Preparing Employees for Benefits Enrollment

The Principal Financial Group's Renee Schaaf talks about best practices for open enrollment

By Karen E. Klein

Smaller businesses are significantly less likely than larger ones to offer health insurance, surveys (BusinessWeek, 7/2/08) show, but there are small firms that offer comprehensive benefits and do so with excellence.

Renee Schaaf, vice-president of retirement and investor services for The Principal Financial Group (PFG), spoke recently to Smart Answers columnist Karen E. Klein about a national contest her firm sponsors to identify small and midsize companies that excel in employee benefits. She discussed the best practices for open enrollment that the winners have in common. Edited excerpts of their conversation follow.

The "open enrollment" period for many insurance packages is coming up. What is open enrollment?

This is the time, it typically lasts between two weeks to two months, when employees are given the opportunity to make changes to their benefits program in health, life, and disability insurance. Usually the insurance companies need to have the decisions in hand by Jan. 1.

What's the most important thing that small employers can do during this time period?

Educating employees is critical. And I'm not talking just about the benefits details, but in general. What was noteworthy in the winners of our contest is that these small companies were sharing financial information about how their company was faring on a frequent basis—all through the year. That gives employees a much better feel for how much they can anticipate in terms of benefits and raises at the end of the year.

Of course, it's also important to offer a comprehensive education program about the benefits and the choices that employees have to make. Best practices include using every possible medium, from face-to-face meetings to group meetings, offering print materials and Web materials. One new practice emerging is to bring in personal guidance for employees in planning their retirement. And include spouses in the meetings. So you need to have them at multiple times, including during lunch and after hours, so the whole family can be involved in these decisions that affect them all.

So much of the language of insurance benefits is jargon-filled. Isn't it tough to even understand the choices, let alone decide between them?

Yes! It's very important to simplify the language and put jargon into plain English. What we found is that employees are embarrassed to say that they don't get words like deductible or co-payment, because they think they ought to know what all these terms mean.

Employers also need to use the same terminology for all communication, so what is online, on paper, and in the plan documents all say the same thing. Ideally, you want employees to be able to understand their options at a glance by synthesizing the information down into digestible chunks. Providing worksheets or spreadsheets, where employees can plug in their own personal information and calculate their benefits, is also good.

Most employees opt for health benefits, but studies show that many either don't understand the need to belong to the retirement savings account or they don't want to see any of their take-home pay diverted into a pension plan. How can employers help cure that short-sightedness?

More companies are considering automatically deferring funds into their employees' retirement plans by making those plans "opt-out." That means employees are plan participants unless they take the step to say they don't want to participate. What we're seeing with that is most employees stay in the plan, so there's some acceptance.

Another thing that helps employees get started with retirement accounts is to set up a company matching account. That provides a good incentive.

Many employees are so challenged just doing their jobs and raising their families that it's hard to get them to take their benefit selection seriously. How do you encourage them not to make superficial decisions?

Some employees assume that choosing the maximum retirement deferral is always the best choice, when actually they should be thinking about where their deferrals are going and if they need to rebalance their funds from year to year. Also, their current life situation may have changed and they maybe need to make adjustments because a new child was born or a spouse has a new medical condition.

This is where those employee meetings are so important, because that's where you can help people understand the difference in balancing short-term and long-term needs. Our 10 winners also reported that serving good food is critical in getting employees to attend the meetings. And they sent text messages to remind them to attend.

What about making meetings mandatory?

Yes, some of our winners go to the point where it's mandatory that employees meet with HR or a benefits counselor or specialist. They don't leave that to chance. And some bring in salaried financial counselors who will meet with employees for free—it's a benefit—and discuss their needs. That's a very effective model because when employees see that their company is making that kind of commitment to their well-being, that's a powerful retention and recruiting tool.

Karen E. Klein is a Los Angeles-based writer who covers entrepreneurship and small-business issues.