HR Professional - February/March 2008 - (Page 23)

C OM P E N S AT ION B Y K A R E N TAY L O R S M I T H CREATIVE APPLICATIONS OF HEALTH CARE SPENDING ACCOUNTS egardless of how big or small the company, health care spending accounts (HCSA) can help create a customized benefits plan that reflects the compensation philosophy of the organization and stays within budget. An HCSA is a predetermined amount of money provided to employees each year for their medical and dental expenses. The plan sponsor must make certain decisions in advance to structure the plan within the context of compensation philosophy; and different annual benefit amounts may be assigned to employee classes—determined by criteria such as family status, years of service or percentage of salary. HCSA guidelines allow for balance or expense carry-forward or no carry-forward for each year’s funds. Most HCSAs make the full annual amount available to the employee at the beginning of the benefit year but are often prorated in the first year of service. The following examples illustrate how HCSAs can be used to meet different objectives depending on the plan sponsor’s goals. R three per cent of the employee’s earnings of Jan. 1 each year, updated annually. Result: The flexible new benefits plan allows employees to choose how they spend their available HCSA funds. Seniority and occupational distinctions are now recognized through annual HCSA increases based on salary increases. Overall benefit costs are controlled because HCSA increases are linked to payroll decisions and renewal increases are restricted due to plan limits that lessen the impact of annual health and dental inflation. Company A Scenario: Originally the Canadian division of an international pharmaceutical company, Company A is now an independent requiring its own benefits plan for 120 employees. The general manager wanted to ensure no employees lost coverage during the changeover. The plan needed to have flexibility and employee choice, and recognize employee seniority and occupational distinctions. Cost maintenance was imperative. Solution: A core benefits plan was created with traditional elements, plus an HCSA. The core plan includes insurance—life, accidental death and dismemberment (AD&D), long-term disability, etc.—50 per cent reimbursement for basic and major dental services to a maximum of $1,000 per person per year and a prescription drug card with 80 per cent reimbursement. The HCSA equals w w w. HRT houghtLeader. c om Company B Scenario: The Toronto office of a North American management consulting firm committed to employee empowerment boasts a corporate culture that fosters work/life balance. As a result, conventional benefits plans had been met with poor response. The company wanted to maintain a minimum level of insurance protection and retirement savings, together with employer-employee cost sharing. Solution: A plan was created featuring a combination of mandatory employee-paid core insurance coverage, mandatory two per cent employee group RSP (GRRSP) contribution, and a $2,500 benefit promise from the employer. The employee chooses annually whether this sum is contributed to an HCSA, to their RSP or shared between the two. Voluntary GRRSP contributions can also be made. Result: Company B’s compensation structure fosters its commitment to individual responsibility by allowing employees to choose HCSA, GRRSP or both. Mandatory insurance protection and minimum retirement savings are in place as conditions of employment, while the annual choice renews employee empowerment. The employer’s costs are limited to the $2,500 benefit promise plus administration costs each year. Karen Taylor Smith, CHRP, GBA (ktsmith@thebenefitstrust.com) is an accounts manager at The Benefits Trust, a third party administration and benefits consultancy. F e b r u a r y / M a r c h 2 0 0 8 23 http://www.HRThoughtLeader.com

Table of Contents Feed for the Digital Edition of HR Professional - February/March 2008

HR Professional - February/March 2008 Contents Editor's Letter Contributors Leadership Matters Boards By the Numbers Did You Know Sustainability Education News: E-Recycling Communications News: HR Study FYI Ethics World Watch News: Legislation Legal Compensation Focus Strategy The Colour of Money Sustainable Skills From Brown to Green HR Trends: From Winners to Also-Rans Branding Human Capital HR 101 Interview with David Suzuki Off the Shelf The Last Word

HR Professional - February/March 2008

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