Employee benefits are like taxes: complex, personal and ever changing due to state and federal government regulations and the arrival of new benefit products in the marketplace. Just when employers thought they had benefits matters under control, President Bush signed the Pension Protection Act into law.
PPA, enacted this summer, contains the most significant changes in pension legislation to come along since the Employee Retirement Income Security Act was passed in 1974. It redefines important provisions of the Economic Growth and Tax Relief Reconciliation Act of 2001.
The challenge for employers arising out of all this legislative ferment is finding simple, fast methods to explain these changes to employees. The list of plans affected by the new act include: hybrid pension plans (including cash balance plans), multi-employer defined benefit pension plans, nonqualified deferred compensation benefits, increased retirement plan limits; defined contribution plans, flexible spending accounts, 401(k)s, and health plans in a variety of models.
In 2005, employers were spending almost 29.8% of their total compensation budgets on benefits, up from 28.2% in 1991. Improving employees’ “benefits literacy” is critical during this time of rising benefits expenditures.
In the information flow from employer to employee, methods of benefits communication are critical. How you package communications about your benefits program has a big impact on employee perceptions of the program itself.
A 2005/2006 Watson Wyatt Communication ROI Study, found that communication effectiveness is a leading indicator of financial performance in a company and that firms who successfully communicate with their employees are less likely to have adverse organizational turnover and 4.5 times more likely to report high levels of employee engagement than those firms whose employee communications programs are lacking.
However, many employees are not aware of the true cost plan sponsors and employers spend on their benefits. Communicating this information can help them understand the financial commitment made on their behalf. Conveying benefits data successfully is necessary for:
–Positively influencing the corporate culture overall.
–Building organizational trust.