Posted on June 28, 2013

Restructuring Benefits 101

As employers continue to sort out the implications of health care reform on their businesses, organizations across the country will no doubt be thinking about restructuring employee benefits. In a recent Deloitte survey, 82% of companies said they planned to redesign some or all of their health care benefits. As benefits agreements are shifting the focus to wellness and disease management, redesigning employee benefit plans will be a major project in the months and years to come.

As benefits can be a touchy subject for employers and employees alike, restructuring must be approached with the utmost care and sensitivity. Keep these tips in mind to ensure your new benefits arrangement satisfies both sides.

Benefits restructuring: 3 tips for employers

1. Decide which plan is best

There are two common options for benefits plans:

* Defined benefit plan: an employee’s benefits are defined in the plan and the employer has an obligation to fund the promised benefits
* Defined contribution plan: the contribution the employer will pay is pre-determined, and the employer is only obligated to pay that amount per employee

Often, employers wish to change from a defined benefit plan to a defined contribution plan, which can be more cost-effective and less risky. But remember that *benefits should be tailored to fit the needs of employees*—there is not a one-size-fits-all solution. To find the right balance, see how your benefits stack up against other firms, and never stop evaluating and refining the benefits you offer.


2. Communicate and educate

Whether you choose to roll out a new benefits structure at the beginning of a new plan year or amend your current plan to change the benefits provided, communication is an absolute must. Employees care deeply about their benefits, so they may be hesitant about any changes being made.

* Be sure to communicate with them frequently and openly.
* Invite their feedback on the new plans.
* Consider setting up a live question and answer session for employees.
* Offer a grace period to respond to the benefits change and allow employees to opt out of the new benefits plan.

Your employees will be much more comfortable with the change if they feel educated, informed and involved.


3. Follow the rules

Though companies are allowed to change their benefits without employee input, they cannot violate any legal guidelines, original plan documents or government regulations. Employers must give proper notification and make sure the new benefits comply with summary plan descriptions that contain all of the benefit information that was previously agreed upon. In addition, companies typically cannot take away benefits retroactively. Make sure you are aware of all compliance issues involved in a benefit plan restructuring before you move forward.


Managing changes to employee benefits can be a complicated process, so make sure you have the right tools on hand. Paycor’s suite of HR solutions can assist you in streamlining benefits enrollment, communicating with employees about upcoming changes, educating your team on benefits plans and best practices and giving you access to call or email an HR professional with your specific questions. Learn more by getting in touch with us today.


Sources: Principal Financial Group, HCR Watch, JDSupra Law News, Deloitte’s 2012 Top Five Total Rewards Priorities Survey