Retirement plan sponsors often have an Investment Policy Statement that describes the standards to which the various fund options and money managers will be held. They provide objective criteria that can be used to determine whether or not to retain or eliminate various investment options.
We use a similar phrase when describing benefits packages as a whole: The Employee Benefits Philosophy Statement. This statement describes the ideal benefits package for a particular employer. Being able to articulate this statement can provide a roadmap for a multi-year benefits planning process.
Here’s an example. Several years ago, we were working with an employer that wanted to have, in her words, “the best benefits package in the Valley.” With that simple sentence and some benchmarking research, we were able to sketch out what the best benefits package in the Valley would look like. From there, all we needed to do was formulate a plan and a timeline to get us there.
Another client felt like her plan was too rich. The executive team had begun to question rising costs, and they wanted to determine where they stood amongst their peers and other local employers. After a benchmarking study, we agreed – their benefits package and particularly their employer contributions were much richer than others.
The management team’s vision of the benefits package was one that was “better than average, but not over the top.” This became the basis for our Employee Benefits Philosophy Statement: XYZ Company’s benefits package will be better than average, but not dramatically better than average.” The combination of the statement and the data helped us to formulate a 5 year plan to gradually scale back employer contributions to the retirement, health, and dental plans.
We communicated the plan, the direction, and the rationale to employees in Year 1 and each subsequent year over the course of those 5 years. Their Benefits Philosophy Statement coupled with the plan of attack helped us to control cost AND reposition their benefits package to match the stated vision. The desired results were achieved because we could visualize what we were building, and we had a plan to get there.
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