Benefit professionals are charged with the challenging task of balancing human capital in tandem with the financial resources of an organization. Not readily apparent to the sales-team, the line worker or the intellectual property attorney is the strategic framework within which Human Resources professionals performs.
Among the responsibilities normally assigned to benefit professionals and committees are the oversight of the company healthcare and retirement benefits. The oversight includes taking an active role which includes managing the providers, the costs and employee awareness of the company benefits.
Runaway Expenses
The task of managing healthcare costs has been anything but easy for Human Resources professionals. According to the 2016 Health Care Benchmarking Report of the Society of Human Resource Management (SHRM) employers are now spending on average $8,669 per employee, per year for covered employees. This represents an annual increase, per employee, of approximately $500.00 from the prior year. The SHRM benchmarking report identifies that 7.6% of corporate-expense budgets are earmarked for employee health care.
While the ballooning cost of health care is a very real concern for companies of all sizes, Jack Craver, benefits-PRO, reports many businesses do not seem to view the problem as something they need to cope with. A new study published in December 2016 Harvard Business Review (HBR) shows that many corporate leaders give very little thought to their health care costs – which account for their second largest expense after wages. Included in the HBR study, eighty-three percent of respondents feel that they could reduce the waste in health care expenses if they had access to better management tools. The authors of the HBR report states, “Treating the health benefits function like any other business unit and holding it accountable for results are relatively new concepts…”
The 401(k) Investment Policy Statement to the Rescue
Even though drafting and adhering to a written Investment Policy Statement (IPS) is not required by the DOL, the IRS or the SEC, 401(k) plan benefit committees and retirement committees have increasingly adopted the IPS document as a valuable tool when carrying out fiduciary responsibility. Plan fiduciaries are required to act prudently when making plan related decisions and overseeing the assets of tax qualified retirement plans. The IPS assists plan fiduciaries in demonstrating prudence and process when making decisions and also when explaining how and why decisions were made.
The well drafted IPS will address roles, responsibilities, investment objectives, the Investment Manager selection process, Investment Expense monitoring and Investment Performance.
Forward-thinking managers of human capital and those who oversee the health care benefit should consider drafting an IPS for their health care plan. There will be benefits professionals who feel the IPS would not work in the health care environment. For those, the question becomes…
Why the acceptance of the complacency that surrounds the U.S. employer sponsored health care costs?
If you choose to not utilize the concept of an IPS style of oversight and process, then the conversation moves toward… What tool will your firm use to stop the employers’ continued acceptance of increasing health care costs, without concern for company and participant assets?
