Feb 1, 2008

Different Plans

From an administrative standpoint, it is easiest for a firm to have a single employee benefit plan that applies to all employees. Nevertheless, some firms have different plans for different groups of employees. This most commonly occurs when the benefits for union employees are determined by collective bargaining. If the benefits for the union employees are provided through a negotiated trusteeship, a separate plan must be designed for the nonunion employees. The employer must then decide whether to play "follow the leader" and provide identical benefits to the nonunion employees or design a plan that reflects their different needs. When benefits are provided through a negotiated trusteeship, the employer is more likely to develop a different plan for nonunion employees than when the employer is required to provide benefits to union employees through group insurance or pension contracts that are purchased or self-funded by the employer. Under these circumstances, employers often find it simpler administratively to purchase a single contract that covers all employees. Different plans also typically exist for retired employees and other categories of people who are not active full-time employees or their dependents.

Even when unions are not involved, an employer still may decide to have different plans for different groups of employees. Usually one plan will be limited to hourly employees and another to salaried employees. In addition, a plan that offers supplemental benefits to top management also may be provided, but it will often be publicized only to those employees who are eligible for these benefits. Some firms that have employees located in different parts of the country also have found it desirable to provide somewhat different benefits at some or all locations in order to remain competitive locally.

Having different plans for different groups of employees is not without its disadvantages. Administrative costs are usually increased, communications with employees become more difficult, and resentment can occur if one group of employees feels its benefit plan is inferior to that of another group. To minimize this latter possibility, some firms have designed their plans so that an overall comparison is difficult. Each plan will have its own positive and negative features when a comparison is made with the plans for other groups of employees.

Different plans can also result by giving a choice to employees. For example, one group of employees may elect an HMO or PPO option, while another group may elect coverage under a traditional medical expense plan. A trend in recent years has been the growth of cafeteria plans.


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