Employers want to make sure their employees understand and appreciate the benefits they provide. It is also important to learn about new trends in employee benefits and to have the proper steps in place when adopting new programs or plans.
Lack of proper attention to employee benefits programs can put employers in the position of incurring adverse legal exposure. This can happen in numerous ways, including being put out on a tax limb without support, having a pension plan that is not qualified, or having an executive comp arrangement that doesn’t meet its purpose or produces adverse tax consequences. One way to avoid these scenarios is to work with competent consultants.
Smart Business talked with Gary Lawson, a partner at Godwin Pappas Langley Ronquillo LLP, about how employers can get the most out of their employee benefits programs and partner with experienced lawyers and consultants to guide them in the right direction.
Will the same employee benefits plans that apply to executives work for rank-and-file employees?
There are generally substantial differences. Executives usually participate in all the basic benefits a business maintains for their rank and file, such as a pension plan, 401(k) plan, or stock purchase arrangement and health care benefits. But they may require additional benefit arrangements, ranging from nonqualified deferred compensation, incentive stock options and phantom stock plans to special travel arrangements such as access to a company plane.
Employer interests are best served by providing adequate plans to all employees, and by making sure everyone knows and fully appreciates their plan details.
How can employers make sure employees appreciate their benefit plans?
Employers might conduct surveys to determine what employees think about their benefits, which ones they consider more than others, what additional benefits they would like to see, etc. But be careful in shaping the questions so you don’t create expectations that you cannot afford to deliver. Following up on such surveys shows employees that companies take their benefit plans seriously.
Employers also have to remember that it is a lot easier to implement programs than it is to get rid of them, so they must carefully consider changes.
Another way is to get employees involved in their benefits plans. Rather than just presenting employees with a finished plan, give them some choices. Within the confines of your acceptable plan alternatives, let them design what will work best for them in the long run.
Should employers try to implement and maintain benefit plans without outside guidance?
No. Employers should be concerned with two questions when offering or amending benefit plans: are we getting our money’s worth?, and can we afford it? A prudent way to answer both questions positively is to team with qualified employee benefit lawyers and consultants, preferably with strong experience. Employers should choose carefully because choosing the wrong consultant can cost employers tens of millions of dollars.
How do employers choose qualified consultants?
It’s a matter of due diligence. Check candidates’ references and degrees, consider their past experiences and how they related to your specific issues with previous clients. Visit with current and past clients, review any publications they have written on the subject, check to see if they have been rated by their peers, and inquire about their involvement with organization such as bar associations. Verify their litigation history and know that such experience in the ‘hot seat’ often makes someone a better counselor.
In general, employers will get better results from consultants who have actually been involved in court proceedings, rather than those who have just read about employee benefit programs.
Are there any trends in employee benefits that employers might consider in evaluating their individual plans?
The Internet allows employers to gather more information about employee benefits than was available only a short time ago. They can often access retirement modeling programs as well, to try to predict what their future needs might be.
They can look at social changes that may affect defined benefit plans, such as dealing with disability laws, coverage of people not related directly to employees, and shifting costs brought about by union contracts that can create unique legal complexities.
Monitoring trends can help employers in the long run as they and their employees try to get the best out of their benefit plans.
GARY LAWSON is a partner and chair of ERISA, Pension, Employee Benefits and Executive Compensation Section with Godwin Pappas Langley Ronquillo LLP in the Dallas office. Reach him at (214) 939-4870, or [email protected]
(A. G. “Gus” Fields, a former chief of the Employee Plans Technical Branch of the IRS National Office, Washington, D.C., and Lawson’s colleague for many years, contributed to this article.)