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February 01, 2002
Top Priority in Benefits: Cost Containment
The
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top priority for an overwhelming majority of benefit specialists this year will be controlling costs, a new survey shows.

The survey was conducted by the International Society of Certified Employee Benefit Specialists (ISCEBS) and the Human Capital Advisory Services practice of Deloitte & Touche LLP.

The participants were requested to rank their priorities for the new year both as benefit specialists and employees.

An overwhelming 85 percent of benefit specialists identified controlling rising health care costs as their top priority for 2002 from an employer's perspective.

When asked to respond as employees, however, they cited retirement issues as their top priority - with three out of their top five priorities relating to retirement and investment issues.

"We see employees becoming even more concerned with retirement planning than in past years," explained Michael Joyce, CEBS, president of ISCEBS and Vice President/Senior Consultant with Marco Consulting Group.

"This contrasts with employers that, in light of the softening economy, are more concerned with cost management/reduction as their top priority. Many employers are being driven to place more emphasis on trying to control double-digit health care cost increases experienced by them over the past two years."

The employer perspective

Concern over health care costs is rising among employers and dominated the survey for the third consecutive year, with 84 percent of employee benefit specialists identifying it as their top priority for 2002.

"Concerns about attraction and retention seem to be taking somewhat of a back seat to concerns about benefit costs in general, and health care costs in particular," said Richard Kleinert, CEBS, and a Principal with the Human Capital Advisory Services practice of Deloitte & Touche. "This is magnified through the industry's consolidation and consequent lack of choice that employers continue to face in the areas of health and welfare services."

The remaining priorities for benefit specialists from the employer's perspective are:

- evaluating/implementing/expanding the use of Internet/intranet applications (51 percent);

- expanding the use of employee self-service technology for communications and/or administration (48.4 percent);

- providing financial/retirement planning tools and information (38.8 percent);

- and providing increased investment education (36.7 percent).

These findings are consistent with the trends identified in last year's survey.

The key objective driving benefit program policy and design for 2002 is also overwhelmingly cost management/reduction (62.7 percent), followed by employee attraction and retention (15 percent), increased use of technology (10.6 percent), compliance and fiduciary issues (7.6 percent), and administrative requirements/alternatives (2.7 percent).

This year cost management/reduction quickly became the top key objective driving benefit program policy and design by a wide margin, replacing attraction and retention, which was the key driver for the past two years. Attraction and retention is still a key objective, but it is now a distant second behind cost management/reduction in importance.

Similar to last years' results, increased use of technology is also still a key objective. Technology can play an important role in both cost management/reduction and employee attraction and retention, simultaneously offering both enhanced employee service and an alternative way to save on health care costs rather than directly passing on these costs to employees.

Now that Web-based services and employee self-service are widely available, they can be used by employers of all sizes not only to positively enhance employee satisfaction, but also to help curb costs related to benefit program administration.

The employee perspective

From an employee's perspective, retirement issues dominated their concerns, with three of the top five priorities identified directly related to retirement and investment issues. This year's first and second priorities for employees traded places: evaluating current levels of retirement savings (63.3 percent) is now first, while evaluating current investment options (61.2 percent) falls to second place.

The remaining priorities in order of importance are: identify additional ways to save for retirement (48.5 percent), understand more about health risks and how to control them (47.8 percent), and make greater use of Internet tools to manage financial and security programs (46.1 percent.)

Employee concerns over retirement planning continue to be important as a large percentage of the workforce nears retirement. With the downturn in the economy, many employees have experienced dramatic decreases in their invested retirement savings and are searching for ways to protect and maximize their nest eggs.

Demographics

Respondents to this year's survey totaled 575 and represented all regions of the United States. Survey results are based on overall response, geographic region of response, industry, age, and gender of respondents.

The International Society of Certified Employee Benefit Specialists (ISCEBS) is a nonprofit educational association whose members have earned the Certified Employee Benefit Specialist (CEBS) designation, which is co-sponsored by the International Foundation of Employee Benefit Plans and the Wharton School of the University of Pennsylvania.

For more information on the Society or CEBS visit the ISCEBS Web site.


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