Category Archives: Employers

Enhancing total rewards program engagement and value proposition

A large Milliman client with approximately 30,000 employees operates under a number of distinct brands. The majority of these employees work in the field, spread across the country in numerous regional centers.

The client is committed to a set of core values and a culture of engagement, yet the multiple brands and scattered geography were making it difficult to create a cohesive culture. Despite the organization’s ongoing investment in a solid package of employee programs, services, and opportunities, employees were not understanding and valuing the programs offered—their overall total rewards. In fact, many benefit programs were languishing.

The client approached the firm looking for a solution. The client’s primary goals were to:

• Maximize the return on the considerable investment the organization was making in employee programs and boost awareness of, appreciation for, and participation in key benefit programs.
• Increase employee engagement and, over time, build trust, influence attraction, motivation, and retention efforts, and improve productivity.

To read more about how Milliman helped this organization meets its goals, read Sharon Stocker’s case study.

Dealing with disability claim procedures: Plan sponsors need foolproof plan by April 1

In order to avoid an unwanted April Fools’ Day surprise, employee benefit plan sponsors need to review their existing ERISA claims procedures and plan documents to determine whether any revisions are required to comply with the new U.S. Department of Labor (DOL) regulations that become effective for disability claims filed after April 1, 2018.

Which types of plans may be subject to the new rules?
The rules potentially apply to any ERISA employee benefit plan that provides disability benefits. As a result, in addition to employers’ health and welfare plans, all qualified retirement plans, whether they are defined contribution or defined benefit, need to be reviewed. Furthermore, while exempt from many of ERISA’s provisions, nonqualified deferred compensation plans are not exempt from the ERISA claims procedures requirements and thus must also be checked. This blog will only discuss the rules as they pertain to qualified and nonqualified retirement plans.

Which plans will have to change their procedures to comply with the new rules?
The good news is that not all plans of the types described above will have to revise their claims procedures. The only ones that are affected by the new rules are those that grant the plan administrator the authority and discretion to determine a participant’s disability status. If the plan’s “disability” definition provides that a participant is considered disabled if such participant qualifies for disability benefits either under Social Security or the plan sponsor’s long-term disability plan, then the new rules don’t apply and no change is required.

What are the new rules?
In general, the updated claims procedure rules require impartiality and independence in decision-making and will require plan administrators to go through additional steps and provide more detailed information when denying claims (either initially or upon appeal). In addition, the rules specify circumstances under which plans will be required to include culturally and linguistically appropriate language in denial notices and offer translation assistance.

For more information, please see the DOL Fact Sheet’s description of the rules here.

What should affected plan sponsors do before April 1?
For those sponsors of plans that currently leave disability determinations to the plan administrator, there are two options:

(1) Amend the plan’s disability provisions so that, effective for claims filed after April 1, 2018, participants’ eligibility for disability benefits under Social Security or the plan sponsor’s long-term disability plan will qualify such participants for disability benefits under the plan.

(2) Administer any claims after April 1 in accordance with the new rules. If this option is elected, and the plan document currently includes a detailed description of the claims procedures, the plan document will need to be amended, effective for claims filed after April 1, 2018, to reflect the new rules so that the plan will be administered in accordance with the plan’s terms. A summary of material modifications to the plan’s summary plan description will also be needed to communicate the change to participants.

Given the complexity of the new ERISA claims procedure requirements for disability claims, plan sponsors may wish to consider option 1 if they wish to avoid having to administer and communicate these rules. However, before proceeding with this alternative, they will need to first consult their ERISA advisers to ensure that their current plan provisions may be amended without violating the applicable Internal Revenue Service (IRS) anti-cutback rules for any plan provided disability benefits or rights already earned before the amendment effective date.

If you have any questions regarding the new rules or the above-described two alternatives, please contact your Milliman consultant.

Thailand: Impact of amendments to the Labour Protection Act on severance payment and retirement

Two recent amendments to the Labour Protection Act in Thailand will affect companies’ retirement practices. One amendment provides for an increase in the severance payment for employees with more than 20 years of service. The other amendment established that an employee is entitled to retirement from age 60 and clarified that the severance payment is payable on retirement. Milliman’s Danny Quant and Mark Whatley provide perspective in this article.

Lifelong income solutions for retirees

While employers may want to provide better options to their employees, the fiduciary, financial, and administrative hurdles are steep. Retirees will have to pick from a small list of solutions until new alternatives are developed. This article by Milliman’s Kari Jakobe summarizes some of the existing approaches commonly used by retirees to convert their retirement distributions into a lifetime of retirement income.

Boomerang employees: What employers need to know

In general terms, a boomerang employee is an individual who leaves an organization and later returns. The often-used and well-known example is Michael Jordan and his stint as a baseball player before returning to playing basketball in the NBA. Lately, however, there is a new trend among boomerang employees. Some are returning to their previous employers, but not from another company. Instead, they are actually coming out of retirement. This movement has become popular to the point that companies are implementing formal programs aimed at rehiring retirees. Some see the rehiring as crucial, especially given how Baby Boomers are retiring at an exceedingly faster rate (current estimates show 10,000 file for retirement benefits per day) and the much discussed labor shortage that some industries are currently experiencing.

These boomerang programs are expected to grow, especially among larger companies with the resources to implement this type of program and take on the associated costs. In fact, phased retirement for federal government employees has been rolled out over the last few years. Such a program allows employees considering retirement to instead reduce their hours over time while still receiving retirement benefits as active employees.

For the most part, retirees are rehired to work less than 1,000 hours per year, which reduces some of the associated retirement plan costs. But if an organization has this type of program, or is looking to implement one, it is worth taking the necessary time to review retirement plan documentation as well other benefits policies regarding rehires. Some things to consider when reviewing the retirement plan are:

• Does a company’s plan exclude any types of employees?
• How does the plan define eligibility for employee and employer contributions (or eligibility for benefit accruals in a defined benefit plan)? (Read carefully—it’s very likely rehired employees will be immediately eligible for employee contributions, at a minimum, and that should be properly communicated.)
• Make sure to have resources in place, internally or through the plan’s third-party administrator (TPA), to answer questions and confirm operational compliance.
• Review the plan’s withdrawal options—are they flexible?
• Is a procedure in place to ensure that employees terminating employment in order to start retirement distributions have a bona fide break in service (as opposed to a brief, sham retirement before starting distributions and returning to work)?
• Lastly, consult with your ERISA counsel for clarification if there are any concerns or questions regarding Internal Revenue Service (IRS) rules and other legislation.

When reviewing the health insurance repercussions for the boomerang employee, the most important thing to consider is how many hours this employee will be working during the year. As an employer, if the rehired employee(s) are only scheduled to work 1,000 for the year (20 hours per week), as seems to be the trend, there is no requirement to offer these rehired retirees health insurance. The Patient Protection and Affordable Care Act has strict rules on how rehires and new hires are classified and clearly defines full-time employees as those who work 30 hours per week.

However, the health plan specs should be reviewed carefully for items such as break in service rules, etc. The employer may wish to consider providing boomerang employees designated health insurance and retirement plan call center or HR resources to tackle these sometimes complex rules.

Taking a step back and looking at the big picture, there are many benefits to such a program. It can be great for organizational culture. “Retiree employees” know the ins and outs of a company and can continue to operate in familiar job functions or can step up to a mentor role; often they are happy to be working and create positive morale. There are also the benefits to the employer: not having to extensively train new hires; being able to implement flexible scheduling such as on an on-call, contract, or project basis; the ability to access years of historical data and information through individuals; and even using a potential retiree rehire program for retention purposes.

Overall, this is an interesting development in the human resources realm and serves as some food for thought.