Lecture 3 Employee Benefit Planning and Management What are the employer’s objectives? What types of benefits should be provided? How should the plan be funded? What provisions for controlling costs should be included? How should the plan be communicated? To what extent should the administrative functions be outsourced?

What are the employer’s objectives? Need for objectives Typical situation Guidelines vs. specific objectives Examples of actual objectives: –To establish an employee benefit plan that channels as large a portion of the benefits as possible to the owners –To reduce employee turnover –To motivate employees to be more productive Who should receive benefits?

What types of benefits should be provided? Determining needs –Employer’s perception of employees’ needs –What competitors are doing –Collectively bargained benefits –Tax laws and regulations –Market research Personal interviews Simplified questionnaires “Sophisticated” research methods –Life-cycle benefits Different plans for different groups of employees

How should the plan be funded? Employer pay all Contributory financing

What provisions for controlling costs should be included? Probationary periods Benefit limitations –Disability income –Orthodontics Alternative funding methods (Chapter 14) Competitive bidding among insurers or administrators Specific program provisions –Managed care –Wellness programs –Employee assistance plans

How should the plan be communicated? Effective communication Methods of communication –Audiovisual presentations –Meetings with employees –Printed material –Interactive voice-response systems –Computers Caveat: Be very careful what you say!

To what extent should the administrative functions be outsourced? Reasons for outsourcing –Expertise –Confidentiality Functions outsourced –COBRA administration –Administration of medical and dental claims –Utilization review –Record keeping –Communication Decision to outsource