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Firms scrutinize benefits packages, make temporary cuts

A difficult economy has forced Mirror Show Management Inc. to re-examine its employee benefits package and temporarily curtail some benefits.  

"Like everyone else, our customers have cut back and our sales volume is down," says Tammy Wilkes, director of human resources at MSM.  

The tradeshow exhibit design firm has tweaked its health care benefits package, moving from a community-rated to an experience-rated plan, she says, to help counter costs.  

And, MSM had to reconsider its 401(k) match program. It used to match 100 percent of the first 6 percent of salary contributed by employees; it now matches 100 percent of the first 3 percent and 50 percent of the next 2 percent of salary contributed.  

MSM is not alone. The economy’s nosedive has forced companies to review employee benefits packages and develop strategies to stay within tight budgets. 

To bring down costs and increase productivity, MSM has developed an employee wellness program, Live Great, that offers employees incentives to lead healthy lifestyles.  

Robert Relph, CEO of Relph Benefit Advisors, says such programs can be beneficial in a number of ways, most notably by reducing medical costs.  

He recommends clients explore wellness programs similar to MSM’s to reduce expenses, increase productivity and maintain morale. 

A National Coalition on Health Care report states that health insurance expenses are the fastest-growing cost component for employers. Premiums for employer-based health insurance rose by 5 percent in 2008.  

Many health insurance costs come from employees’ lifestyle choices, Relph says. Smoking, obesity, high cholesterol and other factors drive up costs for health care, workers compensation, sick time and disability.  

To entice employees to engage in healthy activities, Relph urges his clients to offer richer benefits programs. For instance, an employer can offer a staffer who smokes incentives to participate in a smoking cessation program.  

Programs that encourage positive lifestyle changes are more frequently used because of the economy, Relph notes. He finds that companies too often try to modify health care plans in ways that might not be cost-efficient. 

"That’s why we’re cautious when we are reviewing with an employer," he says. "If you increase these co-pays or put in a plan with a higher deductible and more co-insurance in order to bring down the premium … it may cause some employees to not get the care they need. 

"So money we thought was going to be saved by raising a co-pay… actually ended up costing them money in other areas." 

Like MSM, Paetec has had to examine its employee benefits package. The telecom company has, for now, cut back on tuition reimbursement for employees considering going back to school. And for 2009, Paetec has discontinued the employer match for its 401(k) program, with a plan to revisit it down the line. Previously it offered to match 50 percent of the first 6 percent employees contributed toward a 401(k) investment. 

Still, changes have been minor, and Paetec largely continues to maintain and enhance employee benefits, says Laurie Zaucha, senior vice president of human resources. 

The company is analyzing expenditures with an eye to keeping benefits as intact as possible. It still offers pet insurance and university scholarships for children of employees. 

Paetec is enhancing its employee assistance program to keep employee morale and energy high, Zaucha says. The firm also has created an employee wellness program. The reason: to reduce medical care costs and build a happier, healthier, more productive work force. 

"One of the core values of our company is a caring culture," she says. "Our mission is to be a customer- and employee-oriented communications provider."      

She says Paetec employees have been very understanding and responsive to the adjustments. 

"We’ve been able to do a lot in the company to maintain morale and keep people energized and excited and productive this year," Zaucha says. "I think it shows in how they’re contributing and in that we have lower turnover than we had last year." 

Contributing to high employee morale are programs that recognize employees, such as the top performer sales trips and festive events like a summer picnic and motivational days. 

A focus on morale starts at the top. Paetec CEO Arunas Chesonis holds weekly conference calls and twice-yearly town hall meetings to address all Paetec staffers. 

"In these meetings he is very open and very candid with employees even before decisions like this are made," Zaucha says. "He will tell them what we’re considering as we’re working through the process. 

"That helps employees understand the rationale behind the decisions. It gives employees a chance to respond and provide their feedback as well. It’s a very open process for communication." 

Frances Pullano, president of Pullano and Co., who primarily works with smaller businesses in the area, says most of her clients are reconsidering health care first, 401(k) second and other group benefits last.  

When she sits down with a client, Pullano first tries to rework its benefits package before suggesting any cuts. When changes must be made, she recommends a higher deductible for health care. She says that while some employers are struggling more than others, every small business must look at health care costs.  

Jean Smith, president of Northeast Benefit Services Inc., which concentrates on pension plan services, says firms are looking to limit spending, lessen contributions and stop mandatory 401(k) safe harbor plans.  

Although Pullano and Smith have seen clients pull back, they agree that employees appear to be understanding of necessary changes.  

"Employees are involved in the decision-making process," Pullano says. "They are very aware of the situation employers are in."  

Most employees, Smith says, are glad to have a job and appreciate employers’ willingness to cut costs in other ways.  

MSM remains ahead of the curve when it comes to benefit offerings, despite the changes it has had to make, Wilkes says.  

The changes have been important in a bigger way: The company did not have to slash jobs.  

"We are trying to do positive things to offset cuts," she says.  

Maura Dollard was a Rochester Business Journal intern this summer.

8/21/09 (C) Rochester Business Journal. To obtain permission to reprint this article, call 585-546-8303.

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