Employee Benefit Planning and Management

The significant growth in employee benefits requires increasingly complex decisions. Whether these decisions are made by employers providing benefits, unions negotiating for benefits, or employees selecting benefit options, the need for proper benefit planning is crucial. Employee benefit planning is a dynamic process that must continually be reviewed and modified if an overall benefit plan is to meet the changing needs of a changing environment.

If either a single type of employee benefit plan or an overall benefit plan is to be properly designed and managed, many questions must be asked. For example, should the plan reflect the wants of employees or the needs of employees as perceived by the employer? Should it have a probationary period for eligibility? Under what circumstances should the plan be self-insured? These questions are only subparts of six much broader issues:

1. What are the employer's objectives?

2. What types of benefits should be provided in the plan?

3. How should the plan be funded?

4. What provisions for controlling costs should be contained in the plan?

5. How should the plan be communicated to employees?

6. Should administrative functions be outsourced?

Unfortunately for those who like precise answers, plan design and management is an art rather than a science. However, decisions must be made. In some cases, the advantages and disadvantages of the various alternative answers to these questions must be weighed; in other cases, compromises must be made when the answers to two or more questions conflict.

Too often, the proper design of an employee benefit plan is viewed as a one-time decision rather than as an evolving process. However, benefit plans that were appropriate for yesterday's work force may not meet the needs of tomorrow's work force. As times and organizations change, employers' answers to the questions raised may also have to change. For this reason, these issues must be frequently restudied to determine whether a group benefit plan is continuing to meet its desired purpose.