The notices seem to come in waves. Yes, they’re designed to protect participants in your employee benefit plans, and you likely appreciate that worthy aspiration. But with each subsequent notice, you may feel a slight tightening in the benefits budget.
Each additional analysis, restriction, or requirement seems to cost more money. And times being what they are, it’s tougher than ever to find any. So maybe you wait. Maybe there won’t be a problem. Or if there is, you’ll just fix it then.
That’s a very understandable feeling, but Mark Manin, president of consulting firm Cammack LaRhette, urges you to reconsider. “Right now,” he says, “many companies are struggling tremendously between a rock and a hard place. There are all these new regulations and fiduciary requirements being placed upon organizations, both in the retirement and the health and welfare arenas.
“Most companies know they need to be doing more to protect themselves from potential liability, yet they don’t have the necessary expertise in-house, and they don’t have the budget to pay for outside help. To say that companies have limited resources right now would be the understatement of the century!
“Consequently, what we see is that a crisis must occur before companies are willing to spend the money necessary to comply with these things. Ironically, these are things that could have been done for a lot less money had they been done properly in advance,” Manin says. “Once the lawyers get involved the cost is much higher.”
The point of this discussion is not to provide details about which particular compliance areas you should examine; that’s what we normally do. We’re suspending that in favor of explaining how, without even realizing it, you may already have the funds you need. Manin wants to tell you a few places to look—and he has even more ideas at his company’s website, www.clcinc.com/pdfs/FindingtheMoney.pdf. But first, a note of caution:
“The trick,” he says, “is to make sure that the money you find doesn’t simply fall to the organization’s bottom line. There are many other areas within companies that are more than happy to find a way to spend any money you find in the benefits plans. That’s certainly a temptation. But one should do these things specifically with the understanding and knowledge that the money will be used to support the benefit plans in a different way. That’s a critical concept.”
With that caution in mind, here are some places Manin says you might look for extra money in your benefits plans:
1. Build in an administrative service charge to your qualified retirement plan. “We have many clients who pay us through plan assets,” Manin says. “You just build the fees into the defined benefit or defined contribution plan. The government allows it, because they would prefer that the plan have professional oversight. If the plan is designed poorly or operationally deficient it causes all sorts of problems for the employer and the employees. That doesn’t accomplish the goal.
“Very commonly, an administrative service charge is built into the fees of a defined contribution plan. Sometimes it’s called a plan account or an ERISA account. It can be used to pay for professional services, like lawyers, consultants, or auditors. There are many rules about how the money can be used or not used, but it is certainly a worthy idea to explore.”
2. Make operational changes. Is your health plan fully insured? Think about changing it. “Sometimes you can change how things are done operationally—rather than making a design change, like cost-shifting—that will be less expensive. It could be going from a fully insured arrangement to a self-insured arrangement. Or change to experience rating, or some kind of look-back arrangement in terms of funding. There may be some cost savings there.” Your insurance consultant should be able to help you examine the possibilities.
Changing how you administer your prescription drug program also falls under this heading. If you haven’t already, now is a good time to explore the possibility of using a pharmacy benefit manager (PBM) for prescriptions.
3. Automate your systems (or use someone else’s). This may seem obvious, but automating your labor-intensive processes, such as enrollments, can save a lot of money. There are many avenues to explore, Manin says. “The classic technology model is that systems are very expensive for the early adopters, and then the prices come down. These days, there are a lot of options. You can buy, lease, or use Web-based systems.”
However, what if those things are simply not in the budget? You may be able to kill two birds with one stone if you happen to want to offer voluntary benefits to your employees, Manin says.
“We have seen organizations work out deals with insurance companies that offer voluntary benefits where, in exchange for offering some benefits to the employees, they will actually provide enrollment services for the company.
“For example, one of our clients is a very large regional hospital. It has around 7,000 employees and many different locations, so there are a lot of sites to consider. It had a weak internal HRIS system, so doing an enrollment in-house was difficult.
“There was no way it would have the money available to purchase or lease a system,” Manin explains. “At the same time, it needed to offer short-term disability insurance for its employees.
“It picked a quality voluntary insurance provider and got the provider to provide the enrollment services. It’s been doing it that way for a number of years, and it’s very successful for everyone.
“Compared to when it did the enrollment manually, time spent distributing forms, collecting forms, reviewing forms, loading them into the computer, it saves upwards of $100,000 a year.
“You have to make sure you’re working with a reputable firm, one that you trust,” says Manin. “Make sure the product it’s selling is a good product, not some outrageously priced program you don’t need or want. You don’t want employees to feel like they’re having their arms twisted to buy a bad product.”
4. Bid, baby, bid. “Believe me, our clients take us to bid,” Manin says. “It’s too easy for any vendor who has a nice, positive relationship with a client to get a little too secure.”
If you can’t answer questions like, “How long have you been with your current vendors? How much do you pay them?” and “What services are they providing?” the time has come to take the plans out to bid. Why?
“Because the world is changing. ‘I don’t know’ is not a good answer to those questions. If there are problems with your benefits and somehow they get to be an employee’s problems, there will be litigation.
“If employees get burned because you’re paying too much, or they didn’t get the best product, or things were done poorly, and they lost out on benefits, let me assure you a jury is going to award them money.
“Not knowing these basic things is just not good business practice. It wouldn’t be good business practice if you were buying goods.
“Your purchasing department buys equipment, tools, cement, whatever it is, and yet, one of the biggest purchases an organization makes is their health and welfare programs and the associated attorneys, consultants, and auditors.”
Forget the old adage, ‘If it ain’t broke, don’t fix it.’ “It may be broken but you don’t know it,” says Manin. “And if you find out it was broken using 20/20 hindsight, because of litigation or a DOL audit, well, that’s not a good time to find out.”