Organizations faced with the challenge of retirement planning can simplify their complex benefits administration by adopting a total benefits outsourcing approach.
There is a lot of talk about the aging of the global workforce, but most of the discussion is focused on recruiting talent to replace the Baby Boomers or retaining the institutional knowledge and skills of retiring workers. Yet as the workforce ages, organizations are also faced with growing complexity in the administration of retirement plans and retiree health benefits. They need solutions for managing the cost, harnessing the technology, and ensuring the efficiency of this basic but exponentially growing challenge.
For many companies, a total benefits outsourcing (TBO) approach is the clear alternative to in-house benefits management. In fact, there are a number of organizations that have turned to TBO.
One leading energy provider in the Midwest had struggled with the increasing challenges and costs of managing its extensive employee benefits portfolio. With the average tenure of its employees between 15 and 20 years, retirement planning was top of mind for workers and management alike. Consistent with the overall aging of the workforce, the number of participants in this company’s defined benefit (DB), defined contribution (DC), and retiree health plans would surely increase—causing its administrative costs to balloon, as well. Turning to a vendor already providing consulting services across multiple benefits programs, management explored the advantages of a TBO solution.
Historically, its retiree health and pension benefits had been administered in-house by the HR department, and the DC plan was handled by an outside provider. HR leadership was focused on finding ways to improve efficiency and reduce costs, while the finance team looked for greater cost efficiency in managing retirement programs and a provider to help in the selection of investment managers. Leadership also wanted to improve employee appreciation of the company’s total benefits program by providing employees with a single view of their comprehensive benefits program, as well as deliver enhanced educational resources and self-service tools.
A TBO solution provided seamless 401(k), pension, and retiree health administration, offering employees a single, integrated view of their benefits. A dedicated team now manages the planning, implementation, and day-to-day administration of the benefit programs. Employees received an integrated experience that included a “single sign-on” TBO web portal with access to online tools, calculators, and benefits information, complemented by contact center support to answer any employee inquiries. A customized communications and education program, including targeted mailings to distinct employee populations and on-site educational meetings, was developed to explain to employees how to use these new resources and make better-informed benefits decisions.
What was the result? Almost immediately, the administrative burden for the HR staff was reduced, freeing up resources previously devoted to transactional work for more value-added strategic initiatives to support the business. In addition, the solution heightened employees’ awareness of their employer’s total benefits program, enabling them to become more active managers of their benefits and their future. By shifting to an outsourced model with a single provider, employee self-service and benefits usage have improved significantly over the past 18 months. The metrics were:
- 11,808 calls were received at the service center;
- 90,400 web sessions were conducted;
- 75 percent of employees who attended educational workshops said that they would act on the information they received;
- 401(k) plan metrics were improved;
- Participation increased from 84 percent to more than 87 percent;
- Average contribution rates increased from 7 to almost 9 percent; and
- Participants have invested more than $20 million in the new, “ready-mixed” life-cycle funds representing close to five percent of the total plan assets.
For this employer, TBO made sense. The advantage of having benefits administered in a seamless, streamlined manner by a dedicated team of outsourcing professionals may seem like a no-brainer, but for many companies the decision to turn to TBO may not be so clear because the inertia of in-house administration can make it difficult to see the big picture. But in today’s era of the aging employee base, the TBO solution merits the closest scrutiny.