Benefits June 12, 2017

Benefits Enrollment Pitfalls to Avoid

Willis Towers Watson offers some insight on the overlooked communication mistakes that can damage the effectiveness of a strong benefits program.

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Open enrollment season is a critical time for any human resources (HR) department. Employers put plenty of effort into developing the right benefits package to meet the needs of their unique work force. But even the best benefits program will fail to reach its full potential if not communicated properly—that is, in such a way that employees will see its value and make the right decisions.

Plan sponsors may encounter a number of obstacles when promoting their benefits program. Willis Towers Watson, therefore, offers insights on the major pitfalls to avoid when developing and running a benefits communication program.

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First, HR teams need to make sure their benefits materials will break through the noise of mail, email, spam and other media crying for employees’ attention on a daily basis. One way to do this is to keep information short, crisp and actionable. Employees don’t have time to sift through the intricate details of every benefit, in one sitting, so they shouldn’t be expected to do so. Instead, deliver the most essential information in clear and engaging language so they can quickly recognize what’s important to their specific situation and act on that information, the firm suggests. Employers can then point their workers in the right direction for additional details. This can come in the form of a link or contact information for HR professionals who can then walk workers through the decisionmaking process.

The essential information should be visually attractive, as well. However, it also needs to be consistent across all media to reinforce a familiar brand. This can be as simple as using the company or benefits logo or maintaining the same color, typeface and images across all channels.

Depending on the employee, the medium he finds most engaging will vary. Thus, it is important to take a multi-channel approach. It’s also important to keep emails short and attachments at a minimum. The topic should appear in a newspaper-style headline to catch employees’ attention. Overall, digital communications can be maintained on a microsite or the company intranet.

It is also essential to reinforce the messages and to keep employees in the loop. Some employers make the mistake of communicating benefits during open enrollment season only. A predictable timetable of communications can maintain awareness and reinforce the value in the program. Developing an annual communication schedule can help, the firm says.

For more tips on developing a strong benefits communication program, visit WillisTowersWatson.com.

Compliance June 12, 2017

PSNC 2017: Learning From Litigation

It is not always possible, even for the most carefully run retirement plans, to avoid getting dragged into ERISA litigation, and so having a clear response plan in place is essential.

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Addressing attendees of the 2017 PLANSPONSOR National Conference last week in Washington, D.C., Jamie Fleckner, a partner with Goodwin Procter LLP, made the frank-but-timely observation that, “in the United States of America today, pretty much anyone can sue anybody for anything.”

“Of course, that doesn’t mean the charges will stick, but it’s an important fact for defined contribution [DC] plan sponsors to remember as the latest wave of Employee Retirement Income Security Act [ERISA] lawsuits continues,” Fleckner observed. There may be some cases filed that have merit, “but there are also many more filed that do not ultimately go anywhere.”

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The panel conversation, “Learning From Litigation,” also featured Bradford Huss, director, Trucker Huss APC, and Emily Costin, partner, Alston and Bird LLP. The three long-time ERISA attorneys all agreed that there is just about as much ERISA-focused litigation ongoing today as they have seen at any point in their careers. Huss put the total number of current outstanding lawsuits well above 50, observing that, on average since early 2016, there has been at least one new example of ERISA litigation filed in a U.S. district court each week. There are also now more than a small handful of cases that have been decided, one way or another, and appealed to the circuit courts.

“Each case is unique, but overall we see that investment fees, administration fees and imprudent processes are at the heart of current ERISA litigation trends,” Costin suggested. “Plaintiffs will allege conflicts of interest and imprudence of processes, both for the initial selection of an investment option or service provider and for the ongoing monitoring that a fiduciary has a duty to do.”

Also the concept of self-dealing has become increasingly prevalent—the claim that decisions are not being made for the benefit of plan participants but instead for the financial gain of the plan sponsor. This type of charge is often leveled against the retirement plans being run by investment providers and recordkeeping providers themselves, but non-investment-industry sponsors are also accused of similar conflicts. For example, in one increasingly common approach, the plan sponsors are accused of overpaying for DC plan recordkeeping in order to get a better deal on other services, perhaps other benefits administration or payroll.

As the experts observed, the cases are almost exclusively “lawyer generated,” and that will continue. In other words, it is not even really the participants who are driving the wave of litigation. Rather, there are a growing number of high-powered plaintiffs’ attorneys who see ERISA plans as ripe targets. Costin suggested that these firms have actually not had all that much success so far in terms of winning these suits; decisions have mainly come down against sponsors only in cases where there were clear and pretty egregious conflicts. Unfortunately, many plan sponsors simply move to settle these cases, rather than fight them, either out of fear of losing or simply to get the trouble behind them. 

“These are all lawyer-generated suits … these aren’t participants who just wake up one day and decide to draft a lawsuit making these really complicated arguments,” Fleckner concluded. “The participants are not that sophisticated. They have, in effect, agreed to sign onto this litigation. So for plan sponsors, you cannot let this stuff derail you or stop you from running your plan the way you need to run it for your employees, assuming of course you are making a good faith effort to comply with ERISA. You cannot make decisions based on the fear of getting sued … that’s in itself a fiduciary breach.”

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