Magazine article Personnel

Choosing an Employee Benefits Consultant

Magazine article Personnel

Choosing an Employee Benefits Consultant

Article excerpt

Choosing an Employee Benefits Consultant

Back in the old days, employee benefits were an afterthought called "fringe benefits." Real men (and women) cared about salaries, not about silly things like benefits. Many workers took the attitude that it was great if your company offered "bennies"--but it was no big thing if it didn't. No one in his or her right mind chose a job because it provided a pension plan that, at the employer's whim, could fade away quicker than a summer romance.

How times have changed! Four decades of unequaled prosperity and sociological changes have resulted in a wealth of employee benefits. In most industries, especially those in which unions are entrenched or could make inroads, employee benefits now add 30% to 40% to the cost of payroll. Chrysler literally spends more on its employee benefits than it does on steel!

As if that weren't enough, the folks in Washington have made sure that companies go with this flow. Over the past decade new employee benefits legislation has proliferated like crabgrass. Every 18 months, our public servants have passed another acronym--ERISA, DEFRA, TEFRA, REA, TRA, COBRA, OBRA--whose primary purpose, it seems, is to keep employee benefits consultants off the welfare rolls. And more benefits legislation is in the works.

The New Need for Consultants Indeed, if keeping employee benefits consultants busy was the goal of the recent benefits legislation, then these laws can be declared a smashing success. Whereas in the past most HR departments were able to plan and administer benefits programs in-house, today most organizations need to call on consultants to help them plan and administer programs that comply with the law, are cost-effective, and suit the particular needs of the company's work-force.

Who are these consultants? Where do they come from? The people who do employee benefits consulting come from many kinds of firms. Some are actuaries working for consulting firms. Some work in the trust departments of banks. Many are stockbrokers. And others are insurance agents. The trend toward deregulation has blurred the distinctions among these different kinds of firms.

Unfortunately for the consumers of their services, this trend has also created confusion in the marketplace. And to make matters worse, there is virtually no correlation between price and quality. Too many employers have learned the hard way that three-digit billing rates are no indication of superior talent. To the contrary: Many national firms use inexperienced, junior-level consultants on "small" (fewer than 1,000 employees) accounts. In many instances, companies have decided that they were happier after all with their old, reliable insurance agent--who knows more about the company and about employee benefits than does Joe Fast-Track, on whose MBA diploma the ink is still wet.

The fact is, there are fewer differences among consultants' firms today than there once were--and there will be even fewer distinctions among them in the future. The HR manager who insists on allowing "only a consultant" or "only an investment banker" or "only an insurer" to administer employee benefits is operating according to an outmoded way of thinking. With minor exceptions, you can get what you want from any of a wide variety of providers.

Nevertheless, this widening array of choices has presented employees with a new set of problems. How does the HR manager choose the best employee benefits consultant from the crowd?

Choosing a Consultant Keep in mind that the selling of employee benefits plans has become a high-priority activity for many of those who are in the business of selling financial services. As one who trains some of the people who are so eager to serve you, I feel knowledgeable enough to offer some personal advice on what to look for in the person who will advise you on your employee benefits plan. Were I the one in your company responsible for choosing an employee benefits consultant, here are some questions I'd ask myself before signing on the dotted line. …

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