8

ppeebbaa

Editor-in-ChiefSharon E. Kazaras

Graphic Artist Jill S. Anderson

This newsletter is a publication of PEBA and thecontents are intended as general information only.They do not reflect the views of PEBA and do notconstitute legal advice. You should consult yourown lawyer concerning your situation or anyspecific legal questions you may have. Thisnewsletter or any part may not be reproducedwithout the permission of a PEBA officer or theExecutive Director.

ppeebbaa nneewwss

1528 Walnut Street, Suite 420Philadelphia, PA 19102-3608

See PEBA home page for $9.00parking near our office!

Friday, March 30 Deadline to signup March 9

Friday, April 27 Deadline to signup April 6

Friday, May 25 Deadline to signup May 4

Friday, June 29 Deadline to signup June 8

Friday, August 3 Deadline to signup July 13

Friday, Sept. 28 Deadline to signup Sept. 7

Friday, Oct. 26 Deadline to signup Oct. 5

Friday, Nov. 30 Deadline to signup Nov. 9

Friday, Dec. 28 Deadline to signup Dec. 7

YOUR BENEF I TS AND COMPENSAT ION ASSOCIAT ION

PEBA-SponsoredWorldatWork

2007 Compensation & BenefitsCertification Courses

Update your contact information and addyour initial membership date by logging on to

www.peba.org.

PEBA is pleased to provide new options for WorldatWork programs in 2007. In addition to ourtraditional offering of classes and tests, PEBA is now offering testing only at our conveniently locateddowntown site — PEBA, 1528 Walnut Street, Suite 420, in Philadelphia, from 7:30 AM to 12:00 PM.

Exam Only Sessions for 2007 - *New Option*

The tests will be held provided we have at least 5 tests scheduled. Our maximum number of attendees is 10.

1

MMiissssiioonn SSttaatteemmeenntt

PEBA will strive to berecognized throughout theDelaware Valley as the premierorganization in all areas relatedto employee benefits andcompensation by providingopportunities for:

• education• information• professional

development andexchange, and

• sharing professionalexpertise.

IInnssiiddee TThhiiss IIssssuuee

TToottaall RReewwaarrddss PPhhiilloossoopphhyyaanndd SSttrraatteeggyy 110011 .. .. .. .. .. 11

MMaarrkk SScchhwweeiikkeerr’’ss CChhaalllleennggeettoo PPEEBBAA BBuussiinneessss LLeeaaddeerrss:: GGeett IInnvvoollvveedd……HHeellpp MMaakkee PPhhiillllyy SSaaffeerr aanndd MMoorree BBuussiinneessss--FFrriieennddllyy .. .. .. .. 22

22000077 CCoommmmiitttteeee SSuurrvveeyy UUppddaattee .. .. .. .. .. .. .. 33

TThhee EEffffeecctt ooff CCoonnttrroolllliinnggMMuuttuuaall FFuunndd FFeeeess oonn YYoouurr EEmmppllooyyeeeess’’ RReettiirreemmeenntt NNeesstt EEgggg .. .. .. 44

IInn TThhee WWoorrkkss...... CCoommmmuunniittyyOOuuttrreeaacchh aanndd NNeettwwoorrkkiinnggCCoommmmiitttteeee PPllaannss ffoorr 22000077 .. .. .. .. .. .. .. .. .. .. .. .. 55

CCaassee CCoommppeettiittiioonn DDeevveellooppssBBeenneeffiitt PPrrooffeessssiioonnaallss ooff tthheeFFuuttuurree .. .. .. .. .. .. .. .. .. .. .. .. .. .. 66

CCaann YYoouu TToopp TThhiiss??HHAAVVEE PPAATTIIEENNCCEE –– WWee’’llll AAllllBBee OOlldd OOnnee DDaayy!! .. .. .. .. .. .. 66

WWiitthh YYoouurr HHeellpp,, PPEEBBAACCoonnttiinnuueess ttoo GGrrooww .. .. .. .. 77

Early Spring 2007

ppeebbaa nneewwssYOUR BENEF I TS AND COMPENSAT ION ASSOCIAT ION

Have you ever taken the dog to thekennel, packed the family in the car, andhit the highway for a two-week vacation,heading south but without a destinationin mind? Have you ever gone to the mar-ket to shop for a holiday dinner withouta shopping list? Would you hire a con-tractor to remodel the kitchen withoutseeing a design plan? In each of theseexamples, most of us would need tomake or see a plan, even if it’s just in asimplistic form.

In order to preserve and grow theirgreatest asset – their employee base –companies need a total rewards strate-gy, which includes compensation, ben-efits, and the total work experience. Inorder to attract, retain and motivateemployees, how will a company’srewards compete? A “formal” totalrewards strategy is documented andcommunicated. Some companies havean “informal” or undocumented totalrewards strategy. However, just like animportant ingredient for a holiday din-ner might be forgotten at the market, animportant part of the total rewards strat-egy could be lost or misinterpreted overtime. To ensure consistency and effec-tiveness between departments and overtime, it’s always best to put it in writing.

Developing a total rewards strategyis a cornerstone for successful businessoperation. It may be basic, but takes seri-ous discussion, time, and effort. How isit developed? What influences therewards strategy, and what does therewards strategy influence?

KKnnooww tthhee OOrrggaanniizzaattiioonnDeveloping a total rewards strategy

begins with a clear understanding of thecompany’s mission (the reason for exis-

tence) and business strategy (how thecompany will distinguish itself in the mar-ketplace). Knowing how a companyplans to succeed will help define theemployees it needs to attract, retain, andmotivate. What are the company’s fis-cal resources? With whom is the com-pany competing for customers andemployees? Is the business strategyfocusing on price, customer service, orinnovation? These are just some of themany questions that should be asked.

A well-crafted total rewards strategyhelps ensure business success.

The HR philosophy must also be con-sidered when developing the totalrewards strategy. What are manage-ment’s values and beliefs about theemployee/employer relationship?

TThhee TToottaall RReewwaarrddss PPhhiilloossoopphhyy aannddSSttrraatteeggyy

A total rewards philosophy statementshould be developed by top manage-ment to ensure executive buy-in and har-mony with the company’s mission,business strategy, and HR philosophy. Itshould express the goal of the totalrewards program and management’svalues on compensation and benefits.The Human Resources or Compensationprofessional facilitates the process todevelop a cohesive statement.

The total rewards strategy piecestogether the various rewards programs,which can include salary, bonus, stock,incentive pay, and benefits (tangible and

TToottaall RReewwaarrddss PPhhiilloossoopphhyyaanndd SSttrraatteeggyy 110011

By Melissa Halpin

Continued on Page 3.

2

Mark Schweiker, President and CEOof the Greater Philadelphia Chamberof Commerce, shared his insights intothe challenges and opportunities facingbusinesses with 85 tri-state area busi-ness leaders at PEBA’s October 18th

Evening Event. He urged all to getinvolved, look critically at the businesscommunity, and help improve it byupgrading the fundamental infrastruc-tures impacting businesses such asschools, safety, and employer/employ-ee financial friendly environment. Healso challenged attendees to think ofthe job we, as business leaders, sharein inviting and welcoming other busi-nesses into our community.

Mr. Schweiker was introduced byJoe Frick, the President and CEO ofIndependence Blue Cross and Chair ofthe Greater Philadelphia Chamber ofCommerce.

The evening at the IndependenceVisitors’ Center opened with a cocktailbuffet, enjoyed by many on the terraceoverlooking the Liberty Bell andIndependence Hall and was enhancedby the balmy weather. The networkingcontinued with dessert and coffee fol-lowing the Mr. Schweiker’s talk.

We are grateful to our sponsors whomake it possible to bring special pro-grams such as this to our members andtheir guests.

MMaarrkk SScchhwweeiikkeerr’’ss CChhaalllleennggee ttoo PPEEBBAA BBuussiinneessss LLeeaaddeerrss::

GGeett IInnvvoollvveedd……HHeellpp MMaakkee PPhhiillllyy SSaaffeerr aannddMMoorree BBuussiinneessss--FFrriieennddllyy

We would also like to thank our hard working committee members who madethis evening possible.

Susan Bleiberg – Mercer Health and BenefitsJudy Mester – DeloitteDavid Pierson – The Pierson GroupMichael Rosenfeld – Model Consulting Inc.

Mark Schweik ís Challenge to PEBA Bus Leader :G t InvolvedÖHelp Mak Philly Saf -F

, ident and CEOChamber e Vis 18 w

.

th the 85 tr

/em the j

J

T

W

z

Mark Schweik ís Challenge to PEBA Bus Leader :G t InvolvedÖHelp Mak Philly Saf -F

, ident and CEOChamber e Vis 18 w

.

th the 85 tr

/em the j

J

T

W

z

Mark Schweik ís Challenge to PEBA Bus Leader :G t InvolvedÖHelp Mak Philly Saf -F

, ident and CEOChamber e Vis 18 w

.

th the 85 tr

/em the j

J

T

W

z

Mark Schweik ís Challenge to PEBA Bus Leader :G t InvolvedÖHelp Mak Philly Saf -F

, ident and CEOChamber e Vis 18 w

.

th the 85 tr

/em the j

J

T

W

z

Mark Schweik ís Challenge to PEBA Bus Leader :G t InvolvedÖHelp Mak Philly Saf -F

, ident and CEOChamber e Vis 18 w

.

th the 85 tr

/em the j

J

T

W

z

Platinum Gold

Silver Bronze

Patrons

Mark Schweiker shares his vision

PEBA Business Leaders

J. Arko, M. Burke, J. Kaufman

N. Mowbray and D. Dowell (Southco, Inc.)7

AAllllrreedd CCoonnssuullttiinngg(Chandra Allred, President)

A management consulting firm in theWilmington-Philadelphia metropolitan area, AllredConsulting focuses on achieving organizational resultsfor clients through their expertise in organizationaldesign, workforce planning, and HR competencies.

CCDDII CCoorrppoorraattiioonn(Gail T. Grib, Director Compensation)

CDI Corporation is a professional servicecompany whose main mission is to provide quali-ty technical and engineering services to business-es on a temporary or outsourced basis. Theyprovide engineering and information technologyoutsourcing solutions and professional staffing toa wide range of customers in the aerospace,process and industrial, IT, life sciences, and gov-ernment services sectors.

IIDDSS SScchheeeerr(Amy Y. Goldberg, Director, Human Resources)

IDS Scheer is the market leader of solutionsfor “Business Process Excellence.” The compa-ny’s ARIS-based solutions offer a complete port-folio for business process management includingsoftware, services, and methods to address allphases of the business process lifecycle: strate-gy, design, implementation, controlling, documen-tation, and continuous improvement.

KKiissttlleerr--TTiiffffaannyy BBeenneeffiittss(David I. Camp, Employee Benefits Consultant)

Kistler-Tiffany Benefits is one of the region’spremier employee benefits consulting firms. Forover 40 years, they have provided customizedemployee benefits programs directly to companiesand organizations and comprehensive sales sup-port to independent insurance consumers. Kistler-Tiffany serves all size companies, municipalities,school districts, unions, and associations in thetri-state area.

LLMMAA CCoonnssuullttiinngg GGrroouupp(Barry Frey, Senior Consultant)

With an interdisciplinary team of organiza-tional psychologists, HR executives, and otherbusiness professionals, LMA Consulting group hasbeen providing services to large and small busi-nesses in all industry sectors for more than 20years. They use their expertise to address humanand organizational behavior by employing system-atic principles to effect change.

OOrraaPPhhaarrmmaa,, IInncc..(Helen T. Booth, Sr. Financial Analyst)

A specialty pharmaceutical company that dis-covers, develops, and commercializes therapeu-tics for oral health, OraPharma produces the firstlocally administered time-released antibioticencapsulated in microspheres that effectively killsthe germs that cause periodontal disease.

OORRCC WWoorrllddwwiiddee(Andrew S. Rosen, Vice President)

ORC Worldwide is an international manage-ment and HR consulting firm dedicated to advanc-ing the ar t, knowledge, and practice oforganizational and human relationships. Usingresearch and experience, ORC works with clientsto develop policies and practices that motivateemployees to contribute more effectively to theprofitability and success of the organization. Theyhave offices throughout the United States, Europe,and Asia.

PPhhoottooMMeeddeexx,, IInncc..(Marge Dailey, VP, Human Resources)

PhotoMedex’s principal activities are to devel-op, manufacture, and market excimer laser andfiber optic systems and techniques. Their prod-ucts are designed for the treatment of psoriasis,vitiligo, atopic dermatitis, and leukoderma. In addi-tion to product development, they also manufac-ture and market proprietary lasers and deliverysystems for contact and non-contact surgery andprovide surgical services.

PPoosstt && SScchheellll,, PP..CC..(Brian J. Dougherty, Partner)

Post & Schell currently has over 150 attorneysin Allentown, Harrisburg, Lancaster, Philadelphia,Pittsburgh, Princeton, and Washington, DC. Theyprovide litigation, corporate, transactional, regulato-ry, compliance, consulting, and educational servic-es locally, regionally and nationally to a broadspectrum of proprietary and not-for-profit industries.Their technique is a blend of specific experience witha team approach and a commitment to technology.

TThhee SSttaannddaarrdd(Timothy J. Golden, Sales Manager)

The Standard provides financial services andinvestment products to approximately 7 millionpeople nationwide. Nearly 30,000 employers trustThe Standard to provide or administer their groupinsurance and retirement plans, and their annuitiesare designed to help people guard against outliv-ing their assets.

RReennééee LL.. RRoosseennffeelldd, CEBS, SPHRis an Assistant VP for HumanResources at Holy FamilyUniversity.

DDaarrcceell GGuueerrrraa (Arcadia University,Class of 2007) is a HumanResources Intern at Holy FamilyUniversity.

With Your Help, PEBA Continues to Grow Have you told anyone about PEBA lately?

We welcome the following member companies who joined in recent months:

PEBA Also Welcomes...Our new Executive Director

Susan DeMinicoformer Executive Director of

The Princeton Review

and the New Officers of the

Executive Committee of the Board

PresidentJames R. Bowers

Vice President, Hay Group

Vice PresidentAnabel I. Pichler

Manager, Executive Compensation,

duPont Global Rewards Team

SecretaryMary M. Burke

Associate Director of HumanResources, Villanova University

TreasurerJohn Arko

Director, Benefits Strategy, CIGNA Corporation

6

HHAAVVEE PPAATTIIEENNCCEE –– WWee’’llll AAllll BBee OOlldd OOnnee DDaayy!!One of the “benefits” of being in our profession is knowing how to navigate the system for ourselves and our loved

ones. For the past year, I’ve been discussing Medicare Part D with my elderly parents (81 and 85), who live in Florida.Because they’re in good health, I enrolled them in the least expensive plan in May 2006 to avoid their having to payany late-enrollment penalties. I told Mom and Dad to watch for their “Welcome Kits” in 2-3 weeks, as instructed bythe carrier’s website. Well, after a few weeks, Dad became concerned that nothing had arrived – was I sure I hadenrolled them properly? Would I please make a phone call? Ever the dutiful daughter, I called the carrier, whoserecords showed that kits had been mailed and should have arrived a while ago. I asked them to please send anotherset. When I called Dad to report what the carrier said, he replied: “Oh, you mean the Humana stuff? Mother and Ithought it was junk mail, so we threw it out.” I screamed silently and asked him to please watch for the second set,which should arrive in a week or so. As always, he and Mom were grateful to have their own personal BenefitsConsultant watching out for them.

a a aCan you top this PEBA member’s story? If you have an interesting, scary, or bizarre story to share, please e-mail

Arleen Barisa, PEBA Communications Committee chair, at Arleen.Barisa@uphs.upenn.edu. We will work with you toremove all identifying information; we promise privacy.

Meant to add a lighter note and share some “war stories,” this is the third in a series of arti-cles we offer our members — sharing stories of the more fun, or at least interesting, aspectsof our jobs.

CCaann YYoouu TToopp TThhiiss??

CCaassee CCoommppeettiittiioonn DDeevveellooppss BBeenneeffiittPPrrooffeessssiioonnaallss ooff tthhee FFuuttuurree

By Michael McCloskeyPEBA embarked on a new venture on

Saturday, November 4th – the first annu-al PEBA/Temple University EmployeeBenefits case competition sponsored byCommerce Banc Insurance Services.Students from the employee benefitcourse at Temple University joined indus-try professionals for a day-long competi-tion at Commerce University in Mt. Laurel,NJ. Students partnered with local com-panies on real projects involving currentbenefit issues, such as Medicare part D,Consumer Directed Health Plans, and theannual rate renewal process. Eight PEBAmembers volunteered their services forthe entire day, questioning the students’analyses and conclusions and selectinga winner. The winning team – Kirk

Czonstka and Justin Thomas – work withLarry Friedman of RSI. Rob DrennanPHD, Chairman of the Temple School ofRisk Management, called the competition“a great success,” and looks forward “tocontinuing the partnership with PEBA andCommerce in the years to come.” Toachieve the goal of an annual event, wewill need project sponsors and competi-tion judges. Watch for PEBA communi-cations in 2007. You will have anopportunity to volunteer and participateagain next year.

MMiicchhaaeell MMccCClloosskkeeyy, CEBS is aBenefits Training Manager atCommerce University

3

intangible), and provides the most favor-able mix for the organization. Developingthe strategy should be a team effort includ-ing the compensation committee, seniormanagement, Human Resources, and per-haps outside consultants and employees.

CCoommmmuunniiccaattiioonnOnce a total rewards philosophy and

strategy have been developed, theyshould be clearly communicated in orderto motivate employees to achieve busi-ness goals. It’s important for managersto understand the philosophy/strategybefore it is communicated to otheremployees. There may be a concern thatemployees won’t like what they hear orread. However, even if employees don’tagree with the philosophy or strategy, theywill be aware that their rewards aren’t bychance—they’re based on some rationale.

It’s important to practice what hasbeen documented and communicated.A perception that policy and applicationdon’t agree will have a negative effecton employee motivation and adverselyimpact the integrity of the total rewardsprogram. Also, if the practice is applied

inconsistently, an organization mayopen itself to claims of discrimination.

WWhhaatt tthhee TToottaall RReewwaarrddss PPhhiilloossoopphhyyaanndd SSttrraatteeggyy IInnfflluueennccee

Each year during the planningstages for the compensation and bene-fit programs, the total rewards philoso-phy and strategy should be reviewed toguide the design of the plans. Whatdoes the philosophy/strategy state andhow is the company delivering on thatstrategy? For example, if your strategystates that you pay at the 75th percentileand your average ccoommppaa--rraattiioo (the ratioof an individual’s rate of compensationto the midpoint of the salary range forthe job) indicates that you are paying atthe 68th percentile, you need to identi-fy the reason for the disparity. It may benecessary to recommend salary budgetand salary structure adjustments higherthan the median survey data in order toalign the company’s compa-ratio clos-er to the strategy. Aligning the realitywith the stated philosophy may take afew years, but will move you in the rightdirection.

PPeerriiooddiicc RReevviieewwAs business environments and cul-

tures change, it is important to ensurethat your total rewards philosophy andstrategy are current. For example, inthe start-up phase of a business, thetotal rewards emphasis may dependhighly on long-term incentives. Withgrowth, the strategy may be tweaked toemphasize base pay and/or short-termincentives.

SSuummmmaarryyA total rewards philosophy and strat-

egy is a necessary foundation to ensurebusiness success in hiring, motivating andretaining employees. It needs to be sup-ported by top management, clearly com-municated to managers and employees,applied consistently, and periodicallyreviewed for alignment with the businessenvironment.

MMeelliissssaa HHaallppiinn is a CompensationSpecialist at the University ofPennsylvania

TToottaall RReewwaarrddss PPhhiilloossoopphhyy aanndd SSttrraatteeggyy 110011(Continued from Page 1.)

YES, IT’S TRUE! We’re going to restart anannual PEBA-sponsored compensationsurvey. We got a good start last year andwould like to continue the momentum.You’ll receive an invitation to participatein the spring.

We’ll also be conducting two free surveys in 2007:

• Defined Benefits/Defined Contribution–What’s Happening?

• Executive Pay

WWaattcchh ffoorr tthheemm iinn yyoouurr iinn--bbooxx!!

2007 SURVEYCOMMITTEE

UPDATEHELPING ORGANIZATIONS ACHIEVE

IMPROVED PERFORMANCE THROUGH A FULLYINTEGRATED BENEFITS PROGRAM.

Does your benefits firm provide you with:

– HR Portal?– HRIS System?– Comprehensive benchmarking?– Compliance assistance?– Benefits administration?– Exhaustive financial reporting?– Extensive employee communications?

INTEGRATED HEALTH STRATEGIES

COMMUNICATIONS

HUMAN RESOURCE SYSTEMS

FLEX / COBRA

ONLINE ENROLLMENT

RETIREMENT PLAN SERVICES

COST REDUCTION

COMPLIANCE

610.520.4900www.ibsbenefits.net

4

In addition to fulfilling their fiduciaryduty by evaluating fund fees and deter-mining if they are reasonable, plan spon-sors who reduce their plans’ investmentfees provide a cost-free enhancement totheir employees’ retirement benefits. Evena small reduction, compounded overtime, can have a significant impact on aparticipant’s account balance at retire-ment. Communicating this to employeesadds further value to the plan you offer.Consider the following scenario:

Susan is 35, has a balance of$100,000 and does not contribute anoth-er dollar to her employer’s 401(k) plan.Her investments earn gross returns of 8%a year, less a 1.5% annual fee. Over thenext 30 years, Susan’s balance will growto $661,435. If her employer can reducethe fees to 0.5% of assets, Susan’s finalbalance will instead be $875,450 —$214,015 more in retirement savings. Inthis example, a 1% reduction in plan feesresults in a 32% increase in her accountbalance at retirement. [See chart above.]

WWoouullddnn’’tt yyoouu lliikkee ttoo bbee aabbllee ttooccoommmmuunniiccaattee tthhiiss kkiinndd ooff nneewwss ttoo yyoouurreemmppllooyyeeee ppooppuullaattiioonn??

The remaining portion of this articlefocuses on this type of plan sponsor duediligence and the evaluation of retirementplan service providers conducted duringa benchmarking study or a request forproposal (“RFP”).

Annually, an average of more thanone in eight mid-sized plan sponsors willchange their 401(k) recordkeepers orproviders. More than one-third will con-duct a search or a due diligence reviewof their plan provider each year. (Source:

Diversified Investment Advisors’ Prescience 2010:

Expert Opinions on the Future of Retirement Plans)

The most common reasons for con-ducting a 401(k) provider search arereducing corporate expenses, streamlin-ing administrative functions, and address-ing service problems. Often overlooked

during this process arethe plan sponsor’s ERISA fiduciary respon-sibilities to the plan participants.“Understanding and evaluating [401(k)]plan fees and expenses associated withplan investments, investment options, andservices are an important part of a fidu-ciary’s responsibility,” advises a USDepartment of Labor booklet on retire-ment plan fees and expenses.

When the time comes for your com-pany to conduct a search and evaluatepotential 401(k) plan providers, your deci-sion must go beyond simply reducing cor-porate expenditures and take into accountthe underlying costs associated withinvestment options and plan services.Similar to a car-buying experience, youwill not be able to negotiate the best dealfor you and your plan participants unlessyou do your homework and understandall the components of a service providers’cost and revenue models.

BBrreeaakkiinngg DDoowwnn TThhee FFeeeessSimply put, 401(k) fees can, and

should, be separated into two distinct cat-egories:• Administrative (covering

recordkeeping, reporting orparticipant services)

• Investment relatedWhen 401(k) plans first became pop-

ular, fees were straightforward and gen-erally easy to sort through. Administrativefees were quoted as hard dollar costs paidby the employer or the participants andinvestment fees were expressed and cal-culated based on a percentage of planassets netted against returns. In today’s401(k) marketplace, however, the delin-eation of fees into these categories hasbecome blurred and is often obscured bya dizzying array of investment expense jar-gon and revenue sharing arrangements.

Buyers and fiduciaries beware, if youlack the know-how to navigate throughthe fee maze during a service provider RFP.

BBuuyyeerr BBeewwaarree –– UUnnddeerrssttaannddiinngg RReevveennuueeSShhaarriinngg aanndd ZZeerroo BBiilllleedd FFeeeess

To understand the economies of the401(k) marketplace, you will need a thor-ough knowledge of two interrelated top-ics that merit particular attention —revenue sharing and ‘zero’ billed fees.

Revenue sharing is the transfer of fee-based compensation from investmentmanagers to retirement plan serviceproviders that takes a number of differ-ent forms. It has become an embeddedindustry practice and is the primary rea-son why providers can utilize multiple fundfamilies and offer myriad investmentoptions. The practice of revenue sharingis neither good nor bad. It is anotheroption that warrants consideration andanalysis. Because the amount of revenuesharing varies by fund, negotiating theamount you are paying in fees is often anegotiation on the make-up of your fundlineup. Those funds sharing more rev-enue are more likely to make it into yourservice provider’s proposed fund lineupif administrative fees are negotiateddownward.

Be wary of ‘zero’ billed fees.Although it may sound appealing, thismeans the service provider is alreadyexpecting to earn enough revenuethrough investment based fees that it doesnot have to charge any hard dollar feesfor the administrative services it provides.In other words, the plan participants arebeing asked to incur an increasing vari-able fee for fixed cost services. Under thisarrangement, the providers’ revenue usedto cover fixed costs will automaticallyincrease as the plan’s asset base growsthrough a combination of investmentreturns, contributions, and rollovers.Over the long term, this can be a verylucrative arrangement for serviceproviders at the expense of your partici-pants’ investment performance.

The Effect of Controlling Mutual Fund s Your Employeesí Retirem nt Nes

In addition to fulfilling their fiduciary duty by evaluating fund fees and determining if they are reasonable, plan sponsors who reduce their plansí investment fees provide a cost-free enhancement to their employeesí retirement benefits. Even a small

to the plan you offer. Consider the following scenario:

Su 35, has e of $100,000 an 401(k) . H of 8% a year, les

al fee. Over the n x to $661,435. If

ead be $875,450 -- $214,015 m

Mutual Fund Fee Impact

$0

$200,000

$400,000

$600,000

$800,000

$1,000,000

35 40 45 50 55 60 65

Age

Acco

unt B

alan

ce

.50% Fee

1.50% Fee

W ?

benchmarking study or a request for proposal (ìRFPî).

Annually, an average of more than one in eight mid-sized plan sponsors will change

Source: Diversified Invest

. ìUnders

Acc

ount

Bal

ance

TThhee EEffffeecctt ooff CCoonnttrroolllliinnggMMuuttuuaall FFuunndd FFeeeess oonn

YYoouurr EEmmppllooyyeeeess’’RReettiirreemmeenntt NNeesstt EEggggBy Kal Muchnick and Robert Krane

5

AAsskkiinngg TThhee TToouugghh QQuueessttiioonnss DDuurriinngg TThhee RRFFPP

As part of your evaluation and nego-tiation process, you must know the toughquestions to ask to help uncover the truecosts you will pay and identify the poten-tial bargaining power you can leverage.Do not waver in your demands for full dis-closure from service providers.• What is the targeted plan size and

average account balance for yourpricing model to be competitive?

• At what plan size and averageaccount balance would we qualifyfor a better pricing model or servicepackage?

• Are there any services or featuresyou are not offering because of thesize of our plan or the projectedrevenue you will receive?

• Please provide the audited expenseratio or similar asset charges foreach investment option.

• Please disclose any plan-level assetcharges or wrap fees.

• For each investment option you areproposing, what share classes areyou offering and are there any lowercost classes available to our plan?

• Are there any investment optionsthat can be replaced with acomparable investment option witha lower cost?

• If a lower cost share class is used,what is the impact on your fee quote?

• In your asset allocation, target orlifestyle funds, are there any wrapfees added to the expense ratios ofthe underlying funds?

• For each investment option, pleaseprovide full disclosure of allinvestment revenue you will receive,including revenue sharing through12(b)1 fees, finder fees, sub transferagent fees and other soft dollararrangements.

• How much of the total investmentexpense we are charged and therevenue you receive is earmarked tocover administrative expenses?

• Will you rebate the investmentrevenue that exceeds theadministrative expenses back to theplan and the participants?

• Because of your pricing model, arethere any restrictions on the fundmapping strategy we can use duringconversion?

• If we are using a broker or

consultant to help, are they receivingany type of direct or indirectcompensation from you? Howmuch?

• How much flexibility do we have todetermine which fees and expenseswill be charged directly to us as plansponsor and which fees will bededucted from plan assets?

• What services are covered under thebase fee arrangement and whatservices would result in an extracharge?

• What are the fees for extra orcustomized services?

EEffffeecctt ooff CCoonnttrroolllliinngg MMuuttuuaall FFuunndd FFeeeessAs a plan fiduciary and decision-

maker, you have the challenging respon-sibility to understand the fee structure used

in the 401(k) marketplace. During theRFP process this knowledge can be usedto negotiate a better deal and reduce yourplan’s expenses, but you must know thekey questions to ask. If you do, you canhelp your employees maximize theirretirement nest egg along the same linesas the scenario mentioned at the begin-ning of this article.

A final word of caution: cheaper isnot always better. A proper balance mustbe struck between the quality of servicesand fees.

KKaall MMuucchhnniicckk is a Principal andDefined Contribution PracticeLeader at The Savitz Organization.

RRoobbeerrtt KKrraannee is a ManagingConsultant DC Practice atThe Savitz Organization.

IInn TThhee WWoorrkkss......CCoommmmuunniittyy OOuuttrreeaacchh aanndd

NNeettwwoorrkkiinngg CCoommmmiitttteeeePPllaannss ffoorr 22000077

We’re investigating several new things this year.• Family night at a local ball park this summer (River Sharks in Camden?)• Weekend date to help Philabundance.• Possible golf clinic and outing (all levels welcome, particularly beginners).• Forming a team for the Carolyn Marks Walk for the Whisper.• Assisting South Jersey non-profit associations with community evening

fundraisers.

LLoottss hhaappppeenniinngg aanndd lloottss iinn tthhee wwoorrkkss.. WWaattcchh yyoouurr ee--mmaaiill ffoorr uuppddaatteess!!

4

In addition to fulfilling their fiduciaryduty by evaluating fund fees and deter-mining if they are reasonable, plan spon-sors who reduce their plans’ investmentfees provide a cost-free enhancement totheir employees’ retirement benefits. Evena small reduction, compounded overtime, can have a significant impact on aparticipant’s account balance at retire-ment. Communicating this to employeesadds further value to the plan you offer.Consider the following scenario:

Susan is 35, has a balance of$100,000 and does not contribute anoth-er dollar to her employer’s 401(k) plan.Her investments earn gross returns of 8%a year, less a 1.5% annual fee. Over thenext 30 years, Susan’s balance will growto $661,435. If her employer can reducethe fees to 0.5% of assets, Susan’s finalbalance will instead be $875,450 —$214,015 more in retirement savings. Inthis example, a 1% reduction in plan feesresults in a 32% increase in her accountbalance at retirement. [See chart above.]

WWoouullddnn’’tt yyoouu lliikkee ttoo bbee aabbllee ttooccoommmmuunniiccaattee tthhiiss kkiinndd ooff nneewwss ttoo yyoouurreemmppllooyyeeee ppooppuullaattiioonn??

The remaining portion of this articlefocuses on this type of plan sponsor duediligence and the evaluation of retirementplan service providers conducted duringa benchmarking study or a request forproposal (“RFP”).

Annually, an average of more thanone in eight mid-sized plan sponsors willchange their 401(k) recordkeepers orproviders. More than one-third will con-duct a search or a due diligence reviewof their plan provider each year. (Source:

Diversified Investment Advisors’ Prescience 2010:

Expert Opinions on the Future of Retirement Plans)

The most common reasons for con-ducting a 401(k) provider search arereducing corporate expenses, streamlin-ing administrative functions, and address-ing service problems. Often overlooked

during this process arethe plan sponsor’s ERISA fiduciary respon-sibilities to the plan participants.“Understanding and evaluating [401(k)]plan fees and expenses associated withplan investments, investment options, andservices are an important part of a fidu-ciary’s responsibility,” advises a USDepartment of Labor booklet on retire-ment plan fees and expenses.

When the time comes for your com-pany to conduct a search and evaluatepotential 401(k) plan providers, your deci-sion must go beyond simply reducing cor-porate expenditures and take into accountthe underlying costs associated withinvestment options and plan services.Similar to a car-buying experience, youwill not be able to negotiate the best dealfor you and your plan participants unlessyou do your homework and understandall the components of a service providers’cost and revenue models.

BBrreeaakkiinngg DDoowwnn TThhee FFeeeessSimply put, 401(k) fees can, and

should, be separated into two distinct cat-egories:• Administrative (covering

recordkeeping, reporting orparticipant services)

• Investment relatedWhen 401(k) plans first became pop-

ular, fees were straightforward and gen-erally easy to sort through. Administrativefees were quoted as hard dollar costs paidby the employer or the participants andinvestment fees were expressed and cal-culated based on a percentage of planassets netted against returns. In today’s401(k) marketplace, however, the delin-eation of fees into these categories hasbecome blurred and is often obscured bya dizzying array of investment expense jar-gon and revenue sharing arrangements.

Buyers and fiduciaries beware, if youlack the know-how to navigate throughthe fee maze during a service provider RFP.

BBuuyyeerr BBeewwaarree –– UUnnddeerrssttaannddiinngg RReevveennuueeSShhaarriinngg aanndd ZZeerroo BBiilllleedd FFeeeess

To understand the economies of the401(k) marketplace, you will need a thor-ough knowledge of two interrelated top-ics that merit particular attention —revenue sharing and ‘zero’ billed fees.

Revenue sharing is the transfer of fee-based compensation from investmentmanagers to retirement plan serviceproviders that takes a number of differ-ent forms. It has become an embeddedindustry practice and is the primary rea-son why providers can utilize multiple fundfamilies and offer myriad investmentoptions. The practice of revenue sharingis neither good nor bad. It is anotheroption that warrants consideration andanalysis. Because the amount of revenuesharing varies by fund, negotiating theamount you are paying in fees is often anegotiation on the make-up of your fundlineup. Those funds sharing more rev-enue are more likely to make it into yourservice provider’s proposed fund lineupif administrative fees are negotiateddownward.

Be wary of ‘zero’ billed fees.Although it may sound appealing, thismeans the service provider is alreadyexpecting to earn enough revenuethrough investment based fees that it doesnot have to charge any hard dollar feesfor the administrative services it provides.In other words, the plan participants arebeing asked to incur an increasing vari-able fee for fixed cost services. Under thisarrangement, the providers’ revenue usedto cover fixed costs will automaticallyincrease as the plan’s asset base growsthrough a combination of investmentreturns, contributions, and rollovers.Over the long term, this can be a verylucrative arrangement for serviceproviders at the expense of your partici-pants’ investment performance.

The Effect of Controlling Mutual Fund s Your Employeesí Retirem nt Nes

In addition to fulfilling their fiduciary duty by evaluating fund fees and determining if they are reasonable, plan sponsors who reduce their plansí investment fees provide a cost-free enhancement to their employeesí retirement benefits. Even a small

to the plan you offer. Consider the following scenario:

Su 35, has e of $100,000 an 401(k) . H of 8% a year, les

al fee. Over the n x to $661,435. If

ead be $875,450 -- $214,015 m

Mutual Fund Fee Impact

$0

$200,000

$400,000

$600,000

$800,000

$1,000,000

35 40 45 50 55 60 65

Age

Acco

unt B

alan

ce

.50% Fee

1.50% Fee

W ?

benchmarking study or a request for proposal (ìRFPî).

Annually, an average of more than one in eight mid-sized plan sponsors will change

Source: Diversified Invest

. ìUnders

Acc

ount

Bal

ance

TThhee EEffffeecctt ooff CCoonnttrroolllliinnggMMuuttuuaall FFuunndd FFeeeess oonn

YYoouurr EEmmppllooyyeeeess’’RReettiirreemmeenntt NNeesstt EEggggBy Kal Muchnick and Robert Krane

5

AAsskkiinngg TThhee TToouugghh QQuueessttiioonnss DDuurriinngg TThhee RRFFPP

As part of your evaluation and nego-tiation process, you must know the toughquestions to ask to help uncover the truecosts you will pay and identify the poten-tial bargaining power you can leverage.Do not waver in your demands for full dis-closure from service providers.• What is the targeted plan size and

average account balance for yourpricing model to be competitive?

• At what plan size and averageaccount balance would we qualifyfor a better pricing model or servicepackage?

• Are there any services or featuresyou are not offering because of thesize of our plan or the projectedrevenue you will receive?

• Please provide the audited expenseratio or similar asset charges foreach investment option.

• Please disclose any plan-level assetcharges or wrap fees.

• For each investment option you areproposing, what share classes areyou offering and are there any lowercost classes available to our plan?

• Are there any investment optionsthat can be replaced with acomparable investment option witha lower cost?

• If a lower cost share class is used,what is the impact on your fee quote?

• In your asset allocation, target orlifestyle funds, are there any wrapfees added to the expense ratios ofthe underlying funds?

• For each investment option, pleaseprovide full disclosure of allinvestment revenue you will receive,including revenue sharing through12(b)1 fees, finder fees, sub transferagent fees and other soft dollararrangements.

• How much of the total investmentexpense we are charged and therevenue you receive is earmarked tocover administrative expenses?

• Will you rebate the investmentrevenue that exceeds theadministrative expenses back to theplan and the participants?

• Because of your pricing model, arethere any restrictions on the fundmapping strategy we can use duringconversion?

• If we are using a broker or

consultant to help, are they receivingany type of direct or indirectcompensation from you? Howmuch?

• How much flexibility do we have todetermine which fees and expenseswill be charged directly to us as plansponsor and which fees will bededucted from plan assets?

• What services are covered under thebase fee arrangement and whatservices would result in an extracharge?

• What are the fees for extra orcustomized services?

EEffffeecctt ooff CCoonnttrroolllliinngg MMuuttuuaall FFuunndd FFeeeessAs a plan fiduciary and decision-

maker, you have the challenging respon-sibility to understand the fee structure used

in the 401(k) marketplace. During theRFP process this knowledge can be usedto negotiate a better deal and reduce yourplan’s expenses, but you must know thekey questions to ask. If you do, you canhelp your employees maximize theirretirement nest egg along the same linesas the scenario mentioned at the begin-ning of this article.

A final word of caution: cheaper isnot always better. A proper balance mustbe struck between the quality of servicesand fees.

KKaall MMuucchhnniicckk is a Principal andDefined Contribution PracticeLeader at The Savitz Organization.

RRoobbeerrtt KKrraannee is a ManagingConsultant DC Practice atThe Savitz Organization.

IInn TThhee WWoorrkkss......CCoommmmuunniittyy OOuuttrreeaacchh aanndd

NNeettwwoorrkkiinngg CCoommmmiitttteeeePPllaannss ffoorr 22000077

We’re investigating several new things this year.• Family night at a local ball park this summer (River Sharks in Camden?)• Weekend date to help Philabundance.• Possible golf clinic and outing (all levels welcome, particularly beginners).• Forming a team for the Carolyn Marks Walk for the Whisper.• Assisting South Jersey non-profit associations with community evening

fundraisers.

LLoottss hhaappppeenniinngg aanndd lloottss iinn tthhee wwoorrkkss.. WWaattcchh yyoouurr ee--mmaaiill ffoorr uuppddaatteess!!

6

HHAAVVEE PPAATTIIEENNCCEE –– WWee’’llll AAllll BBee OOlldd OOnnee DDaayy!!One of the “benefits” of being in our profession is knowing how to navigate the system for ourselves and our loved

ones. For the past year, I’ve been discussing Medicare Part D with my elderly parents (81 and 85), who live in Florida.Because they’re in good health, I enrolled them in the least expensive plan in May 2006 to avoid their having to payany late-enrollment penalties. I told Mom and Dad to watch for their “Welcome Kits” in 2-3 weeks, as instructed bythe carrier’s website. Well, after a few weeks, Dad became concerned that nothing had arrived – was I sure I hadenrolled them properly? Would I please make a phone call? Ever the dutiful daughter, I called the carrier, whoserecords showed that kits had been mailed and should have arrived a while ago. I asked them to please send anotherset. When I called Dad to report what the carrier said, he replied: “Oh, you mean the Humana stuff? Mother and Ithought it was junk mail, so we threw it out.” I screamed silently and asked him to please watch for the second set,which should arrive in a week or so. As always, he and Mom were grateful to have their own personal BenefitsConsultant watching out for them.

a a aCan you top this PEBA member’s story? If you have an interesting, scary, or bizarre story to share, please e-mail

Arleen Barisa, PEBA Communications Committee chair, at Arleen.Barisa@uphs.upenn.edu. We will work with you toremove all identifying information; we promise privacy.

Meant to add a lighter note and share some “war stories,” this is the third in a series of arti-cles we offer our members — sharing stories of the more fun, or at least interesting, aspectsof our jobs.

CCaann YYoouu TToopp TThhiiss??

CCaassee CCoommppeettiittiioonn DDeevveellooppss BBeenneeffiittPPrrooffeessssiioonnaallss ooff tthhee FFuuttuurree

By Michael McCloskeyPEBA embarked on a new venture on

Saturday, November 4th – the first annu-al PEBA/Temple University EmployeeBenefits case competition sponsored byCommerce Banc Insurance Services.Students from the employee benefitcourse at Temple University joined indus-try professionals for a day-long competi-tion at Commerce University in Mt. Laurel,NJ. Students partnered with local com-panies on real projects involving currentbenefit issues, such as Medicare part D,Consumer Directed Health Plans, and theannual rate renewal process. Eight PEBAmembers volunteered their services forthe entire day, questioning the students’analyses and conclusions and selectinga winner. The winning team – Kirk

Czonstka and Justin Thomas – work withLarry Friedman of RSI. Rob DrennanPHD, Chairman of the Temple School ofRisk Management, called the competition“a great success,” and looks forward “tocontinuing the partnership with PEBA andCommerce in the years to come.” Toachieve the goal of an annual event, wewill need project sponsors and competi-tion judges. Watch for PEBA communi-cations in 2007. You will have anopportunity to volunteer and participateagain next year.

MMiicchhaaeell MMccCClloosskkeeyy, CEBS is aBenefits Training Manager atCommerce University

3

intangible), and provides the most favor-able mix for the organization. Developingthe strategy should be a team effort includ-ing the compensation committee, seniormanagement, Human Resources, and per-haps outside consultants and employees.

CCoommmmuunniiccaattiioonnOnce a total rewards philosophy and

strategy have been developed, theyshould be clearly communicated in orderto motivate employees to achieve busi-ness goals. It’s important for managersto understand the philosophy/strategybefore it is communicated to otheremployees. There may be a concern thatemployees won’t like what they hear orread. However, even if employees don’tagree with the philosophy or strategy, theywill be aware that their rewards aren’t bychance—they’re based on some rationale.

It’s important to practice what hasbeen documented and communicated.A perception that policy and applicationdon’t agree will have a negative effecton employee motivation and adverselyimpact the integrity of the total rewardsprogram. Also, if the practice is applied

inconsistently, an organization mayopen itself to claims of discrimination.

WWhhaatt tthhee TToottaall RReewwaarrddss PPhhiilloossoopphhyyaanndd SSttrraatteeggyy IInnfflluueennccee

Each year during the planningstages for the compensation and bene-fit programs, the total rewards philoso-phy and strategy should be reviewed toguide the design of the plans. Whatdoes the philosophy/strategy state andhow is the company delivering on thatstrategy? For example, if your strategystates that you pay at the 75th percentileand your average ccoommppaa--rraattiioo (the ratioof an individual’s rate of compensationto the midpoint of the salary range forthe job) indicates that you are paying atthe 68th percentile, you need to identi-fy the reason for the disparity. It may benecessary to recommend salary budgetand salary structure adjustments higherthan the median survey data in order toalign the company’s compa-ratio clos-er to the strategy. Aligning the realitywith the stated philosophy may take afew years, but will move you in the rightdirection.

PPeerriiooddiicc RReevviieewwAs business environments and cul-

tures change, it is important to ensurethat your total rewards philosophy andstrategy are current. For example, inthe start-up phase of a business, thetotal rewards emphasis may dependhighly on long-term incentives. Withgrowth, the strategy may be tweaked toemphasize base pay and/or short-termincentives.

SSuummmmaarryyA total rewards philosophy and strat-

egy is a necessary foundation to ensurebusiness success in hiring, motivating andretaining employees. It needs to be sup-ported by top management, clearly com-municated to managers and employees,applied consistently, and periodicallyreviewed for alignment with the businessenvironment.

MMeelliissssaa HHaallppiinn is a CompensationSpecialist at the University ofPennsylvania

TToottaall RReewwaarrddss PPhhiilloossoopphhyy aanndd SSttrraatteeggyy 110011(Continued from Page 1.)

YES, IT’S TRUE! We’re going to restart anannual PEBA-sponsored compensationsurvey. We got a good start last year andwould like to continue the momentum.You’ll receive an invitation to participatein the spring.

We’ll also be conducting two free surveys in 2007:

• Defined Benefits/Defined Contribution–What’s Happening?

• Executive Pay

WWaattcchh ffoorr tthheemm iinn yyoouurr iinn--bbooxx!!

2007 SURVEYCOMMITTEE

UPDATEHELPING ORGANIZATIONS ACHIEVE

IMPROVED PERFORMANCE THROUGH A FULLYINTEGRATED BENEFITS PROGRAM.

Does your benefits firm provide you with:

– HR Portal?– HRIS System?– Comprehensive benchmarking?– Compliance assistance?– Benefits administration?– Exhaustive financial reporting?– Extensive employee communications?

INTEGRATED HEALTH STRATEGIES

COMMUNICATIONS

HUMAN RESOURCE SYSTEMS

FLEX / COBRA

ONLINE ENROLLMENT

RETIREMENT PLAN SERVICES

COST REDUCTION

COMPLIANCE

610.520.4900www.ibsbenefits.net

2

Mark Schweiker, President and CEOof the Greater Philadelphia Chamberof Commerce, shared his insights intothe challenges and opportunities facingbusinesses with 85 tri-state area busi-ness leaders at PEBA’s October 18th

Evening Event. He urged all to getinvolved, look critically at the businesscommunity, and help improve it byupgrading the fundamental infrastruc-tures impacting businesses such asschools, safety, and employer/employ-ee financial friendly environment. Healso challenged attendees to think ofthe job we, as business leaders, sharein inviting and welcoming other busi-nesses into our community.

Mr. Schweiker was introduced byJoe Frick, the President and CEO ofIndependence Blue Cross and Chair ofthe Greater Philadelphia Chamber ofCommerce.

The evening at the IndependenceVisitors’ Center opened with a cocktailbuffet, enjoyed by many on the terraceoverlooking the Liberty Bell andIndependence Hall and was enhancedby the balmy weather. The networkingcontinued with dessert and coffee fol-lowing the Mr. Schweiker’s talk.

We are grateful to our sponsors whomake it possible to bring special pro-grams such as this to our members andtheir guests.

MMaarrkk SScchhwweeiikkeerr’’ss CChhaalllleennggee ttoo PPEEBBAA BBuussiinneessss LLeeaaddeerrss::

GGeett IInnvvoollvveedd……HHeellpp MMaakkee PPhhiillllyy SSaaffeerr aannddMMoorree BBuussiinneessss--FFrriieennddllyy

We would also like to thank our hard working committee members who madethis evening possible.

Susan Bleiberg – Mercer Health and BenefitsJudy Mester – DeloitteDavid Pierson – The Pierson GroupMichael Rosenfeld – Model Consulting Inc.

Mark Schweik ís Challenge to PEBA Bus Leader :G t InvolvedÖHelp Mak Philly Saf -F

, ident and CEOChamber e Vis 18 w

.

th the 85 tr

/em the j

J

T

W

z

Mark Schweik ís Challenge to PEBA Bus Leader :G t InvolvedÖHelp Mak Philly Saf -F

, ident and CEOChamber e Vis 18 w

.

th the 85 tr

/em the j

J

T

W

z

Mark Schweik ís Challenge to PEBA Bus Leader :G t InvolvedÖHelp Mak Philly Saf -F

, ident and CEOChamber e Vis 18 w

.

th the 85 tr

/em the j

J

T

W

z

Mark Schweik ís Challenge to PEBA Bus Leader :G t InvolvedÖHelp Mak Philly Saf -F

, ident and CEOChamber e Vis 18 w

.

th the 85 tr

/em the j

J

T

W

z

Mark Schweik ís Challenge to PEBA Bus Leader :G t InvolvedÖHelp Mak Philly Saf -F

, ident and CEOChamber e Vis 18 w

.

th the 85 tr

/em the j

J

T

W

z

Platinum Gold

Silver Bronze

Patrons

Mark Schweiker shares his vision

PEBA Business Leaders

J. Arko, M. Burke, J. Kaufman

N. Mowbray and D. Dowell (Southco, Inc.)7

AAllllrreedd CCoonnssuullttiinngg(Chandra Allred, President)

A management consulting firm in theWilmington-Philadelphia metropolitan area, AllredConsulting focuses on achieving organizational resultsfor clients through their expertise in organizationaldesign, workforce planning, and HR competencies.

CCDDII CCoorrppoorraattiioonn(Gail T. Grib, Director Compensation)

CDI Corporation is a professional servicecompany whose main mission is to provide quali-ty technical and engineering services to business-es on a temporary or outsourced basis. Theyprovide engineering and information technologyoutsourcing solutions and professional staffing toa wide range of customers in the aerospace,process and industrial, IT, life sciences, and gov-ernment services sectors.

IIDDSS SScchheeeerr(Amy Y. Goldberg, Director, Human Resources)

IDS Scheer is the market leader of solutionsfor “Business Process Excellence.” The compa-ny’s ARIS-based solutions offer a complete port-folio for business process management includingsoftware, services, and methods to address allphases of the business process lifecycle: strate-gy, design, implementation, controlling, documen-tation, and continuous improvement.

KKiissttlleerr--TTiiffffaannyy BBeenneeffiittss(David I. Camp, Employee Benefits Consultant)

Kistler-Tiffany Benefits is one of the region’spremier employee benefits consulting firms. Forover 40 years, they have provided customizedemployee benefits programs directly to companiesand organizations and comprehensive sales sup-port to independent insurance consumers. Kistler-Tiffany serves all size companies, municipalities,school districts, unions, and associations in thetri-state area.

LLMMAA CCoonnssuullttiinngg GGrroouupp(Barry Frey, Senior Consultant)

With an interdisciplinary team of organiza-tional psychologists, HR executives, and otherbusiness professionals, LMA Consulting group hasbeen providing services to large and small busi-nesses in all industry sectors for more than 20years. They use their expertise to address humanand organizational behavior by employing system-atic principles to effect change.

OOrraaPPhhaarrmmaa,, IInncc..(Helen T. Booth, Sr. Financial Analyst)

A specialty pharmaceutical company that dis-covers, develops, and commercializes therapeu-tics for oral health, OraPharma produces the firstlocally administered time-released antibioticencapsulated in microspheres that effectively killsthe germs that cause periodontal disease.

OORRCC WWoorrllddwwiiddee(Andrew S. Rosen, Vice President)

ORC Worldwide is an international manage-ment and HR consulting firm dedicated to advanc-ing the ar t, knowledge, and practice oforganizational and human relationships. Usingresearch and experience, ORC works with clientsto develop policies and practices that motivateemployees to contribute more effectively to theprofitability and success of the organization. Theyhave offices throughout the United States, Europe,and Asia.

PPhhoottooMMeeddeexx,, IInncc..(Marge Dailey, VP, Human Resources)

PhotoMedex’s principal activities are to devel-op, manufacture, and market excimer laser andfiber optic systems and techniques. Their prod-ucts are designed for the treatment of psoriasis,vitiligo, atopic dermatitis, and leukoderma. In addi-tion to product development, they also manufac-ture and market proprietary lasers and deliverysystems for contact and non-contact surgery andprovide surgical services.

PPoosstt && SScchheellll,, PP..CC..(Brian J. Dougherty, Partner)

Post & Schell currently has over 150 attorneysin Allentown, Harrisburg, Lancaster, Philadelphia,Pittsburgh, Princeton, and Washington, DC. Theyprovide litigation, corporate, transactional, regulato-ry, compliance, consulting, and educational servic-es locally, regionally and nationally to a broadspectrum of proprietary and not-for-profit industries.Their technique is a blend of specific experience witha team approach and a commitment to technology.

TThhee SSttaannddaarrdd(Timothy J. Golden, Sales Manager)

The Standard provides financial services andinvestment products to approximately 7 millionpeople nationwide. Nearly 30,000 employers trustThe Standard to provide or administer their groupinsurance and retirement plans, and their annuitiesare designed to help people guard against outliv-ing their assets.

RReennééee LL.. RRoosseennffeelldd, CEBS, SPHRis an Assistant VP for HumanResources at Holy FamilyUniversity.

DDaarrcceell GGuueerrrraa (Arcadia University,Class of 2007) is a HumanResources Intern at Holy FamilyUniversity.

With Your Help, PEBA Continues to Grow Have you told anyone about PEBA lately?

We welcome the following member companies who joined in recent months:

PEBA Also Welcomes...Our new Executive Director

Susan DeMinicoformer Executive Director of

The Princeton Review

and the New Officers of the

Executive Committee of the Board

PresidentJames R. Bowers

Vice President, Hay Group

Vice PresidentAnabel I. Pichler

Manager, Executive Compensation,

duPont Global Rewards Team

SecretaryMary M. Burke

Associate Director of HumanResources, Villanova University

TreasurerJohn Arko

Director, Benefits Strategy, CIGNA Corporation

8

ppeebbaa

Editor-in-ChiefSharon E. Kazaras

Graphic Artist Jill S. Anderson

This newsletter is a publication of PEBA and thecontents are intended as general information only.They do not reflect the views of PEBA and do notconstitute legal advice. You should consult yourown lawyer concerning your situation or anyspecific legal questions you may have. Thisnewsletter or any part may not be reproducedwithout the permission of a PEBA officer or theExecutive Director.

ppeebbaa nneewwss

1528 Walnut Street, Suite 420Philadelphia, PA 19102-3608

See PEBA home page for $9.00parking near our office!

Friday, March 30 Deadline to signup March 9

Friday, April 27 Deadline to signup April 6

Friday, May 25 Deadline to signup May 4

Friday, June 29 Deadline to signup June 8

Friday, August 3 Deadline to signup July 13

Friday, Sept. 28 Deadline to signup Sept. 7

Friday, Oct. 26 Deadline to signup Oct. 5

Friday, Nov. 30 Deadline to signup Nov. 9

Friday, Dec. 28 Deadline to signup Dec. 7

YOUR BENEF I TS AND COMPENSAT ION ASSOCIAT ION

PEBA-SponsoredWorldatWork

2007 Compensation & BenefitsCertification Courses

Update your contact information and addyour initial membership date by logging on to

www.peba.org.

PEBA is pleased to provide new options for WorldatWork programs in 2007. In addition to ourtraditional offering of classes and tests, PEBA is now offering testing only at our conveniently locateddowntown site — PEBA, 1528 Walnut Street, Suite 420, in Philadelphia, from 7:30 AM to 12:00 PM.

Exam Only Sessions for 2007 - *New Option*

The tests will be held provided we have at least 5 tests scheduled. Our maximum number of attendees is 10.

1

MMiissssiioonn SSttaatteemmeenntt

PEBA will strive to berecognized throughout theDelaware Valley as the premierorganization in all areas relatedto employee benefits andcompensation by providingopportunities for:

• education• information• professional

development andexchange, and

• sharing professionalexpertise.

IInnssiiddee TThhiiss IIssssuuee

TToottaall RReewwaarrddss PPhhiilloossoopphhyyaanndd SSttrraatteeggyy 110011 .. .. .. .. .. 11

MMaarrkk SScchhwweeiikkeerr’’ss CChhaalllleennggeettoo PPEEBBAA BBuussiinneessss LLeeaaddeerrss:: GGeett IInnvvoollvveedd……HHeellpp MMaakkee PPhhiillllyy SSaaffeerr aanndd MMoorree BBuussiinneessss--FFrriieennddllyy .. .. .. .. 22

22000077 CCoommmmiitttteeee SSuurrvveeyy UUppddaattee .. .. .. .. .. .. .. 33

TThhee EEffffeecctt ooff CCoonnttrroolllliinnggMMuuttuuaall FFuunndd FFeeeess oonn YYoouurr EEmmppllooyyeeeess’’ RReettiirreemmeenntt NNeesstt EEgggg .. .. .. 44

IInn TThhee WWoorrkkss...... CCoommmmuunniittyyOOuuttrreeaacchh aanndd NNeettwwoorrkkiinnggCCoommmmiitttteeee PPllaannss ffoorr 22000077 .. .. .. .. .. .. .. .. .. .. .. .. 55

CCaassee CCoommppeettiittiioonn DDeevveellooppssBBeenneeffiitt PPrrooffeessssiioonnaallss ooff tthheeFFuuttuurree .. .. .. .. .. .. .. .. .. .. .. .. .. .. 66

CCaann YYoouu TToopp TThhiiss??HHAAVVEE PPAATTIIEENNCCEE –– WWee’’llll AAllllBBee OOlldd OOnnee DDaayy!! .. .. .. .. .. .. 66

WWiitthh YYoouurr HHeellpp,, PPEEBBAACCoonnttiinnuueess ttoo GGrrooww .. .. .. .. 77

Early Spring 2007

ppeebbaa nneewwssYOUR BENEF I TS AND COMPENSAT ION ASSOCIAT ION

Have you ever taken the dog to thekennel, packed the family in the car, andhit the highway for a two-week vacation,heading south but without a destinationin mind? Have you ever gone to the mar-ket to shop for a holiday dinner withouta shopping list? Would you hire a con-tractor to remodel the kitchen withoutseeing a design plan? In each of theseexamples, most of us would need tomake or see a plan, even if it’s just in asimplistic form.

In order to preserve and grow theirgreatest asset – their employee base –companies need a total rewards strate-gy, which includes compensation, ben-efits, and the total work experience. Inorder to attract, retain and motivateemployees, how will a company’srewards compete? A “formal” totalrewards strategy is documented andcommunicated. Some companies havean “informal” or undocumented totalrewards strategy. However, just like animportant ingredient for a holiday din-ner might be forgotten at the market, animportant part of the total rewards strat-egy could be lost or misinterpreted overtime. To ensure consistency and effec-tiveness between departments and overtime, it’s always best to put it in writing.

Developing a total rewards strategyis a cornerstone for successful businessoperation. It may be basic, but takes seri-ous discussion, time, and effort. How isit developed? What influences therewards strategy, and what does therewards strategy influence?

KKnnooww tthhee OOrrggaanniizzaattiioonnDeveloping a total rewards strategy

begins with a clear understanding of thecompany’s mission (the reason for exis-

tence) and business strategy (how thecompany will distinguish itself in the mar-ketplace). Knowing how a companyplans to succeed will help define theemployees it needs to attract, retain, andmotivate. What are the company’s fis-cal resources? With whom is the com-pany competing for customers andemployees? Is the business strategyfocusing on price, customer service, orinnovation? These are just some of themany questions that should be asked.

A well-crafted total rewards strategyhelps ensure business success.

The HR philosophy must also be con-sidered when developing the totalrewards strategy. What are manage-ment’s values and beliefs about theemployee/employer relationship?

TThhee TToottaall RReewwaarrddss PPhhiilloossoopphhyy aannddSSttrraatteeggyy

A total rewards philosophy statementshould be developed by top manage-ment to ensure executive buy-in and har-mony with the company’s mission,business strategy, and HR philosophy. Itshould express the goal of the totalrewards program and management’svalues on compensation and benefits.The Human Resources or Compensationprofessional facilitates the process todevelop a cohesive statement.

The total rewards strategy piecestogether the various rewards programs,which can include salary, bonus, stock,incentive pay, and benefits (tangible and

TToottaall RReewwaarrddss PPhhiilloossoopphhyyaanndd SSttrraatteeggyy 110011

By Melissa Halpin

Continued on Page 3.