Employee benefits have been and remain important to society as a whole, are necessary for individual employee’s financial security, and support the employer’s financial and workforce business needs. This article focuses on the business case for employee benefits from the perspectives of several different stakeholders: the employer that is often a plan sponsor, the public at large and the individual. The article discusses the perspective of each of these stakeholders and why benefits are useful from the perspective of that stakeholder. It starts with the business case and then provides supporting information.

Suboptimal employee decisions are prevalent in employee benefit plans. Poor decisions have significant consequences for employees and employers. Improving participant decisions produces beneficial outcomes such as lower labor costs, higher productivity and better workforce management. The business case for employee benefits can be strengthened by applying lessons learned from the field of behavioral economics to employee benefit plan design and to workforce communication. This article explains the types of behavioral biases that influence suboptimal decisions and explores how enlightened employee benefit plan choice architecture and vivid behavioral messaging contribute to human and better organizational outcomes.

Benefits represent one of the largest investments a company makes in its talent. However, our tendency can be to design, deliver and communicate benefits programs independently, without fully considering how those programs fit within a bigger picture of total rewards. Sure, we need to manage and execute individual benefit programs—but not at the expense of getting a real return on our more significant investment in talent. This article provides employers with perspectives on the value of managing benefits within the broader framework of total rewards, why it works and, most importantly, how to make it work.

The choice of a retirement age needs to be a rational decision that accounts for a variety of confusing and competing considerations. Planners and clients will benefit by using a systematic checklist of issues in order to make the optimal choice. We present this checklist, analyze the underlying issues regarding each factor that must be weighed and suggest a decision model that includes evaluating the financial feasibility of retiring, the client’s ability to continue working, the psychological factors surrounding the retirement decision and the client’s personal situation.

Actual contribution percentage (ACP) testing is only one part of nondiscrimination testing of matching contributions, whether in a 401(k) or 403(b) plan. Other parts include coverage testing and benefits, rights, and features testing of matching contributions. Plan sponsors and their third-party plan administrators need to clearly communicate information necessary for ACP testing, as well as for coverage and other nondiscrimination testing of matching contributions, such as controlled group information about plans, employers and employees, and exactly what compensation is used for what purposes.

What role should longevity insurance annuities play in 401(k) plans? This article addresses the question of whether participants, and in particular men, should consider purchasing longevity insurance annuities through a 401(k) plan. It first describes what longevity insurance annuities are. It then discusses the proposed regulation and the Financial Engines product. With that background, it evaluates whether participants should purchase longevity insurance in 401(k) plans and, alternatively, in individual retirement accounts (IRAs).

With Supreme Court and election uncertainty now resolved over the Patient Protection and Affordable Care Act (ACA), employers are recognizing the need for immediate action and reassessing the role they play in promoting and insuring the health of their population. Centered on a consistent need to have a workforce that is healthy, present and high-performing, employers face four possible strategic paths with their attendant risks and opportunities.

While the regulatory landscape of the Affordable Care Act (ACA) continues to evolve, employers must focus on implementing upcoming group health plan mandates. This article provides a high-level checklist of the most common longterm requirements facing employers and some strategic considerations, outlining the three possible health care strategies employers generally should consider for 2014 and later.

Health reform is helping to transform the health insurance marketplace and facilitate new opportunities to reevaluate and restructure the underlying framework of employer-sponsored employee benefits. Central to these opportunities is the emergence of public health exchanges at the state and federal levels and of private health exchanges that similarly offer a diversity of plans on a variety of bases. This article shows why, together, these offerings provide potential streamlined solutions for employers as they reevaluate how they facilitate and support access to affordable coverage for their employees (and retirees).

For industries most likely to be transformed by the Patient Protection and Affordable Care Act (ACA), enacting the right strategy is the only strategy. A critical issue will be balancing cost and compliance factors with productivity concerns brought on by changes in the full- and part-time or hourly status of a given workforce. This article discusses industry perspectives in light of the ACA’s 2014 implementation date, options for changing staffing models, and how the success of such changes depends on segmenting business units and locations while developing strategies for the different groups.

Employers all across the country should be in full swing as they prepare to implement the tougher parts of the Patient Protection and Affordable Care Act’s (ACA) employer provisions, which are about to come online and take effect in 2014. This article reviews these more challenging requirements and their complications, including how employer calculations over whether to continue to offer coverage might vary by industry characteristics. The author then looks further ahead to how the “Cadillac” tax may affect every employer’s decision about its health care strategy leading up to 2018.

The Affordable Care Act (ACA) introduces many new mechanisms into the insurance marketplace that significantly impact business as usual. Although the changes are of great magnitude and, at times, intertwined with each other, this article sets out to introduce many of the changes in a simplified format. The 2014 changes will impact each market (individual, small-group, large-group and self-insured) in a different manner.

This article considers the employer’s decision to continue or to drop health insurance coverage for its workers under the provisions of the 2010 health reform law, on the presumption that the primary influence on that decision is what will produce a higher worker standard of living during working years and retirement. The authors incorporate the most recent empirical estimates of health care costs into their long-horizon, optimal savings consumption model for workers. Their results show that the employer sponsorship of health plans is valuable for maintaining a consistent and higher living standard for middle- and upper-income households, whereas exchange-purchased and subsidized coverage is more beneficial for lower income households.

The Patient Protection and Affordable Care Act (ACA) established the Early Retiree Reinsurance Program (ERRP) to provide temporary stability to the employer-supported retiree health care benefit market until the major provisions of the law ensuring every individual access to individual insurance become effective in 2014. The $5 billion appropriation was expected to last four years, but was expended in 18 months. This article reviews the development and motivation for the benefit.

Can the way you frame a message really make a big difference in whether people will get a health screening, consider a high-deductible health plan or save for retirement? Research in behavioral economics demonstrates that the answer is “yes!” This article provides practical advice on how employers can use two behavioral economics principles— framing and social norms—to create more powerful, effective messages that will lead to action instead of indifference.

Innovations that use the insights of behavioral economics can encourage 401(k) participants to annuitize part of their accounts. Behavioral economics extends traditional economics, which focuses on “rational” behavior of well-informed economic agents, and focuses instead on psychological aspects of human behavior that affect economic decision making. This article first provides a brief introductory discussion of annuities. It then discusses insights from behavioral economics for encouraging workers to annuitize and new products that have resulted from those insights.

Throughout the retirement process, individuals are in a continuous state of making decisions. From deciding when to start deferring money to a 401(k) plan, to figuring out how retirement money should be invested and when to rebalance, to choosing which date to commence Social Security benefits, we are always making choices. Wherever there is choice, behavioral economics plays a role. This article introduces concepts of behavioral economics and discusses their impact on retirement plans. It draws on research from noted behavioral economists to showcase not only what “irrational” retirement decisions we make, but also how employers are combating them through automation features, premixed portfolios and the like. Finally, it concludes with how behavioral economics principles can be applied to create future 401(k) features.

From January 2006 to September 2012, defined benefit (DB) plans outperformed defined contribution (DC) plans by nearly one percentage point. Over time, this type of differential can mean the difference between participants having a comfortable versus challenging retirement. This article focuses on participant behavior as a key reason behind DB plans’ superior investment performance. The author discusses behavioral finance’s considerable research on participant inertia, momentum market timing, framing effects and choice fallacy. By bringing more of the lessons of behavioral finance to the structure and communication of the core fund lineup, participants may enjoy a greater chance of capturing more DB-like performance.

Why and how do Americans manage postretirement risks? To help answer this question, this article draws heavily on Society of Actuaries research, as well as additional research done on retirement plan selection and lifetime income options. These surveys raise a number of issues about planning for retirement that should be helpful to employers as they focus on plan design structures and employee education programs.

Results from behavioral economics suggest that inertia would cause workers who began contributing to their 401(k) plans to continue doing so, as long as they remained with the same employer, and microsimulation models projecting final retirement wealth often assume persistency of workers’ 401(k) contributions. The authors’ original research presented in this article investigates an aspect of the issue of persistency of contributions, and their results challenge assumptions of inertia and persistency. Results show a positive, statistically significant effect of market volatility on 401(k) participation over time.

If the potential of accountable care organizations (ACOs) is realized, they could significantly transform how health care is delivered and financed, bringing the promise of high-quality affordable health care within reach. This article explores the root causes that have handicapped the value in the health care delivery system historically and the critical requirements to overcome those issues. The authors describe how commercial and Medicare ACOs attempt to address those issues, the potential land mines in the transition to a new paradigm and the principles plan sponsors should consider in understanding and integrating ACOs into their health care benefits strategy.

The accountable care organization (ACO) has emerged as the centerpiece of postreform initiatives to improve the delivery of quality, cost-efficient care. As the primary partners in delivering ACOs, payers and providers have begun to collaborate on the opportunities presented by the legislation. For employers, however, this new approach to managed health care delivery models will present challenges in adoption different from its predecessors: preferred provider organizations, health maintenance organizations and consumer driven models. This article identifies these challenges and helps employers understand how they can respond in ways that make them active participants in the emergence of ACOs and secure the potential value of ACOs for their own organizations. For employers, the method to capturing the value of these emerging delivery models is to have a broad understanding of the evolving payer and provider marketplace, how to access or develop ACOs, and how smart decisions today can improve the future landscape of health care.

Transparency tools, whether offered by carriers or third-party administrators, rely on adequate experience, by market and by service, to provide information to consumers about health care costs and quality of care. The opportunities for savings to individual consumers and to employer-sponsored health plans are clearly significant and possible if people will use the tools and act. This article reviews two studies showing a shift in consumer claims experience to less costly services after the implementation of a transparency tool and when combined with a consumer driven health plan. It also outlines best practices employers can implement to carefully craft interventions to engage and create value in the minds of health care consumers.

There are already a number of firms entering the active employee exchange marketplace, and the trend will continue as more employers show interest in this model. Private health exchanges will be a permanent and significant avenue for health care benefits delivery because they are dynamic, powerful and necessary for employers aiming to achieving lower, predictable health care costs. The emergence of efficient and effective health exchanges, combined with a responsibility to provide affordable health coverage, presents an opportunity for employers to take advantage of new options available to help manage costs and improve the health of their population in a way that leads to a workforce that is healthy, present and productive.

By putting together a comprehensive wellness strategy, employers are not only “doing the right thing” but also able to see, believe and maintain the tangible return on investment (ROI) that wellness programs are capable of delivering. This article discusses employers’ ROI from wellness initiatives, as well as innovations that support a culture of wellness and what enhanced opportunities for increasing employee wellness are available under health care reform.

Plan sponsors are interested in actual deferral percentage (ADP) and actual contribution percentage (ACP) safe harbor designs primarily because they can eliminate the need for ADP and/or ACP testing and ensure that highly compensated employees can maximize deferrals under the plan. There are many nuances to ADP/ACP safe harbor requirements that present traps for the unwary, which can render them unsafe, but the same complexity that creates these traps also creates planning opportunities.