Benefits July 28, 2021

2021 Trends in Open Enrollment

Decision support is a top focus, and lessons learned from the pandemic are influencing this year’s season as well.
Reported by

The 2020 benefits open enrollment season was like no other, thanks to the COVID-19 pandemic, and plan sponsors learned some lessons from last year they will likely carry forward to this open enrollment season.

James Bernstein, a partner in Mercer’s U.S. Health and Benefits practice, says many employers are aspiring to use a hybrid approach for open enrollment, providing in-person as well as virtual education and events. Depending on the employer’s policies about returning to the workplace and the logistics of its workforce, in-person events and education can still be challenging, he adds.

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

For employers that have multiple sites in the U.S., aside from the usual challenges of holding in-person events, each location might have different policies about returning to the workplace, Bernstein explains. “We’re finding that some employers are trying to plan as much as possible with the assumption that virtual communication is going to be critical,” he says.

Employers are showing an interest in virtual benefit fairs that are similar to an in-person experience, Bernstein notes. And, an advantage of a virtual benefit fair is that spouses can be included.

“There was an explosion of the use of virtual benefit fairs a year ago and the trend is continuing,” he says. “They’re available 24/7 to employees and spouses. Employees can go into the site and click on different ‘booths’ where they will find videos, information on benefits and Q&As. They can do it on their own time while still getting information in an engaging way.”

Kim Buckey, vice president, client services, at DirectPath LLC, says many employers that have employees at the workplace are avoiding large group meetings, as people still might feel uncomfortable in bigger settings.

She says DirectPath is seeing a lot of interest in dedicated benefit sites that include not only enrollment information but everything employees need, including education materials, forms and information about the process, checklists, and links to other resources that can help them make decisions about which benefits to choose and how to use them. She notes there has been an increase in the use of decision-support tools and people and that she’s also seen a “gigantic” uptick in the use of virtual benefit fairs.

“The fairs include chat functions by which employees can ask questions of benefits specialists in real time,” Buckey says. “Employers are also offering benefit educators. Employees can do their homework ahead of time and meet with an educator to help with decisions.”

Brian Colburn, senior vice president, corporate development and strategy, Alegeus, says he thinks employers will build off some of the digital strategies they rushed to put into place last year out of necessity that have proven to be effective. These include plan selection tools, digital assets and virtual training. “Given that we don’t know yet what’s going to happen with the continuing pandemic and the Delta variant, employers should prepare to operate remotely through open enrollment again,” he says.

Filling Gaps in Benefits

According to Mercer’s 2020 “National Survey of Employer-Sponsored Health Plans,” fielded from July through September 2020 among 1,812 employers, after years of little growth, the use of telemedicine jumped in first half of last year. A large majority of employers (80%) said virtual health care will play a bigger role in their programs going forward.

For 2021, employers are prioritizing employee support, especially for mental health. Despite the troubled economy, few employers planned to cut health benefits in 2021 as way to reduce spending. Only 12% of employers said they would shift cost to employees in 2021, while 36% planned to add new benefits or resources to support employees. The survey shows that behavioral health is the top priority for 2021 for large employers.

Regarding communicating with and helping employees, Bernstein says there are two themes: Employers are communicating about what is changing and what is new, as well as what resources are offered, and they’re providing decision-support tools to help employees determine the right benefits for their unique situations. He says the communications include little bites of information that employees can capture quickly.

“Employers are communicating early via the company intranet, newsletters and emails,” Bernstein says. “There are new and changing benefit options employees need to know about, as we’re seeing so many employers evaluating where there are gaps in benefits, partly informed by the experience of the pandemic. Telemedicine, mental health and child care support are top areas.”

According to Mercer’s survey, nearly one-quarter (23%) of all large employers said they will add or expand their voluntary benefit offerings in 2021. These include supplemental health insurance, such as cancer or critical illness insurance and hospital indemnity plans, as well as coverage to protect employees from a variety of unexpected expenses, such as pet insurance.

Nearly one-fourth (23%) of those with 5,000 or more employees will add new targeted health solutions—typically with a digital component—in 2021 to help employees better manage health conditions on their own or help them improve their health habits.

Buckey says there is an increasing realization among employers that benefits are complicated for employees. Few employees understand what they need to know, and with increases in voluntary and supplemental benefit offerings, it’s even more complicated, she says.

“If employers make an investment in benefits, they want to see a return on their investment,” Buckey says. “They don’t want to put something out there employees don’t use, so employees need to be educated.”

Decision Support

Decision support is being addressed in a couple of ways, Bernstein says. Service providers have technology that offers plan comparisons or point solutions that can help employees make decisions. For example, an employee answers questions about his situation, how he’s used benefits in the past and his health conditions, and the technology will navigate him to the company plan that would be the right fit.

Employers are also considering offering one-on-one connections, such as via health concierge vendors. With this decision-support solution, employees will have a dedicated resource to call for a one-on-one 20- to 30-minute discussion during which all benefits are explained and employees get help selecting the right fit.

A hot topic right now is cost transparency information, according to Buckey. “There have been news reports about hospitals that are not in compliance with regulations requiring them to be transparent about prices, and over the next three years employers with self-funded health plans will see similar requirements for them,” she explains.

To help with that, employers are offering tools to inform employees about where to receive good care and how much it will cost them.

“They are educating employees that they can shop around for care,” Buckey says. “Employers should educate employees about how their health care choices can affect their wallets.”

She notes that the No Surprises Act, a part of the Consolidated Appropriations Act, 2021, takes effect in January and could change how out-of-network services are covered and claims are processed.

“Even if an employee did his due diligence, there can be surprises,” Buckey explains. “For example, they could see an in-network specialist and have to have surgery, then get a bill from the anesthetist, who is an out-of-network provider.”

Employers are providing ongoing support as part of their benefits, offering advocacy and transparency services to help employees navigate the differences in prices between hospitals or providers.

According to Mercer’s survey, more than a third of all large employers offer a health navigator service, either a by telephone (29%) or through an artificial intelligence (AI)-powered digital service (6%), to help employees find the right provider and offer assistance during episodes of care, and another 16% are considering it.

Colburn says most people, in all stages of life, tend to choose the wrong health plans because they don’t understand their choices. Alegeus’ 2021 “Post-Open Enrollment Survey” found that nearly half (48%) of employees said their employer did not provide them with enough educational resources to prepare them for enrollment decisions.

“As a result, employees are struggling to make the right benefit enrollment decisions, with nearly two-thirds simply re-enrolling in the same plan as the previous year,” Colburn says. “It’s extremely important for employers or HR [human resources] departments to provide resources—printed assets, digital tools, virtual courses—so that if an employee isn’t comfortable speaking directly to someone in the HR department, they have these to guide them to a more informed decision.”

Administration July 26, 2021

The Allure of PEPs for Current Plan Sponsors

PEPs offer some advantages worth considering even if plan sponsors already have help and think their plans are running fine, experts say.
Reported by

What should current plan sponsors do when a pooled employer plan (PEP) is pitched to them as a solution for offering a retirement plan to employees? Many current plan sponsors already use help that is available—3(16) plan administrators, 3(38) investment managers—so they should weigh the appeal of offloading some responsibilities to a pooled plan provider (PPP) carefully.

Rich Rausser, senior vice president, client services, at Pentegra, says plan sponsors need to evaluate the pros and cons of any service provider or arrangement, including ones they are currently using. “They have an obligation to do what’s in the best interest of plan participants and to come up with solutions that are good business solutions as well,” he says.

Never miss a story — sign up for PLANSPONSOR newsletters to keep up on the latest retirement plan benefits news.

“Even if a plan sponsor thinks its plan is running fine, a PEP at least deserves an evaluation,” Rausser notes. “A PEP can be a great solution for a lot of existing plans.”

Theodore Schmelzle, second vice president, customer operations, at Securian Financial, says plan sponsors are being ever pressured to do more, and running a retirement plan is extremely complex.

“There are multiple traps for the unwary, and, in many instances, plan sponsor staff members don’t have the knowledge, experience or expertise to navigate such rocky shoals,” he says. “For plan sponsors seeking help outsourcing fiduciary responsibilities, PEPs could be an attractive candidate.”

Schmelzle says he believes the current mechanisms plan sponsors use for that type of help are not as effective as PEPs. “PEPs do represent, in my estimation, the highest degree of fiduciary and administration transfer to folks who know how to do it, whether that be a TPA [third-party administrator], RIA [registered investment adviser] or recordkeeper,” he says.

Schmelzle further explains that while 3(16) plan administrators and 3(38) investment managers are valuable, the bottom line is the plan sponsor is still the named Employee Retirement Income Security Act (ERISA) fiduciary.

“With the advent of the pooled plan provider, those burdens are removed from the shoulders of plan sponsors,” he says. “If looking for help with fiduciary and administrative tasks is what is important to plan sponsors, the movement of those tasks makes PEPs the most effective option.”

He adds that plan sponsors will still have some remaining duties—the submission of data and the fiduciary choice of participating in a PEP will not go away—but with a PEP, they can shed many responsibilities they still would have if they engaged a 3(16) or 3(38).

PEPs are often touted as a solution for startup plans or smaller plan sponsors, but Rausser says there’s no question a PEP could be an excellent solution for some larger plans. He adds that Pentegra has seen some instances where large plan sponsors are interested in PEPs for two main advantages: fiduciary outsourcing and a cost-saving impact from bundling all services together.

PEPs offer a fiduciary provider, recordkeeper, investing help and the audit function all in one package, and, in some instances, plan sponsors find they will get a more cost-effective solution with a PEP, Rausser explains. However, he adds that not every PEP will be more cost effective or necessarily cheaper because some PPPs are bringing more services to the table.

Schmelzle says he thinks it’s too early to tell what the full extent of PEP market disruption will be, though he has seen more interest than he expected at this point. “We’re still in the early innings, but I haven’t seen anything to dissuade the notion that PEPs have the potential to change the landscape of the way plans are structured and administered,” he says.

Whether PEPs are appropriate for larger plan sponsors has been the subject of speculation in the industry, Schmelzle notes. He says he’s heard some industry players say they are good for jumbo plans, some target them for plans with $100 million or less in assets, and some think they’re only useful for small and startup plans.

“The jury is still out on where the sweet spot is, but from a legal standpoint, I don’t see why plans of any size couldn’t participate in a PEP,” Schmelzle says. “The question is whether or not it is appropriate for the plan and participants.”

However, he adds, “It seems as you get into larger plan sizes, for which design could be more detailed and the plan sponsor could have dedicated staff for the plan, the utility of a PEP lessens.”

Although situations vary, he gives an example of when a PEP could be especially useful. “If an employer has a plan that is right at the DOL [Department of Labor] audit threshold, and perhaps has $5 million to $15 million in assets, that’s probably a vibrant small business that’s growing, where cost and the attractiveness of benefits is a significant issue,” he says. “That employer would benefit from outsourcing administrative responsibilities. A PEP would check a number of boxes for such a plan sponsor.”

Things to Evaluate

Rausser says current plan sponsors should look for PEPs with some scale. There is an audit exemption for PEPs with no more than 1,000 participants and no participating employer with more than 100 participants. “My thinking is that PEPs that are smaller than that audit threshold won’t have the scale they need to operate cost-efficiently,” he says.

Rausser adds that another critical and “probably most important” thing to look for in a PPP is experience. He says 100 or so PEPs have been established to date, and many PPPs are new to the fiduciary side of the business. “Providers may have the knowledge of administering plans, but many haven’t been experienced in effectively discharging fiduciary duties,” he says.

Plan design is another consideration when evaluating a PEP. Plan sponsors will need to think about the many different plan design options PEPs offer, as there are nuances among the offerings put out there by different types of PPPs, says Schmelzle. Plan sponsors will have to decide which one is right for them and also think about cost, as different plan designs produce different price points.

Rausser suggests plan sponsors include PEPs in regular requests for information (RFIs) and requests for proposals (RFPs) or other benchmarking of service providers. “When evaluating a PEP, look and learn, but only leap into it if it’s the best solution for participants and the sponsor,” he says.

«