Tag Archives: Julie Bentz

Employee communication considerations for M&As

This blog post is the fifth in a series of six that will highlight considerations for and the impacts of employee benefit plans on mergers and acquisitions (M&A) transactions. Click here for additional blogs in this series. To learn how Milliman consultants can help your organization with the employee benefits aspects of M&As, click here.

What about me? That’s the number one question employees are thinking about when they hear the first whisper of M&A activity.

• Will I have a job?
• What will my benefits look like?
• I was on track for that promotion; what now?

In her blog post “Employee benefit plan considerations for M&As,” Cheryl Frost writes, “In addition, appropriate, well-timed communication is critical to talent management—the most critical asset in the deal. Retention of key management is sensitive and important. Communicating the strategic vision and benefits of the transaction to employees is a key component to the success of any transaction.”

An M&A is the time for more communication—not less. Communication efforts are often spent on getting the attention of employees. During times of change, you have their attention. Use it! This is a unique time to reaffirm the value of the total benefits package available to employees and their families. Promote your financial and health benefits. Remind them about the Employee Assistance Program. These are benefits that are available any time and may be particularly helpful during times of change.

Six tips for an effective M&A communication strategy
If you’re already communicating with your employees on an ongoing basis, you have the foundation on which to build an effective M&A communication strategy. Be sure you:

1. Communicate early and often. Change causes stress. And stressed employees can cause loss of productivity. So get in front of it! Even if you don’t know the answers, it’s OK to say that. Just let employees know when they can expect an update, and then follow through with it.

2. Know where you stand. If you are not sure how employees are feeling or what you need to communicate, review the data. Some indicators of employee stress or disengagement include:

• Higher call volume to human resources (HR) or vendor call centers
• Trends in your benefit claims
• Spikes in 401(k) loans
• An uptick in sick days
• More traffic to your website or specific searches

3. Control the message. Make sure employees get the news from you—not the media or the watercooler. Use every communication channel you have available and make sure the message is consistent. Consider a microsite devoted to M&A information, and update it regularly as more information becomes available or changes occur.

4. Listen. Whether this means town hall meetings, webinars, focus groups, or a simple, dedicated email address, give employees an outlet for questions. This simple act involves them in the process, builds buy-in, and allows you to adjust your communication strategy in response.

5. Use straight talk. Share the facts. Help employees understand the business perspective on what’s happening and why. Let people know what to expect and when, and avoid platitudes or promises.

6. Keep your managers informed. Managers are often the go-to source for employee questions. Make sure to arm employees with positioning statements, FAQs, and where they can go for more information.

A successful merger or acquisition is supported by a thoughtful, well-planned and executed communication strategy. Get your communication consultant involved from the beginning.

Keep your employees warm during a pension plan freeze or termination

Bentz-JulieYour pension plan is frozen. Your pension plan is terminating. While the temperature for pension plans continues to drop, don’t leave your participants out in the cold.

In today’s business environment, employers continue to shift more and more of the responsibility for their benefits to employees. A few examples come to mind, including high-deductible health plans with health savings accounts (HSAs), wellness programs, and telemedicine. How employees save for retirement is certainly near or at the top of that list. Your decision to freeze or terminate your pension plan may not come as a big surprise to your participants. But that doesn’t mean that they will understand what this decision really means for them or what they need to do to stay on track for a secure retirement.

A pension freeze or termination can lead to a lot of logistical and regulatory hurdles for both company management and the plan administrator—for example, in the case of a termination, improving the funded status of the plan, submitting government filings, and finding lost participants. The up-front data cleanup project for a termination alone may leave a chilly feeling in the air. Aside from what’s required, consider how you can help your participants make this important transition.

1. Start early. As with most change management communication, begin communicating with your employees as soon as possible. You don’t want them to find out what you’re planning through watercooler gossip or the local newspaper.
2. Be direct. Help your participants understand the business reasons for the change. Remember that your active employees aren’t the only ones who may need to warm up to the idea. Former employees with a vested benefit in the plan and former employees who are retired and already receiving a monthly check also need to be in the loop on what’s happening.
3. Promote the good news. Let your employees know if there’s still “free” money to be had. Now is a good time to remind employees about any matching or profit-sharing contributions that you make to your defined contribution (DC) plan. A pension plan was always intended to be only a piece of the retirement savings puzzle. With the pension plan going away, the rest of the retirement pieces take on greater importance.

With the shift in focus from a pension plan to a DC plan, you can also make employees aware that they’re now in control of their retirements. They control how much they contribute; they control where the funds get invested. Employees will now be the arbiter of their own retirement destinies. Through research and use of the saving and investing tools that your plan offers, they can continue to be or become informed consumers.

Overall, this process might be complicated for you as a plan sponsor. However, employees may also feel confused and uncomfortable—even frozen just like the plan. Through effective communication, you can help them decide whether to save more in their DC plans, and in the case of terminations, whether to take a one-time lump-sum distribution or stick with the annuity. Guide them to a resource where they can receive sound financial advice. And help them to understand their options so they can avoid the potential taxation pitfalls related to these types of decisions.

Keep your employees informed before, during, and after the process. This open line of communication will help you maintain positive employee relations long after the project is done. After all, just because your plan is undergoing a freeze or termination doesn’t mean you can’t help everyone feel warm and fuzzy about their benefits.

Communication is key to achieving high take-up rates for pension lump-sum cash out programs

Bentz-JulieOne of the ways many organizations are reducing pension risk is by offering a lump-sum cash out opportunity, or “window,” to former employees. Successful cash outs can reduce participant-driven fees and future plan liabilities, as well as protect plan sponsors from unexpected plan costs. But without a high response rate, cash outs won’t deliver the desired results. That’s where communication comes in: successfully notifying and educating participants of their cash out options is key to achieving the highest possible response rate.

Generally, Milliman has seen that a program with an effective communication campaign can achieve take-up rates in the range of 50% to 60%. Consider these proven steps to communicate your lump-sum cash out option:

1. Plan for success. Determine how to get your communications into their mailboxes, literally. Do you have good addresses? How about email addresses? If not, how can they be found?

2. Make the message clear. Separate information from action to simplify the decision-making process and to ensure that participants aren’t overwhelmed with their options. Highlight what they need to know, what they need to do, and where they can find help along the way. Communication should be carefully presented as unbiased and understandable options.

Our lump-sum communication plan is supported by what the U.S. Government Accountability Office (GAO) reported regarding the eight key types of information participants should have for a sound understanding of a lump-sum offer. Your communication should answer the following questions:

• What benefit options are available?
• How was the lump sum calculated?
• What is the relative value of the lump sum versus the monthly annuity?
• What are the potential positive and negative ramifications of accepting the lump sum?
• What are the tax implications of accepting a lump sum?
• What is the role of the Pension Benefit Guaranty Corporation (PGBC) and what level of protection does the PGBC provide on each benefit option?
• What are the instructions for either accepting or rejecting the lump sum?
• Who can be contacted for more information or assistance?

An appealing design should complement a clear message. Design, layout, graphics, and colors are all factors that can make the difference between something that gets a response and something that gets ignored.

3. Reinforce the message. Don’t expect one mass mailing to do the job. Include multiple touch points to announce the window, educate about the opportunity, and provide reminders about the deadline.

4. Offer support. Be sure to consider where participants can go for help, whether that’s a call center, human resources (HR) department, or outside financial advisors. Then provide the service team with materials such as frequently asked questions (FAQs), communication samples, and training to prepare them to answer questions and support the initiative.

5. Go the extra mile. To boost the response rate, you may also want to consider additional touch points, such as:

• Webinars with overviews of pension benefits, discussions of lump sums versus annuities, and other considerations
• Letters for special situations, such as qualified domestic relations orders (QDROs), alternate payees, etc.
• Individual consultations with experienced retirement education specialists
• Group meetings to walk through the statement, form, and election process
• A website with personalized statements, online election capabilities, and daily reporting of response rates

The case for total rewards statements

Bentz-JulieAccording to the Center for American Progress (CAP), it costs nearly $10,000 to replace an employee earning $50,000. For upper management employees, the cost can be 10 to 20 times higher. Then consider the impact of the Patient Protection and Affordable Care Act (ACA) on employee retention. With health coverage available to all and preexisting conditions no longer applicable, employees have more freedom than ever to change jobs. This is why it is so critical to have effective employee retention and attraction strategies in place. One of those strategies is to effectively communicate the value of the benefits you offer via a total rewards statement.

Whether regularly produced in print or hosted online, this statement gives employees a snapshot of their total rewards packages and highlights the value of employer-paid benefits. Without these statements, employees are less likely to be aware of the full value you offer as an employer. This can potentially lead to low morale, dissatisfaction, and, at its worst, departure for an organization that appears to have a better benefits package or that pays an extra $5 per hour. Consider some of the following benefits as well.

Employee engagement. When you provide information about the investment you’re making in your employee through employer-sponsored benefits, you are also showing employees that you value them. Employees who feel valued are more engaged. And as you’re likely aware, the more engaged an employee is, the more committed he or she is to your organization. Online total rewards statements are particularly effective in driving engagement. They allow you to make regular content updates, such as quarterly commission payments, merit increases, or adding new hires throughout the year. In addition, employees can view archived statements and link directly to benefits providers for more information or to make changes in their benefits.

Cost reduction. A total rewards statement is an inexpensive way to interact with employees about their benefits. It makes providing information as simple as sending an employee a printed statement or accessing the information at the click of a mouse. Online statements can reduce costs even more because they eliminate printing and mailing costs that are associated with print-only statements.

Streamlined simplicity. You want your employees to know about the valuable benefits you offer, but expecting employees to proactively seek that information is simply not realistic. The total rewards statement allows you to streamline all this information in one regularly provided document or in one online destination. An effective statement visually demonstrates an employee’s personal total rewards package of compensation plus employer-paid benefits. Your employees may be surprised at how much their benefits add to their personal bottom lines. And that’s a powerful message.

With another open enrollment around the corner, new disclosures required under the ACA, and a competitive job market, your employees are likely paying closer attention to the benefits you offer. Now is the time to beef up your benefit communication efforts and make certain that your employees understand their options and the actual costs.