Benefits April 21, 2014

Executive Rewards Less Influenced by Economy

April 21, 2014 (PLANSPONSOR.com) – The economy’s influence on the adjustments being made to executive reward programs is decreasing this year.
Reported by

The results of Mercer’s Executive Rewards 2013 Year-End Survey indicate the impact of proxy advisory firms is slightly increasing as more organizations try to align programs with advisers’ guidelines. According to the survey results, changes to annual and long-term incentive programs, use of special retention grants, and grant values have increased in 2014 as a result of proxy advisers’ guidelines.

With regard to plan design, the survey results show a continued shift away from stock options relative to the increased use of performance awards in delivering long-term incentives to executives. Few organizations are making changes to current stock option plans (4% of survey respondents are increasing use, while 4% are decreasing use).

Get more!  Sign up for PLANSPONSOR newsletters.

More significantly, 10% of organizations are planning to increase the use of performance shares in 2014, and 5% are increasing use of restricted shares.

“The influence of shareholder regulatory groups and public scrutiny is causing many companies to coalesce around similar types of compensation programs, yet similarity in plans may not address unique business priorities, talent requirements or the complex environment,” says Gregg Passin, senior partner with Mercer. “Finding that delicate balance between managing executive talent as both a risk and a business driver will be a competitive advantage.”

Corporate boards of directors are expanding the range of executive talent management issues on which they focus. The survey finds specific areas of increasing focus by boards are succession planning (69% in 2014 vs. 53% in 2013), executive candidate evaluation (69% in 2014 vs. 58% in 2013), leadership development (40% in 2014 vs. 28% in 2013) and work force metrics (33% in 2014 vs. 24% in 2013).

As result of this broadening of focus, some companies are rebranding their compensation committees as either human resource committees, or compensation and leadership development committees.

“This larger, more diverse portfolio of responsibilities means that boards recognize the critical challenges facing global organizations today,” says David Cross, partner with Mercer, based in New York. “These challenges include the shortage of leaders with expertise to run complex organizations, the intense competition for executive talent around the world, the surge in the cost of attraction and retention, and the outdated or frail succession plans that can leave organizations vulnerable.”

According to the survey results, this broader focus comes as the executive compensation landscape becomes more complex. Increased globalization, industry consolidation, changing technology and an aging work force are all increasing risks, making decisions around business issues more difficult and heightening the importance of the board’s oversight function. It is also placing greater emphasis on board composition given the value that can be added by board members with strategically critical skills and experience.

“It is clear that companies are going through a transition right now,” says Cross. “Strategic actions like aligning programs with global practices, integrating executive programs with broader work force management issues, assessing all elements of compensation, and applying metrics to identify objective insights about organizational threats and opportunities can help companies be better prepared for the future.”

The survey was conducted in November 2013, and includes responses from more than 215 employers across 20 industry sectors throughout the United States and Canada. A copy of the survey report can be requested here.
Benefits April 21, 2014

ACA Prompts Scaling Back of Medical Plans

April 21, 2014 (PLANSPONSOR.com) – Employers are scaling back designs for their medical plans due to taxes related to the Patient Protection and Affordable Care Act (or ACA), says a new report.
Reported by

A new study released jointly by HighRoads, a provider of benefits plan management and health care compliance services, and Corporate Executive Board (CEB), an executive consulting and advisory firm, finds that many employers are beginning to scale back their medical plan designs in an effort to avoid having to pay the ACA’s “Cadillac tax,” which takes effect in 2018.

The report, “2014 Medical Plan Trends,” also shows employees are facing an increased share of upfront costs for health care, as well as an increase in high-deductible plans, a greater number of plans with coinsurance charges, higher out-of-pocket maximums, and increases in emergency room copayments.

For more stories like this, sign up for the PLANSPONSOR NEWSDash daily newsletter.

“The employer-sponsored medical plan landscape continues to shift in response to the ACA and, as a result, it’s more important than ever for employers to effectively communicate plan changes to their employees,” says Cynthia Weidner, vice president of client development for HighRoads, based in Burlington, Massachusetts.

Weidner adds, “It’s evident that companies are embracing typical health plan consumerism strategies that encourage a more thoughtful, cost-effective use of medical benefits by exposing plan participants to more of the upfront costs. With plan designs changing and the emergence of new options including both public and private exchanges, benefits management professionals should be armed with the information employees need to make informed decisions on plan choices and efficient benefits usage.”

In 2018, the ACA will impose a 40% excise tax on benefits if the value of the health insurance benefits exceeds the threshold for a plan that costs more than $10,200 for an individual and $27,500 for a family (indexed for inflation). The report shows that companies are starting to transform their benefits plans to prepare for this requirement in ways that include:

  • Two-thirds of 2014 medical plans have individual, in-network out-of-pocket maximums (OOPMs) of $2,500 or more. This is up from 58% of plans in 2013, and 49% in 2012;
  • Forty-two percent of plans charge coinsurance for office visits, up from 35% in 2013;
  • Emergency room visit copayments have increased by roughly $3 per year since 2009, with a 2014 average of $113 per visit; and
  • The percentage of plans with high deductibles grew by 2% in 2014, from 23% to 25%.

In addition to trends related to greater plan participant cost sharing, the report finds some positive trends that can be attributed to the ACA, including:

  • More generous coverage for mental health. The average copay for an inpatient mental health visit dropped by 3% from 2013 to 2014; and
  • Greater free preventive coverage. Nearly all 2014 plans cover 100% of patient costs for in-network cancer screenings, immunizations and other preventive services.

“Our research shows that the changing face of health care plan design will continue to evolve as employers work to meet ACA requirements while avoiding added tax penalties by 2018,” says Laura Arpin, associate director, Corporate Executive Board, based in Arlington, Virginia. “But, employers must recognize how these changes may be reflected in the health care behaviors of their plan participants.”

Arpin adds, “Without strategic communication processes in place on the best practices for utilizing health plan benefits, plan participants may be more apt to delay necessary care due to the uncertainty of its actual cost. By making sure plan participants have cost information, employers can reduce the likelihood of their employees and employee families delaying or rationing care by as much as 50%.”

Information on how to request a copy of the report can be found here.

«