New "Flexible Benefits Plan"?

[Guest Billy D.]

Does anyone have information about a new "Flexible Benefits Plan"? This plan allows each employee a fixed dollar amount to be used to fund the retirement plan, pay insurance premiums, or purchase any of a variety of benefits.

I am not sure of the name of this plan.

Thanks,

[E as in ERISA]

I have seen European arrangements that include a wide variety of benefits (including choices about telecommuting, having an office, use of a computer or phone, etc). Because of qualified retirement plan rules, 125 plan rules, etc., plans in the US generally cannot offer a choice between retirement, welfare and other benefits.

However, I have seen plans offered to tax exempt entities that offer choices between deferred compensation programs and a variety of welfare benefits. Since the dollar amounts that go into deferred compensation programs often exceed the 457 eligible plan limits, one of the main issues in those plans depends is the definition of "substantial risk of forfeiture."

[papogi]

Under Section 125, employers can allocate pre-tax credits (dollars) to be used as the employee wishes, including paying for health premiums, purchasing ancillary coverage such as STD and life insurance, and putting money into a 401(k).

[GBurns]

Is this plan being offered to US based employees, non-US employees or all employees (domestic and international)?

Who is offering it?

[Guest Billy D.]

GBurns,

I really don't know. Several clients have heard about this program and asked me about it's availability. I have not found a provider. According to the clients, this has been mentioned on at least one of the business news programs.

[papogi]

Perhaps these clients have heard of the new HRA's, and are twisting the definition of them. Your original post mentions that the "new product" is funded by the employer, which HRA's are. HRA's are designed to reimburse medical expenses, including health insurance premiums. They have no relation to retirement plans, however. Just a guess, but I'm wondering if this is what they are referring to.

[E as in ERISA]

We have transitioned to a service economy in which employees are one of a company's most valuable assets (thus the use of the term "Human Capital" by many consulting firms). There is growing concern about labor shortages in various sectors of the economy and various geographic areas. There are increasing efforts to hire women, minorities, older employees, etc. But there is a recognition that these employees may desire completely different benefits than a 40-year old white male employee. So the trend is to design more flexible benefits packages. Europe is far ahead of us. Several years ago I saw a presentation by individuals from the U.K., Belgium, etc. regarding new software that was being designed to accomodate the flexible compensation arrangements (in which employees were given the choice among cash compensation, health benefits, retirement benefits, use of an office, computers, access to phone lounges, etc.) The benefits laws in Europe are generally much simpler than in the U.S. -- the arrangements they have would not be possible here. Nevertheless, the movement here is definitely toward much more flexible arrangements and I would expect to see increasing discussion about them.