that no one is perfectly happy with the outcome — and yet, flexibility can be extended under a benefits plan in many ways. A good beginning is to think in terms of spending accounts rather than benefits packages.

The addition of a health-care spending account provides each plan member with the flexibility to address their own specific health-care needs. HCSAs add a defined contribution element to the benefits plan, providing a portion that isn’t subject to inflation or other factors beyond a plan sponsor’s control, as contributions can be adjusted at their discretion.

Plan sponsors wishing to cover expenses not eligible under the Income Tax Act, such as fitness memberships, can provide employees with a taxable wellness account. Under a truly flexible plan, employees would be able to direct the funds to non-taxable HCSAs or taxable wellness accounts at their own discretion, reflecting their personal situation and goals. 

Read: Back to basics on health-care spending accounts

Different levels of coverage under health and dental benefits along with different levels of spending accounts could help our three employees maximize their satisfaction with their benefits plans. Ultimately channeling spending account allocations to retirement plans could be an attractive tool to Alex or even Sam.

Voluntary or optional benefits can expand the flexibility of the plan even further. Employers have the ability to access products at favourable rates or that aren’t available to the general public at any price. These benefits put the employer in the role of facilitator, where they support employees’ access but they may not be providing financial support. Access to emergency daycare and elder-care services are a perfect example of something an employer can provide that could bring peace of mind to someone like Sam.

With flexibility and good communications comes enhanced employee appreciation of the benefits plan. Surveys have shown that when employees appreciate and understand their benefits plan, they are more engaged — and engaged employees contribute to better corporate results.

Imagine these three employees accessing their employer’s total rewards portal to check on their coverage. They elect their coverage according to their own personal needs, trading cash for coverage or not, as appropriate. Thanks to artificial intelligence, the portal can also assist like online shopping tools. This interactivity would be a valuable tool in education, leading to greater financial literacy and potentially assisting in stress reduction in the area of personal finance.

Read: Employee, employer views on quality of benefits plans differ, finds Sanofi survey

Alex trades health coverage for retirement savings. The ability to allocate the dollars to the retirement plan allows for tax mitigation and savings optimization. The ability to continue saving has enhanced his relationship with the employer and satisfaction with the plan.

Sam is harder to please. There really is only so much money to go around. She elects a full slate of coverage, selecting a slightly higher co-pay on drugs in order to maximize funds to support the virtual therapy for a few more months. And, since there’s limited time for vacation, she trades three vacation days for additional retirement contributions.

As a single person with no dependants, Taylor’s elections seem quite easy, but she’s quite happy to rely on the tools for a little guidance. In the end, she selects coverage that will cover vaccines and provide protection in the event of a disability or serious illness, puts a portion into the wellness account to cover the cost of financial counselling, enhanced internet, an ergonomic setup for the home workspace and a fitness app, taking the rest in cash. Finally, she trades a week of vacation for cash; although the cash is taxable, it’s the easiest way to get those credit cards paid off.

Read: How is benefits plan design evolving?

While some components of the plan require lock-ins or lock-outs, the employer allows employees to reselect whenever they have a significant change. Taylor has an extra level of comfort knowing that, once the debt is under control, the benefits allowance can be redirected to other priorities, like long-term savings.

Further, in designing the new plan, the employer also included a provision so that credits flow back to employees should there be an event in the future that resulted in the disruption of covered services for more than two months. 

Conventional thinking gives us many reasons to avoid this level of flexibility. Some of the biggest reasons include administrative complexity, paternalism, taxes, anti-selection, benchmarking and employer size.

Employees won’t only be looking for flexibility in their benefits and compensation, but in many other areas as well. We have seen that many jobs can actually be done from home. While permanent out-of-office locations may not be practical for everyone, employers need to consider what flexibility of location brings to the employee value proposition. Employees want to minimize their commutes, especially in the short term when COVID-19 is a deterrent from using transit.

Read: Employers expect remote, flexible arrangements to linger after coronavirus: survey

While work location will be a big one, flexible hours of work will also be important. After months of juggling priorities, employees are adept at meeting deadlines by working around taking care of their families. This flexibility may allow some employees to reduce the amount paid for childcare. Now that we’ve seen how successful it can be, flexible work will outlast the pandemic.

After experiencing the advantages of virtual physicians and mental-health therapy, people will be reluctant to return to in-person appointments that involve juggling schedules. Providing virtual treatment under the plan is no longer nice to have; it allows plan members to be present when they’re working and eliminates the time spent commuting and potential exposure to viruses. And the ease of seeking mental-health treatment this way may actually encourage plan members to act sooner, lessening the burden of a protracted illness. Plan sponsors should be early adopters of the technology and tools that reduce inconvenience and support good health.  

Employees value flexibility and they’ll seek out employers that provide it. It’s a great differentiator in the current market and the communications requirements change both the employees’ perception of the plan and their relationship with their employer.

Thanks to technology, so many people have been able to work and shop from home through the COVID-19 lockdown in a way that was previously thought to be impossible. This same technology allows employers to expand their communications with employees and administer more complex benefits plans that recognize the needs of the individuals in the workforce.

A seismic shift of this magnitude must be built on a broader corporate strategy, but, when everything is aligned, a human-centred benefits plan will be more valued by employees, attract quality talent, increase engagement and drive improved productivity.

Lizann Reitmeier is health practice leader at Buck.