Lecture 3Employee 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