Benefits are important to employees, but in their time-short, sleep-deprived, cash-strapped world, benefits are not necessarily high on the “completely understood” list. I want to share three obstacles I have experienced regarding the importance of understanding employee benefits. I also want to share with you three actionable takeaways. Whether you are an employer offering benefits or someone in need of coverage, I hope these stories will cause you to pause and learn more about your benefits.
Obstacle One: Misunderstanding Benefits
Overview: Starting new roles in HR, I have often inherited someone else’s benefits communication plan or lack thereof. Starting in the middle has not always given me hindsight to what was done prior in regards to benefit communications. Because of this, problems I might have never imagined have surfaced.
Story: I worked in the benefits department for a city government. Every day, I had employees in my office asking about their pensions. One afternoon, I had a city laborer come and tell me he was ready to start his retirement paperwork. He had worked for the city for 25 years. He said he was covered under the plan that allowed him to retire after 25 years of service regardless of his age. (This was referred to the “old plan”.)
With that information, I checked the system for his pension information. Nothing there. I them went to paper back up files that were still kept for folks under the “old plan.” Nothing there. In my system, he did not exist as a city employee under the “old plan.”
I went back and asked him more about what he did and what department he worked in. He worked in sanitation. Clue number one. He also mentioned he was a union member. Clue number two. The city had an “old plan,” a “new plan,” and a “carve-out plan” for sanitation workers. He was not in the “old plan,” but in the “carve-out plan” His retirement requirements were service and aged based. While he met the service requirement, he was only 58 years old. He had to be at least 62 years old to retire in the “carve out plan.”. I had to give him the devastating news that he could not retire. He had to wait four more years.
Takeaway: Employers, especially those with a lot of longer term employees, need to make sure that they cover the benefits basics with all employees on a regular basis, not only new hires. Employees need to make sure that they really do understand their benefits and not assume they do based on their length of service.
Obstacle Two: Forgotten Personal Responsibility
Overview: One of my worst nightmares about benefits administration is employees who fail to update their beneficiary information when it should be updated. Even though my best practice is to send out reminders twice a year about updating personal information and beneficiaries, I cannot force employees to do it.
Story: An employee had voluntary life insurance coverage. When he was originally hired, he listed a beneficiary. During the time I was employed, the employee went through a divorce, remarried, and had children. After each life event, we talked about his benefits and what he needed to do to update them. Then, the employee died suddenly. His second wife with his two young children came to see me. She wanted to file a claim for his life insurance. When I pulled his paperwork, she was not the beneficiary. He had never removed his first wife as the sole beneficiary.
I told his grieving wife that she was not the beneficiary and could not tell her who was. From the look on her face, she knew who was listed. Sobbing, she left my office to find an estate attorney.
Takeaway: Open enrollment is a great time for employees to update their personal information and beneficiaries. Unfortunately, no one knows what tomorrow will bring. As employers, we can explain the details and remind employees that they need to stay on top of their benefits coverage. Employees are ultimately responsible for the forms and updates they do or do not complete. If this does not make you run to the person who handles benefits in your organization, I do not know what will.
Obstacle Three: Unplanned Benefits Scenario
Overview: Offering a new benefit during open enrollment is a great experience not only when the employee understands it, but when the employee sees a true upside in the change. Even when these two pieces are in perfect alignment, sometimes situations occur that the employee did not foresee. The positive benefits change becomes more of a liability. I worked with an employee through such an experience. What happened was unplanned and unaccounted for by the employee.
Story: During one open enrollment, we began offering a high-deductible plan with a health saving account (HSA). I had one employee who thought the high-deductible plan would be great for her and her family for at least one year. She was in her second trimester of pregnancy with her baby to be born a month into the new year. With the baby scheduled to be born in January and this being her third pregnancy, she believed that she would meet the high deductible in January and then be covered at 100% the rest of the year. Plus, she would start putting money into a HSA as soon as she could. She honestly thought nothing could go wrong.
I touched base with her about a month after enrolling about starting to put her money in an HSA as she had planned. She told me things had changed and that she was not going to contribute to the HSA. She knew how much she would have to pay out with the baby. No concerns.
Baby decided to arrive early. At the end of December. She now had expenses in the current year that were not supposed to arrive until the following year. She met her deductible for the current year on the last day of the year. Her deductible then reset for the next year. Because baby came early, she was now paying twice as much in deductible for the birth and after care, not reaping the “already met my deductible” benefits she thought she would. Plus, she had nothing saved in an HSA to offset the expenses.
Takeaway: Employers need to do a good job at making sure employees understand their benefits and can make good decisions. When employees make benefits decisions (for or against coverage) based on a short-term life event, remind them to think of positive and negative scenarios that could occur. Their one year choice could cost them if they have not vetted possibilities.
These situations really happened to me. I have tried to learn from each one. Keep these obstacles in mind the next time you work on benefits communications for your organization. Or the next time you need to make benefits decisions.