1987 SURVEY OF FLEXIBLE COMPENSATION PROGRAMS AND PRACTICES

• Document Type: CREST
• Collection: General CIA Records
• Document Number (FOIA) /ESDN (CREST): CIA-RDP90-00530R000400730011-1
• Release Decision: RIFPUB
• Original Classification: K
• Document Page Count: 92
• Document Creation Date: December 22, 2016
• Document Release Date: August 27, 2012
• Sequence Number: 11
• Content Type: MISC

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I
1987 Survey of Flexible
Compensation Programs
and Practices
Hewitt Associates
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Copyright C 1987, Hewitt Associates
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About the Survey
The 1987 Survey of Flexible Compensation Programs and Practices
contains information on 206 flexible programs sponsored by 202
different organizations. As in the past, only those companies that have
implemented either a flexible spending account or a program offering
choices in benefits were invited to participate. The survey excludes
flexible compensation programs consisting of only pre-tax premiums
or just a 401(k) option.
The mix of survey participants is diverse, and represents both newly
implemented flexible programs as well as programs which have been
in effect for several years. The survey's purpose is to reflect current
practices and highlight trends in designing, communicating, and
administering flexible programs.
Report Format
The survey results are presented in three major sections:
? Section I profiles survey participants,
? Section ll covers choicemaking plans, and
? Section Ill presents findings on spending accounts.
Sections II and Ill cover program objectives, design, eligibility,
administration, and communication for choicemaking plans and
spending accounts, respectively.
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Contents
Page
Executive Summary
1
I. Profile of Survey Participants
2
II. Choicemaking Plans
8
Program Objectives
8
Design Overview
12
Eligibility Requirements
28
Administration
30
Communication
36
III. Spending Accounts
44
Program Objectives
45
Design Overview
46
Eligibility Requirements
48
Participation and Contribution Rates
52
Administration
58
Communication
65
Index of Tables
69
Index of Graphs
71
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Executive Summary
Following are some highlights of 1987 survey findings:
? Meeting the diverse needs of employees is the most frequently
mentioned design objective, while containing medical costs comes in
a close second.
? Approximately 80% of choicemaking plans give employees control
over the allocation of some employer dollars.
? Per capita medical costs under flexible programs are increasing at
a slower pace than national per capita costs. Over the three-year
period from 1983 through 1985, national per capita cost increases
exceeded those of employers with flexible programs by about 100/0.
? Spending account contributions tend to increase over time, reflecting
a "learning curve" on the part of employees.
? Employees continue to estimate spending account expenses accurately.
Forfeitures for the 1986 plan year averaged less than $10 per employee.
? In administration, there has been a trend away from internal systems
development toward the purchase of software for both choicemaking
and spending account programs.
? Communication media are becoming more sophisticated, with greater
use of video, election confirmation reports, and interactive software.
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I. Profile of Survey Participants
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I. Profile of Survey Participants
This section highlights the characteristics of employers responding to
the 1987 survey, the basic structure of their flexible benefit programs,
and their implementation strategies.
Organization Size
As found in past surveys, flexible compensation programs are offered
by all sizes of organizations. As many organizations with less than 1,000
employees offer a flexible program as do organizations with over 15,000
employees. Organizations with 1,000 to 5,000 employees continue to be
the largest segment represented.
Organization Size
5,000 to 10,000
Employees
18%
10,000 to 16,000
Employees
8%
1,000 TO 6,000
Employees
43%
15,000 or
Employees
Under 1,000
16%
More Employees
17%
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Industry Classification
Flexible compensation programs are also offered by a wide variety
of industry groups. Almost two-thirds of the survey participants can
be classified as service employers (65%), while the remainder are
manufacturing organizations. About one-third of the service industry
organizations are banks or financial institutions. Of the manufacturing
organizations, about one-fourth are diversified manufacturers.
Industry Classification
Other
Diversified Manufacturing
b?
Other
26%
Manufacturing
9%
Banking and
Financial4V
Non-manufacturing
16%
Education
Health
Care
Institutions
16%
Insurance 6%
Public Utilities 4%
4%
Institutions
20%
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Effective Date of Program
Survey participants represent recently implemented programs as well as
older flexible programs, providing a range of experience. This range is
important for two reasons: (1) it ensures that the survey represents a
cross section of all programs in effect, and (2) it enables identification
of trends that have emerged over time.
The graph below shows the number of flexible programs implemented
at major employers each year through 1987. For each implementation
year, survey respondents are shown next to the total number of known
implemented programs among major employers to demonstrate that the
survey does provide a cross section of experience.
Flexible Programs by Year of Implementation
Number of Programs
150
126
100
75
50
25
0
IM' Survey Participants
ON Total Flexible Programs
Pre-
1984
84
85
86
Year of Implementation
4
87
(July)
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Type of Flexible Program
The vast majority (70%) of flexible programs include choices in benefit
areas plus a flexible spending account (FSA). Programs consisting of
only a spending account, or only choices among benefits, continue to
be less common.
Flexible Program Structure
Choice w/FSA
70%
FSA Only
19%
5
, Choice Only
11%
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Implementation Strategy
The most common implementation strategy is to introduce the flexible
program in its entirety in the first year (the "full-fledged" strategy), rather
than introducing the changes in planned phases. Very few organizations
choose to "test market" the concept of flexibility by offering the program
at one division, or to a selected group of employees, on a trial basis.
Just over one-third (37%) cited a "build-up" strategy, which consists
of initially offering pre-tax premiums and/or a spending account and
moving later to a broad choicemaking program. Nine percent are using
a "phase-in" strategy of offering choices in one or two benefit areas
initially and adding more areas later.
Table 1: Implementation Strategies
Full-Fledged
Build-Up
Phase-In
Test-Market
Other
48%
37%
9%
3%
3%
It should also be noted that most (85%) of the stand-alone spending
account programs are the first stage of a build-up strategy. This suggests
that more choicemaking plans will appear in the near future as the rest
of the program is implemented.
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There appears to be a trend away from the partial implementation
strategies and toward implementing the entire program at once. In
1987, 64% of programs implemented used the full-fledged approach,
while only 26% used the build-up strategy.
Implementation Strategy
Percent of Plans Implemented
80%
= Phase-In
IM Build-Up NI Full-Fledged
60% -
40% -
20% -
0% ?
6%
470/o
50%
5%
64%
1985
1986
Year of Implementation
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1987
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II. Choicemaking Plans
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II. Choicemaking Plans
This section summarizes survey findings from the 166 flexible
compensation programs that offer choices in benefit areas, and/or
between benefits and cash. Where significant differences exist between
choicemaking plans with spending accounts and those without, the
differences are noted.
Program Objectives
Survey participants were asked to identify and rank the top four
objectives for their program. The most highly ranked objective is meeting
the diverse needs of employees, followed closely by the objective of
containing medical costs.
Interestingly, flexible programs consisting of choices in benefits only
(no spending account) ranked medical cost containment as the primary
objective more often than did choicemaking programs with a spending
account (41% vs. 330/0). Conversely, choicemaking programs with a
spending account listed meeting diverse employee needs as the
primary objective more often than did choicemaking only programs
(33% vs. 140/0).
These findings support the idea that flexible program design is driven
largely by underlying program objectives. To the extent that these
objectives differ, so does program design.
Another finding of interest concerns the objective of increasing employee
understanding of benefits. This objective is becoming more prevalent:
fifty percent of programs implemented in 1987 ranked it as one of four
major objectives, compared to 35% in 1985 and 23% in 1983.
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Major program objectives are listed below, ordered from most to least
frequently mentioned. Also presented are responses to the question of
whether the objective has been met.
Table 2: Evaluation of Program Objectives
Was Objective Met?
Too Soon
Possible Objectives
Yes No
To Tell
Meet Diverse Employee Needs
84% 2%
14%
Contain Medical Costs
56% 5%
39%
Maximize Tax-Effectiveness of Benefits
90% 1%
9%
Increase Employee Understanding of Benefits
71% 3%
26%
Reduce Benefit Expenditures
62% 4%
34%
Offer New Benefits at Low or No Employer Cost
88% 6%
6%
Control Other Benefit Costs
54% 7?/o
39%
Meet Competitive Pressures
69% 2%
29%
Facilitate Mergers or Acquisitions
88% 0%
12%
Flexible programs appear to be highly successful in meeting major
program objectives. As financial data becomes available, the "too soon
to tell" response is becoming less frequent for cost-related objectives.
However, some objectives appear to require a longer time frame, or
have more subjective criteria. For example, many organizations said it
was too soon to tell whether the objectives of increasing employee
understanding of benefits and meeting competitive pressures have
been accomplished.
A recently appearing objective is using flexible benefits to facilitate
mergers or acquisitions. For those organizations that mentioned this as
a program objective, 750/s ranked it as first or second in importance.
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Medical Cost Containment
Of the 163 programs that offer a choice of medical plans, 125 stated that
medical cost containment is a major objective. Of these, 92% indicated
that it is a long-term objective, while to 8% it was a more immediate
objective. The available claims data from these programs supports
earlier findings that offering choices in medical plans does, in fact,
reduce medical costs over time.
Organizations were asked to provide average per capita claim costs, both
total and net of any employee contributions, for each year under the
flexible program. In order to ascertain how the annual change in these
per capita costs compares to national trends, data compiled by the
Health Care Financing Administration (HCFA) in July 1986 on national
per capita health care costs in the private sector were utilized as a
basis for comparison.
The following graph illustrates how the percentage change in per capita
medical costs for the flexible programs differs from the national figures
in 1983, 1984 and 1985. As the data indicates, the flexible programs
experienced significantly lower medical cost increases than private
plans in general on an ongoing basis.
Percentage Increases in Medical Costs
Per Capita Increase
EM Nat'l Costs (HCFA) I. Flex Programs
Calendar Year Experience
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The second graph, which compares the employer-paid share of per
capita increases to the national figures shows an even more dramatic
difference. On a cumulative basis for the three-year period, national per
capita increases exceeded those of employers with flexible programs
by almost 25%.
Percentage Increases in Employers' Medical Costs
Per Capita Change
EMI Nat'l Costs (HCFA) MI Flex Programs
1983
1984
Calendar Year Experience
1985
Comparative data for 1986 is not yet fully available, but it is reasonable
to expect that the differences seen in 1983 through 1985 will recur,
particularly with respect to employer costs, which are significantly
more controllable under a flexible program.
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Design Overview
Sources of Funds
A variety of mechanisms are used to create funds which employees use
to purchase benefits. In addition to the common sources of funds?
employer contributions and employee salary reduction?benefits
trade-offs (e.g., selling of vacation) is used.
Table 3: Sources of Funds for Choicemaking Plans
Employee Salary Reduction
930/s
Employer Contribution
78%
Trade-Off Among Benefits
35%
Credit Allocation
Flexible credits or dollars which can be used to purchase benefits are
provided in almost two-thirds (64%) of the choicemaking programs.
Of those programs in effect for more than one year, the majority (55%)
have not increased the amount of non-pay-related flexible credits
provided when the program was implemented. For the 1988 year, 34%
of all programs which provide credits do not plan to increase credits,
while 13% say they will; 53?/o are undecided. It appears that organizations
are exercising careful control over increases in credits, thus controlling
total benefit expenditures.
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Many different credit allocation bases are used. As shown in the
following graph, most organizations use multiple bases for allocating
credits. It appears that many credit formulas contain an age and/or
pay-related component to determine credits for pay-related benefits,
such as life insurance and LTD. About one-third (300/0) of programs
allocate credits on a per capita basis, i.e., provide every employee
the same amount.
Credit Allocation Factors
Pay
Per
Capita
Age
Service
Family
Status
Work
Status
Other
r A 64%
r / 30%
A
'/4
21%
/z
23%
23%
29%
0%
1 1
20% 40%
Percent of Programs
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Benefit Areas
The following table shows, for each benefit area: the percentage of
survey organizations that include the benefit in the flexible program,
the average number of options (a no coverage option is not counted as
an option), and whether the benefit is purchased with pre-tax dollars.
It should be noted that the 4% of medical plans not paid with pre-tax
premiums are completely employer-paid plans and, therefore, have
no employee contribution.
Not shown but worth mentioning is the finding that 2% of programs offer
employees the choice of how premiums are paid (before or after tax)
for medical, dental, and AD&D. Another 8% of programs offer this
choice for LTD.
Table 4: Benefit Areas Offered
Part of
Average
Paid With
Flexible
Number of
Pre-Tax
Benefit Area
Program*
Options
Premiums**
Health Benefits
Medical Care: Indemnity
980/0
3
960/0
Medical Care: HMO
830/0
6
96%
Dental Care
83%
2
950/0
Vision Care
17%
1
93%
Death Benefits
Group Life
77%
4
76%
Dependent Life
590/0
3
580/0
Survivor's Income
8%
2
62%
Employee AD&D
56%
6
63%
Dependent AD&D
300/0
7
58%
Disability Benefits
Short-Term Disability
14%
1
640/0
Long-Term Disability
48%
2
71%
Other Benefits
Capital Accumulation/401(k)
57%
N/A
N/A
Vacation/Holidays
270/0
N/A
N/A
Retirement/Pension
40/0
N/A
N/A
*Of 166 organizations with choicemaking plans.
**Base is those organizations with benefit area as part of the
flexible program.
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Industry-Specific Plan Design
The table below shows program design for the major industry groups:
health care, banking/finance, and manufacturing. Medical, dental, and
group life insurance are the most popular flexible benefit areas offered,
for all industry types. Dependent life insurance is offered by over half of
all these organizations, showing an increase in popularity from past years.
Table 5: Program Design by Type of Industry
Benefit Areas
Health
Care
Banking/
Finance
Manufacturing
Medical (Indemnity)
96%
100%
98%
Dental
81%
76?/a
86%
Group Life
81%
76%
80%
Dependent Life
58%
61%
66%
Employee AD&D
58%
58%
54%
Long-Term Disability
42%
61%
47%
Short-Term Disability
15%
3%
20%
Vacation Trading
15%
33%
310/0
Capital Accumulation
42%
67%
58%
(401(k) or 403(b))
Number of Respondents
15
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Health Benefits
Medical
Among the survey group, virtually all organizations (98%) include
medical benefits in the flexible program. Of these, a majority (60%)
allow employees to opt out of medical coverage. Only half of the survey
respondents allowed employees to opt-out of coverage prior to the
flexible program. A summary of opt-out policies is shown below.
Medical Opt-Out Policies
No Opt-Out
40%
With Proof
N.-- Of Coverage
21%
If an employee chooses no medical coverage, a majority (56%) of
organizations restrict the availability of medical options during subsequent
enrollment. For example, 34% require proof of insurability, while 22% have
other restrictions. The remaining 44% place no restrictions on employees
coming back into the medical plan.
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Health Maintenance Organizations (HMOs) and Preferred Provider
Organizations (PPOs) are appearing more frequently as options in the
medical benefit area. As shown below, 87% of flexible programs include
a PPO or HMO option.
Prevalence of HMOs and PPOs
PPO Only
3%
Offering choices between indemnity plans and HMOs affects medical
enrollment patterns in a variety of ways. Six percent report that
employees returned to an indemnity plan from an HMO. This may
indicate that employees with low medical expenses can be attracted
back to a lower cost, higher deductible indemnity plan.
Table 6: Effect of Offering Choices on HMO Enrollment
Employees Left HMOs for Indemnity Plan
More Young Employees Chose HMOs
More Families Chose HMOs
No Change
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6%
29%
31%
34%
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Medical Plan Design Changes
In addition to offering choices between medical plans, many organizations
make other design changes with the implementation of the flexible
program. Many organizations (42%) used the opportunity to replace
their basic plus major medical plan with a comprehensive plan.
Table 7: Medical Plan Design Changes
Design Change
Subsequent
First Year Years
Choices Offered Where Previously 52% 13%
There Were None
Comprehensive Plan(s) Replaced 42% 9%
First Dollar Plan(s)
Deductibles Increased 410/0 310/0
Higher Employee Contribution 23% 31%
For Dependent Coverage
Higher Employee Contribution 23% 27%
For Employee Coverage
Opt-Out Option Added 18% 190/o
No Changes 18% 30%
Other Changes 50/a 160/0
Total Number of Respondents
141 67
The type of medical design change varies slightly by industry. For
example, 28% of financial institutions require higher first-year
contributions for employee coverage, compared to 15% for health
care organizations and 13% for insurance companies.
Cost Management
In addition to design changes, 70% of organizations implemented cost
management tactics at the same time as the flexible program. The most
common first-year features added were second surgical opinions (44%)
and out-patient surgery for certain conditions (42%). In subsequent
plan years, pre-admission certification and concurrent utilization review
were the most prevalent cost management methods adopted, by 44?/o
and 35% of organizations, respectively.
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Subsidy for Dependent Coverage
The level of subsidy for dependent health coverage is another design
feature that varies according to an organization's objectives. Medical
coverage options can be priced to encourage, or discourage, employees
to cover their dependents under the company's plan. Virtually all survey
organizations (94%) subsidize dependent coverage by making a larger
contribution for family medical insurance.
Over half (53%) of those programs which subsidize dependent coverage
plan to maintain the present level of subsidy. Another 27% say they will
reduce, but not eliminate the subsidy, while 20% plan to gradually phase
out the entire subsidy. The most frequently cited time period anticipated
for eliminating the subsidy is five years, with responses ranging from one
to twelve years.
Most organizations planning to reduce the level of employer contributions
identify 50% of total dependent cost as the target level of subsidy.
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Dental
Of the 138 survey programs that include dental, 15% are offering the
benefit for the first time. Over three-fourths (77%) of all choicemaking
programs offer a no coverage option in dental. In order to limit the impact
of adverse selection, the majority of plans place restrictions on subse-
quent dental elections. Requiring dental elections to be in effect for two
years is now the most common reenrollment restriction.
Table 8: Dental Reenrollment Restrictions
None
48%
Elections for Two-Year Period
26%
Based on Prior Option
13%
Other Restrictions
13%
Alternative choices to traditional dental insurance are appearing, in the
form of dental PPOs and HMOs. More flexible programs may offer these
as options as their availability increases.
Table 9: Alternative Dental Plans
Dental HMO
18%
Dental PPO
4%
Both
4%
Neither
740/0
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Group Life Benefits I
Of the 128 programs which include group life, about two-thirds (660/0)
allow an open enrollment in group life for the first election.
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Table 10: Group Life Initial Enrollment Restrictions
None
66%
None if Level Is Equal or Less than Pre-Flexible Coverage Level
15%
Proof of Insurability Required for All but Lowest Option
6%
Other Restrictions
13%
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In subsequent enrollment periods, 760/0 of programs place some type I
of restriction on available options. For example, movement is limited to
an increase of one coverage level per election in about one-third of
these programs. 111
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Table 11: Group Life Reenrollment Restrictions
Proof of Insurability Required for All Higher Levels
390/0
None if Coverage Is Increased by One Level
310/0
Proof of Insurability Required for Other Reasons
60/0
None
24%
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Design Features
Most survey organizations (77%) require employees to have life
insurance. Traditionally, life insurance is the benefit area that has
the lowest availability of no coverage options in a flexible program.
Also, there is little variation among industry groups concerning
this requirement for a minimum level of life insurance.
However, many programs require fairly low levels of group life
protection. The most typical required core level is one times pay,
but lower and higher levels of core life insurance are also common.
Lowest Group Life Benefit Available
No
Coverage
$5,000
$10,000
1/2 x Pay
1 x Pay
2 x Pay
Other
23%
A 9%
A
15%
A 16%
A28%
0%
10%
20%
Percent of Programs
30%
40%
Almost three-fourths of organizations (73%) calculate pricetags for
optional life insurance on an age-graded basis. Another 17% use a flat
rate while 100/0 use a combination. Both methods might be used in
programs that added optional coverage to the company-provided
coverage: the optional coverage is age related and the old basic
coverage is kept at a flat rate.
22
Hewitt Associates
Declassified and Approved For Release 2012/08/27: CIA-RDP90-00530R000400730011-1
Declassified and Approved For Release 2012/08/27: CIA-RDP90-00530R000400730011-1
Dependent Life
Of the 98 programs which include dependent life insurance as an option,
770/0 determine pricetags on a flat rate basis. Also, in over half of these
programs (58%), dependent life is purchased with pre-tax dollars. This
is lower than the 76% of programs that pay employee group life on a
before-tax basis.
One reason for purchasing dependent life insurance with after-tax dollars
is to avoid the issue of imputed income. One-fourth of organizations
offering dependent life calculate imputed income on some amount of
coverage. Of the programs that do not impute income, many require
that employees purchase this coverage on an after-tax basis.
23
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Declassified and Approved For Release 2012/08/27: CIA-RDP90-00530R000400730011-1
Disability Benefits
More organizations include long-term disability benefits (48%) than
short-term disability benefits (14%) in the flexible program. Almost two-
thirds (62%) of the 79 programs with LTD options allow employees to opt
out, while less than half (48%) of the 23 programs with short-term
disability options allow employees to choose no coverage.
For LTD benefits, the majority of organizations (63%) have pre-tax
payment of premiums. Of the remaining companies, 29% pay with after-
tax dollars, while 8% offer employees a choice. Short-term disability is
usually purchased on a pre-tax basis (64%).
Cash and 401(k) Options
Employer contributions provided in the form of credits or flexible dollars
can be used to purchase benefits, taken in cash, or put into a 401(k)
plan. Of the 107 organizations that provide employees with credits, 84%
permit employees to take unused credits as taxable pay, and 50%
permit employees to direct them to 401(k) accounts.
There is some variation by industry for cash and 401(k) options.
For example, more banks and financial institutions than health care
organizations allow cash to be taken out of the program (95% vs. 74%).
Financial institutions and public utilities are the industry groups most
likely to include a 401(k) option for unused credits (67% and 100%,
respectively).
24
Hewitt Associates
Declassified and Approved For Release 2012/08/27: CIA-RDP90-00530R000400730011-1
Declassified and Approved For Release 2012/08/27: CIA-RDP90-00530R000400730011-1
Paid Time Off
Paid time off is included in about one-fourth (27%) of all programs.
Vacation trading is complicated by the current limitations on carryovers.
More programs are offering both buying and selling of vacation days;
fewer allow only vacation selling.
Vacation Options
Sell Only
11%
There is little variation between manufacturing and non-manufacturing
companies in the vacation options offered. But within service organiza-
tions, 33% of financial institutions include vacation trading, compared
to only 15% of health care organizations.
25
Declassified and Approved For Release 2012/08/27: CIA-RDP90-00530R000400730011-1
Declassified and Approved For Release 2012/08/27: CIA-RDP90-00530R000400730011-1
Vacation Buying Policies
Virtually all organizations (97%) charge 100% of a day's pay as the
pricetag for purchasing an additional day of vacation. The maximum
number of additional days that can be bought ranges from 2 to 15,
with five days being the most common maximum.
Table 12: Maximum Days for Vacation Buying
No Maximum
2?/a
Two Days
8?/a
Three Days
5%
Five Days
78%
Ten Days
5%
Fifteen Days
2%
Additional vacation days that are not used by the end of the plan year
are forfeited at most of the organizations with vacation buying. However,
14% allow unused days to be cashed in prior to the end of the plan year.
26
Hewitt Associates
Declassified and Approved For Release 2012/08/27: CIA-RDP90-00530R000400730011-1
Declassified and Approved For Release 2012/08/27: CIA-RDP90-00530R000400730011-1
Vacation Selling Policies
Of the 26 organizations which offer vacation selling, most (92%) buy
vacation days back from employees at 100% of a day's value. Another
buy-back price is 75% of a day's value.
Some organizations (23%) reduce their potential vacation buy-back
expense by limiting the amount paid for a vacation day. These limits
range from $100 to $300 for each day sold.
Most programs with vacation selling (92%) set a maximum on the number
of days which can be sold. The most common maximum is five days,
with a range of 2 to 21 days.
Table 13: Maximum Days for Vacation Selling
None 8%
Two Days 8%
Five Days 62%
Ten Days 12%
Other 10%
Restrictions that limit an employee's ability to sell vacation are present
in 7 3 % of the programs. The most common restriction is no vacation
selling for those with two weeks or less of vacation (74%). Service-
related restrictions are in effect at another 22% of organizations, which
require five or six years of service before any vacation can be sold.
27
Declassified and Approved For Release 2012/08/27: CIA-RDP90-00530R00040073001171
Declassified and Approved For Release 2012/08/27: CIA-RDP90-00530R000400730011-1
?
Eligibility Requirements
Most choicemaking programs (96%) are offered to full-time salaried
and/or exempt employees. Non-bargaining hourly employees are
covered in 62% of programs, while bargaining hourly are eligible in
16%. Part-time employees are eligible if they meet certain conditions
in 53% of programs: only 5% of choicemaking programs include all
part-time employees.
Table 14: Full-Time Eligibility Requirements
Full-Time Salaried/Exempt 96%
Non-Bargaining Hourly 62%
Bargaining Hourly 16?/o
International 5%
Table 15: Part-Time Eligibility Requirements
All Part-Timers 50/0
Must Work 20 Hours/Week 33%
Must Work 30 Hours/Week 7%
Other Restrictions 13%
Not Eligible 42%
Changes in Eligibility Requirements
Of those programs in effect for over one year, most (72%) have not
extended the flexible program to other employee groups in subsequent
years. However, over half (54?/o) of the programs implemented in 1983
have extended eligibility.
28
Hewitt Associates
Declassified and Approved For Release 2012/08/27: CIA-RDP90-00530R000400730011-1
Declassified and Approved For Release 2012/08/27: CIA-RDP90-00530R000400730011-1
Interestingly, the most frequently added group is bargaining employees.
Forty-seven percent of those that did extend the program added
bargaining employees, while 28% added non-bargaining hourly
employees. This indicates that bargaining units may be becoming
more receptive to choicemaking programs.
Newly Eligible Employee Groups
Percent Of Programs
60%-
50%-
40%-
30%-
20%-
10%-
0%
39%
47%
28%
VA
3%
14%
6%
Other Union
Domestic Hourly
Divisions
Non-
Union
Hourly
lntnl.
Divisions
Pert-
Timers
Retirees
Of those companies with bargaining units not already participating in the
choicemaking program, 12% plan to include bargaining employees at
some future date, while 39% have not yet decided whether bargaining
units will be included.
29
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Declassified and Approved For Release 2012/08/27: CIA-RDP90-00530R000400730011-1
Administration
Fewer organizations implementing a flexible program in recent years are
choosing to develop their own administration system. This is probably
due to the increased availability of computerized software.
In 1987, the number of organizations that purchased software and
used it to handle administration internally outnumbered those using an
external source for administration. Internal processing is now feasible for
both large and small organizations: software packages can be installed
on a mainframe or run on a personal computer.
Type of Administration System
Percent Of Programs
100%
?I Purchased Software
M Externally Processed Software
MI Internally Developed Software
75%-
50%-
25%-
0%
1983 1984 1985 1986
Year of Implementation
19 87
30 Hewitt Associates
Declassified and Approved For Release 2012/08/27: CIA-RDP90-00530R000400730011-1
Declassified and Approved For Release 2012/08/27: CIA-RDP90-00530R000400730011-1
Administration Costs
The cost of developing and implementing the benefit administration
system can be lower than $10,000 or as high as $1 million, depending
on factors like the complexity of the program and the number of
participants.
Set-up costs generally increase with the number of program participants
because more complex computerized administration systems become
necessary for larger organizations.
Ongoing administration costs are also influenced by the number of
participants. As shown below, the highest cost is reported by programs
with 5,000 to 10,000 participants. The drop in ongoing expense among
larger companies may be explained by the fact that programs with over
10,000 participants are more likely to install mainframe software, thereby
reducing ongoing administration costs.
Administration Costs (in thousands)
Choicemaking Plans
7.?4
0
0
$300
iTZ Set-up NM Ongoing
$200?
$100 ?
so
$118
$42
$152
$260