Providing employee benefits to
employees and retirees is critical
to the success of any company.
But while employee benefits are
necessary to attract and retain
strong employees, they are also
one of the fastest growing ele-
ments of a company’s
cost structure. Here
are some points you
should consider to
maximize benefits
while reducing costs.
n Weigh pension
plan vs. 401(k) plan.
Every day, fewer com-
panies offer traditional
defined benefit pen-
sions to employees
because the employer
bears ongoing cost
risks. Most employers, however, of-
fer 401(k) plans to allow employees
to prepare for retirement. A 401(k)
plan allows an employer to fix its
cost, while the employee bears the
gains and losses. The employee
benefits from a 401(k) account by
having a readily portable benefit
when moving to a new job.
n Shop for health benefits.
Employers need to “shop the mar-
ket” to reduce costs to employers
and employees. The fees charged
for managing self-insured plans
need to be weighed against the
costs of buying insurance. Us-
ing consultants or participating in
chamber-sponsored plans can help
employers to obtain better benefits
at lower costs.
n Structure plans to address
health benefit cost increases.
Health care costs
have risen faster
than inflation
generally. Employ-
ers need to avoid
open-ended prom-
ises of health care
“for life,” either in
individual employ-
ment agreements
or in collectively
bargaining. Such
promises can result
in unsustainable
cost structures. Instead, employers
should retain the right to “modify,
amend or terminate” benefits plans.
n Consider coordinating
retiree health costs with Medicare.
When providing retiree health ben-
efits, employers should consider co-
ordinating benefits with Medicare.
The Equal Employment Opportu-
nity Commission recently ruled that
this practice is not age discrimina-
tory. Employers can transfer health
costs for age 65 and older retirees to
the federal government while pro-
Auditing Your Employee Benefits
By J