ludmila i scutaru - lincolnfinancialgroup.fall2011
TRANSCRIPT
Lincoln Financial Group
Part III: Plan Design Analysis
RMI 3501 Dr. Drennan Fall 2011 911976784 914439371
ContentsIntroduction......................................................................................................................................2
Design Considerations and Objectives in Offering Employee Benefits..........................................2
Goals, Competitors, Rising Costs, Non-Discrimination Testing, Communication Issues, Design and Funding Decision......................................................................................................2
Problems, Issues, Concerns, Considerations in the Design of Health Benefits...............................4
Vendor Choice.............................................................................................................................5
Eligibility Issue and Waiting Period............................................................................................5
Self-Funding.................................................................................................................................6
Stop-Loss Insurance.....................................................................................................................7
Four Plan Choices........................................................................................................................7
Dental and Vision Plans...............................................................................................................8
Prescription Drug Plan.................................................................................................................8
Flexible Spending Account (FSA)……………………………………………………………...9
Tobacco Surcharge.......................................................................................................................9
Problems, Issues, Concerns, Considerations in the Design of Other Types of Non-Retirement Benefits..........................................................................................................................................10
Group Life Insurance, Accidental Death and Dismemberment (AD & D) and Spouse and Child Life Insurance Plan....................................................................................................................11
Short Term Disability Plan (STD) and Long-Term Disability (LTD).......................................12
Educational Assistance Program (ETAP) and Employee Assistance Program (EAP)..............13
The Impact of Regulatory Compliance in the Benefit Plan Design and Operation.......................14
Patient Protection and Affordable Care Act (PPACA)..............................................................14
Employee Retirement Income Security Act (ERISA)...............................................................14
Health Insurance Portability and Accountability Act (HIPAA)................................................14
Conclusion.....................................................................................................................................15
1
Introduction
Founded in 1905, Lincoln Financial Group is a nationally recognized full-service
financial corporation headquartered in the greater Philadelphia area that offers a range of
financial services for individuals and businesses. To communicate the spirit of integrity, the
company adopted the name of the 16th President, Abraham Lincoln, to represent the ideals the
new business was founded upon. Robert Todd Lincoln, the President's only surviving son, gave
the founders permission to use his father's name in July 1905, setting the name for the new
company. Lincoln Financial Group’s mission is to help people build and protect their
investments, so they can enjoy their wealth in retirement. Lincoln National Corporation and
insurance company affiliates work together as a single enterprise to provide an array of financial
tools and strategies, including insurance and annuities, individual and group retirement plans,
and group benefits. It is not surprising that for many years, Lincoln Financial Group has been
one of the top Fortune 500 corporations that offer outstanding benefit packages to its 7,500
employees and 1,000 agents.
Design Considerations and Objectives in Offering Employee Benefits
Goals, Competitors, Non-Discrimination Testing, Communication Issues, Rising Cost, Design and Funding Decision
The Lincoln National Corporation Employees’ Life, Health and Accident Plan includes a
medical plan, dental and vision plans, Long-Term Care and Short-Term Care, and Life Insurance
and AD& D. According to Glenn Alvarez, senior employee benefits analyst, the major goal
behind the comprehensive benefits package offered to workers is to attract top talents, reward,
and retain them, while remaining cost-effective. Alvarez has been with the company for almost
eight years and he strongly believes that the benefits employees receive, play a very important
role in the overall company’s performance. As he states, if workers are healthy and the company
helps them deal with everyday life problems, they are happier and are motivated to be more
productive since they have more time to concentrate on their job duties. Additionally, Alvarez
states that offering employees their own company’s product such as LTD fully insured by The
Lincoln National Life Insurance Co. is an important marketing strategy. Alvarez says, “Who is
going to buy our products if we ourselves do not utilize them?”
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Another strategy behind providing a benefits plan for employees is competition with
other companies. Lincoln Financial Group’s main competitors are MetLife and Prudential. The
company regularly performs benchmarking in order to stay in line with its competitors. Alvarez
says, “Our strategy is to stay competitive, not to be on the cutting edge, but not to lag behind
either.” Additionally, Lincoln Financial Group conducts satisfaction surveys to better understand
employees’ needs and, consequently, to be able to meet them. The company uses Towers Watson
consulting services. For over five years Towers Watson has assisted Lincoln Financial Group
making recommendations of what is the best practice in terms of employee benefits in the
business world. Moreover, the company performs a “speedometer test” that compares the
benefit plan of similar companies (Sun Life Financial and ING Direct, per Alvarez) as well as
companies of a different size and profile (MetLife and Prudential). The test shows how Lincoln’s
plan differs from other companies’ plans.
As any business, Lincoln Financial Group has to deal with many difficulties and issues
arising from designing and implementing a benefits plan. Rising health care costs are one of the
biggest issues right now. Lincoln Financial Group’s goal is to reward their employees with
comprehensive and affordable benefits while staying within the company’s budget. Self-funding
of the medical plan, eligibility dependent audits, utilization reviews, and satisfaction surveys –
are the techniques that Lincoln uses to keep up with the rising health care costs and inflation.
These strategies will be explored in relation to each benefit later.
Because Lincoln’s benefit plan is a grandfathered plan, which will be discussed in detail
further throughout the analysis, PPACA provisions do not require Lincoln to perform non-
discrimination testing. However, being in the process of changing its grandfathered status, the
company is implementing non-discrimination testing arrangements. Alvarez says that the firm
will probably contract with a third party that will perform non-discrimination testing for them.
Additionally, the same variety and level of benefits is offered to all employees without regard to
their income and job title.
Lincoln Financial Group has its own benefits department that utilizes an Oracle-based
system, called CHRIS Knowledge Base. The system contains detailed information about the
medical benefits plan, as well as the other health and welfare benefits the company provides.
Employees can access the CHRIS data base at any time and get all the necessary information
about their benefits and costs. Lincoln Financial employees are mainly “white-collar” workers;
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therefore, the majority of benefits communication is done online. Additionally, every enrollment
period, Lincoln provides updated SPDs and brochures to keep employees up to date with any
changes. This is the strategy Lincoln uses to communicate the available benefits and their costs.
Proper communication can boost the value of a benefits program in the minds of employees and,
additionally, send a clear message that an employer is sincerely looking out for the employees’
interests .1 Lincoln’s benefits department works directly with vendors, administrators and
consultants. This allows the company to control and manage the structure and cost of benefits,
compliance with various federal regulations and helping efficiently allocate the company’s
funds.
Some of the benefits are self-insured while others are fully-insured. Thus, employees
contribute to certain benefits although quite a few benefits are completely paid for by the
company. In implementing a benefit plan, Alvarez must analyze previous experience, data from
satisfaction surveys and evaluate the company’s budget; based on the gathered data Alvarez
decides which plans should be self-insured or fully-insured, contributory or non-contributory.
The benefit plan is carefully designed to maintain employees’ happiness and satisfaction with the
work place. Overall, Lincoln Financial Group has been successful in meeting their employees’
needs and keeping the personnel motivated and engaged. The turnover rate of 2% is proof of
employee satisfaction.
Problems, Issues, Concerns, Considerations in the Design of Health Benefits
The Lincoln Financial Group’s medical plan is a “grandfathered health plan” which, as
permitted under Patient Protection and Affordable Care Act ( PPACA), can preserve certain
basic health coverage that was already in effect before PPACA regulation was enacted. Yet,
grandfathered health plans still must comply with some consumer protections under PPACA.
Lincoln Financial Group has already implemented certain changes. For example, Lincoln
eliminated life time limits on benefits and increased the age for children to 26 to be covered
under parents’ medical plan. According to Alvarez, Lincoln Financial Group is in line with the
healthcare reform, however, a few changes will still need to take effect in the nearest future to
change the grandfathered status.
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Vendor Choice
Prior to 2010, Lincoln’s regional carrier (for Philadelphia area and Florida) for the
medical plan administration was Independent Blue Cross. In 2009 the company put the business
out for a bid, looking for better discounts and financial structure. Their national carrier at the
time was Aetna that was not performing up to Lincoln’s expectations due to problems with the
service level. IBC’s pricing turned out to be significantly better. Additionally, IBC’s Blue Card
Network, which was the main concern for Lincoln, was sufficient to provide national coverage
for the company.
Eligibility Issue and Waiting Period
Lincoln employs over 9,000 employees and agents and the medical plan covers
approximately 25,000 lives, including agents and dependents. As any company, Lincoln must
properly define eligibility requirements. Generally, companies provide healthcare benefits to
full-time employees and their dependents. However, despite the high cost, Lincoln offers
benefits to part-timers too. Lincoln strongly believes that offering benefits to part-time
employees helps to attract and retain talented part-time workers. Before implementing these
eligibility requirements, the company carefully evaluated the plan costs vs. the cost of turnover
and concluded it was beneficial to the business in the long run.
Another remarkable and distinguishing aspect of Lincoln’s medical plan is that since
2004 it offers benefits for same sex domestic partners. According to Alvarez, it helps promote
equality, diversity, and innovation in the company. Lincoln is proud to offer domestic
partnership benefits because it attracts innovative talents; it is especially important for the
business units where there is a higher concentration of a younger generation. To be eligible for
the domestic partnership coverage, employees must provide written documentation, proving their
relationship. Alvarez says that the company has not had any problems ever since they started
providing this benefit. However, a dependent eligibility audit will be performed in 2012 to make
sure all the domestic partners currently receiving benefits are eligible to do so. A research
conducted by Ceridian shows that American companies lose an estimated $22 billion annually
paying for the health care of their employees’ ineligible dependents.2 Dependent eligibility audit,
is an important cost containment technique that Lincoln utilizes.
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Lincoln Financial provides the medical plan with no waiting period for new hires and
their dependents, as long as they enroll in the plan during the first 45 days of hire. By eliminating
the waiting period, Lincoln takes care of the coverage gaps that might arise when people switch
jobs. Usually, eliminating waiting periods increases administrative costs because the company
must enroll every newly hire employee without a guarantee that he or she is going to stay with
Lincoln for a long period of time. This is not an issue for Lincoln Financial with their
historically low 2% turnover rate, as mentioned earlier.
Self-Funding
Lincoln’s medical and dental plans are self-funded (with the exception of Kaiser HMO).
Since it is a large company, Lincoln has significant past loss experience and, consequently, high
credibility. Therefore, it is easier to predict future expected losses. A fully-insured plan would be
much more expensive and irrational due to additional administrative costs and a risk charge.
Furthermore, Alvarez explains that self-funding gives the company full control over the benefit
plan design and may provide extra savings. Under ERISA’s Deemer Clause, self-funded
employer provided benefit plans are exempt from the state regulation which makes it easier to
administer the plan.
Lincoln Financial Group utilizes a Voluntary Employees’ Beneficiary Association
(VEBA) Trust as its self-funding vehicle to protect itself from catastrophic losses and to ensure
that employees are covered in the event of bankruptcy. The VEBA Trust allows the companies
deduct taxes on contributions when they are made. Additionally, if the company suffers
bankruptcy, VEBA will ensure payment continuation to eligible employees. Having a VEBA
Trust poses complexity in its administration. As Alvarez says, the company has to go through a
third party audit every year. Additionally, because VEBA is a non-profit organization, Lincoln
has to file a Form 990 with IRS.
Stop-Loss Insurance
After thorough evaluation of its claims history, Lincoln Financial Group decided that
Stop-Loss Insurance was not necessary. Since Alvarez started to work for Lincoln Financial, the
company has never had a catastrophic loss that would exceed their self-insurance budget. Stop-
Loss Insurance is very expensive and it is not cost-efficient for the company of this size to get it.
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Additionally, Stop-Loss Insurance is very specific with what it covers, this can pose additional
problems. For example, pre-existing conditions are excluded. Lincoln’s plan, on the other hand,
is written on a guarantee issue to accommodate all its employees without regard to their health
status.
Four Plan Choices
Rising health care costs are a major issue for employers and Lincoln Financial Group is
not an exception. Cost efficiency and quality of care are two major issues an employer must
consider when implementing a medical plan. Lincoln has developed an excellent strategy in
balancing cost, quality, and employee satisfaction with the medical coverage they receive. An
85 % participation rate in the medical plan attests to a successful plan.
Lincoln Financial Group offers four medical plans. The “Core” PPO plan provides higher
copayments and higher maximum out-of-pocket expenses with lower monthly contribution
requirement. The “Enhanced” PPO is more expensive monthly but the out-of-pocket costs are
lower. This way the company transfers some of the financial risk to employees to make sure that
their expenses balance with their actual medical needs.
The third plan is CDHP with HSA. This plan gives employees more control over their
health care spending and encourages them to behave as rational consumers. The CD HP requires
lower monthly contributions from employees, incentivizing them to enroll. According to
Alvarez, the CDHP participation rate is lower than expected because employees are not properly
educated as to what the plan offers and usually workers become skeptical when they see a $1,500
deductible. Currently Lincoln is trying to implement a better communication strategy that will
inform employees about the benefits of this plan and increase the participation rate.
Kaiser Permanente HMO is the only fully-insured plan primarily because it insures only
300 California employees and the Law of Large Numbers will not apply. One of the issues with
this plan is that the company has no control over the plan’s design and structure. Although the
benefits are richer, the premiums are higher. According to Alvarez, the company is looking to
change this plan in the nearest future.
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Overall, Lincoln implemented a medical plan design that balances its costs with its value.
The fact the company provides four different options gives employees freedom of choice to
select the plan that fits their needs best. This strategy is essential to prevent cost inflation and to
impose employees to be rational in their health care consumption.
Dental and Vision Plans
Lincoln Financial Group offers its employees a dental plan. Because it is the second most
wanted coverage after the medical coverage, the participation rate is 83 percent. The plan is self-
funded and employees pay the full cost. The reason for an employee-pay-all basis is cost
containment. The yearly limit for diagnostic and preventive care is $2000 which is higher than
the standard limit other companies offer to their employees ($1,500). Alvarez believes that it is
important to offer a higher limit in order to encourage employees to utilize dental care services
because dental health is very important and if neglected, dental problems can lead to other health
problems. Also, the “Passive” Dental PPO allows employees to stay with the dentist of their
choice, allowing them to use the doctor they trust. However, if they use in-network PPO
provider, the out-of-pocket costs are lower, which is an example of steerage the plan utilizes.
Lincoln’s Vision Plan is fully-insured and fully paid by the employees. This is a common
way vision benefits are generally offered by different companies, according to Alvarez.
Employees benefit from in-network providers’ discounts which is an example of a service
benefit. If they go out of network, they must file a claim to be reimbursed, which is an example
of an indemnity benefit.
Prescription Drug Plan
Originally, Lincoln’s prescription drug plan was self-insured and imbedded in the three
medical plans where Aetna was the national provider. The strategy proved to be costly and
inefficient. In 2009 Lincoln pooled all the small regional prescription drug plans into a single
plan where Medco took the role of a Pharmacy Benefit Manager (PBM). As a result, Lincoln
decreased the administration costs since the company no longer has to deal with three different
plans and several PBMs in case if a change or update needs to be processed. In addition, Lincoln
gained more control over the plan and increased employees’ satisfaction. The prescription drug
plan is set up to incentivize employees to purchase generic prescription drugs instead of brand
name drugs by providing lower copayments for the first ones. Lincoln has also implemented a
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mandatory mail order for “maintenance” drugs (drugs that a person will be on for a long period
of time). After the third retail refill an employee is obligated to obtain the mail order refill. The
mail order copayment is twice the retail copayment, although, it provides a 90 day supply instead
of only 30. Thus, the prescription drug plan is designed to be less costly to both employer and
employee.
Flexible Spending Account (FSA)
Lincoln Financial Group offers its employees’ health care and dependent care Flexible
Spending Accounts. It provides an opportunity for employees to use their pre-tax dollars to fund
FSAs so later they can be used to pay for qualified medical, dental, vision and, prescription drugs
expenses. The issue the company has with FSAs is that they constantly must remind employees
about the limitations of the spending accounts and warn them that unused funds are forfeited to
the employer at the end of the coverage year. Another issue is the new PPACA regulation. In
2013, under PPACA the maximum contribution to FSA will be $2,500. Lincoln must apply all
the necessary changes to comply with the regulation.
Tobacco Surcharge
Lincoln Financial Group “penalizes” tobacco users by charging $30 in addition to
monthly contribution for the medical plan. The objective is to encourage employees to quit
smoking and, consequently, to decrease their overall health care costs, since non-smokers are
generally healthier than smokers. There is an issue with this program. Because it is very costly
to test all the employees to find out if they use tobacco, Lincoln requires employees to self-
report. According to Alvarez, some people lie they do not smoke but at the same time they
smoke outside the building during the day. This creates problems of unhappy employees who
honestly report themselves as smokers and pay additional $30 every month knowing that there
are employees who lie to avoid the penalty. Another issue is that an employer must be aware of
the legal requirements for such penalties. Under HIPAA, an individual cannot be required to pay
a greater premium on the basis of any health status-related factor. However, adopting a wellness
program that offers incentives for certain behavior, rather than health status, would be in
compliance with the law3. Thus, Lincoln employees can avoid this penalty by completing the
tobacco cessation program. The workers do not necessarily have to quit smoking, but the
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completion of the program lets them have the surcharge removed for the remainder of the
coverage year.
Problems, Issues, Concerns, Considerations in the Design of Other Types of Non-Retirement Benefits
Besides the medical plan, Lincoln Financial Group provides its employees Group Life
Insurance, Accidental Death, Dismemberment (AD&D) and Loss of Sight Insurance, and Spouse
and Child Life Insurance Plan, STD, LTD, Educational Assistance Program, and Work/Life
Benefits. However, the company does not provide Long Term Care (LTC) primarily because the
workforce of Lincoln Financial Group is fairly young (between 35-40 years old). Thus, the
benefit is not necessary and it is not cost-efficient for both the company and the employees.
Nevertheless, Lincoln Financial Group has a product that incorporates Life Insurance and LTC
into one policy but it is written on an individual basis. So, if an employee wants LTC, he or she
can get it directly from the company at a discounted rate. This proves that Lincoln Financial
Group cares about their employees and always tries to find ways to satisfy their needs.
According to Alvarez, one of the issues the company faces is “noise,” which as he
explained happens when employees think that they want a certain benefit and they keep talking
about it, but when it comes to utilization, not many people use it. Lincoln Financial Group has
had times when they added a benefit and it was not worth its cost to the company. For example,
a few years ago the corporation implemented legal assistance services for the workers. Very few
employees were utilizing it and after conducting a survey and analyzing the expense of the
benefit, the company decided to rescind it. Additionally, Alvarez says that any time Lincoln
Financial Group contracts with a vendor it needs to go through a security assessment, especially
when the company is going to send out data with personal information. These security
assessments are very stringent and can take months to complete. The whole process is expensive
and takes a lot of resources, so before introducing a new benefit, the company must make sure it
is going to be useful for their employees and cost-effective for the business. Thus, when Lincoln
Financial Group faces a problem of this type the solution comes from conducting the surveys and
following their consultant Towers Watson’s recommendations, as stated earlier.
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Group Life Insurance, Accidental Death and Dismemberment (AD & D) and Spouse and Child Life Insurance Plan
Lincoln Financial Group provides their employees with a Life Insurance and AD & D
Insurance. The main strategy behind providing this type of benefit is to be competitive with other
companies. Alvarez says that offering this benefit is fairly standard, so that is why Lincoln
Financial Group offers it. Yet, the company differentiates itself by providing a higher limit for
the life policy. The maximum possible limit available is 2.5 million, which is above the standard
limit other companies usually offer their employees. The objective is to accommodate the
executives, since Lincoln Financial Group does not provide a separate health and welfare benefit
plan for top officers. However, the plan is available to all eligible regular employees.
According to Alvarez, life insurance is provided on a guarantee issue basis as long as the
face amount does not exceed 1.5 million. No evidence of insurability (EOI) is needed in this
case. For any higher limit employees need to fill out a medical questionnaire as part of the
guidelines of Lincoln National Life Insurance Company that the plan is fully-insured with.
There are two reason for having a fully-insured Life Insurance and AD&D plan. First, there is a
potential for a catastrophic loss, so the company wants to transfer the liability for deaths or
dismemberment to a third party. Second reason is the administrative costs. According to
Alvarez, Lincoln Financial Group used to have a form of a self-insured life plan some time ago.
However, it was very difficult to administer it; it required a lot of resources and time to track the
claims, process them, and reimburse beneficiaries. With a fully-insured plan, all the company
does is just remitting the premium and all the claim processing is done by the vendor. Thus,
after analyzing and recalculating all the costs, Lincoln Financial Group switched to a fully-
insured plan that turned out to be more advantageous for the company.
The life insurance benefit is provided on a non-contributory basis up to the limit of
$50,000. When the benefit exceeds $50,000, a beneficiary or an employee would have to pay
taxes on the excess amount, which is called the imputed income. As Alvarez explained the
company pays for the life insurance up to the limit of $50,000 to avoid imputed income for their
employees. Any worker who wants a higher limit has the option to get it. If an employee elects
Supplemental Group Life and matching Supplemental AD&D Insurance, he or she pays the
entire cost of the coverage on an after-tax basis. The reason behind this after-tax contribution is
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an attempt to avoid the deferred taxation for the employees. Overall, Lincoln Financial Group
provides the Life Insurance and AD&D benefit to stay competitive, while cost-efficient. The
company takes into consideration the taxation of the excess benefit and that is why provides its
employees with the basic coverage, leaving the higher limit option up to employees’ decision.
Short Term Disability Plan (STD) and Long-Term Disability (LTD)
STD plan or “salary continuation” is provided by Lincoln Financial Group because of
two reasons. First reason again, is competition strategy. It is common for companies to offer
this benefit. The second objective is to retain employees. For example, recently many employees
have had babies and the company does not want these employees to leave Lincoln. So, according
to Alvarez, the benefit provides a regular paycheck for the temporarily disabled employees to
retain them until they come back to work.
The STD plan is self-insured and is provided on a non-contributory basis. As Alvarez
states, with the years of experience it turned out to be more cost-efficient for the company to pay
for the plan in full than to hire and train new people if the disabled employees leave the
company. The STD benefit can be received after seven consecutive days of disability and up
until 26-27 weeks, after that the LTD coverage begins.
The disability must be approved by the Group Protection division. One of the biggest
issues right now is abuse of STD plan due to moral hazard. Alvarez says that the company is
already working on a new strategy, trying to find a better way to manage this abuse. Lincoln
Financial Group is going to implement a more stringent way of administering the disability
claims. Many employees over utilize this benefit by going on and off the disability several times
throughout the year due to the same medical conditions. The company intends to look into the
process of approving these claims and, additionally, will probably change the definition of
disability in the plan description. Moreover, the design of the plan is set up to reduce moral
hazard. The amount of reimbursement decreases, the longer employees stay on STD, as
described in the Part II of this analysis.
LTD plan is integrated with the STD plan and, therefore, starts after the “elimination
period,” which is after the 27th week. The plan is fully-insured because of the possibility of
higher losses as opposed to STD. The company provides basic coverage that will pay 50% of the
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employee’s eligible income (as defined in Part II) to, again, eliminate moral hazard by
incentivizing workers to return to work sooner. Employees, however, can get additional
coverage although they have to pay for it with after-tax dollars. The reason for this, per Alvarez,
is the fact that when the benefit is paid to the employee, it is not going to be taxed since he or she
has paid for it with the after-tax dollars. Overall, STD and LTD plans are designed to
compensate employees for non-occupational injuries and, therefore, retain them. The plans are
designed to be cost-efficient and to control moral hazard.
Educational Assistance Program (ETAP) and Employee Assistance Program (EAP)
Lincoln Financial Group’s main strategy behind providing Educational Assistance
Program is to differentiate themselves from the companies that do not offer this benefit. The
company provides assistance for those employees who want to pursue a college degree or job-
related course. This is a kind of long-term investment because once an employee gets a college
degree or a course certificate, he or she can contribute the obtained knowledge and skills to the
company, bring in new visions and ideas. Before implementing this program, Lincoln Financial
analyzed its benefit to the company and came to a conclusion that it is cost-efficient for them to
pay for the employee’s classes (business expense for tax purposes) to further strengthen their
qualification and productivity at work. Additionally, employees are more committed knowing
that their job pays for their education.
Employee Assistance Program’s strategy is to help employees to deal with everyday life
problems and stay focused on their jobs. For example, family counseling services, alcohol abuse
treatments, and adoption assistance – these services help workers to resolve the problems they
might get and concentrate on the work rather than think about solutions. Moreover, there are
on-site fitness clubs that keep employees active and healthy; the “health advocate” assistance
allows for any health related questions to be answered by professionals. In the long run these
programs lower the health care costs, which is beneficial to Lincoln Financial Group who pays
70% of them.
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The Impact of Regulatory Compliance in the Benefit Plan Design and
Operation
Patient Protection and Affordable Care Act (PPACA)
As of today, Lincoln Financial Group is in line with the health care reform. Lincoln has
adopted all the necessary PPACA requirements up to this time. All preventive care services are
covered by the medical plan 100%, there is no life time limit for all medical plans, and
dependent coverage for children is extended to the age of 26. These changes increase the
company’s spending on health care by approximately 1.5%, according to Alvarez. Alvarez also
mentioned that Lincoln Financial tries to educate their internal employee benefits department to
ensure all the provided benefits comply with PPACA regulations. Additionally, Towers Watson
helps the company with all the regulations hassle by providing their consulting services.
Employee Retirement Income Security Act (ERISA)
Lincoln Financial Group is subject to several responsibilities under ERISA, most
important being fiduciary responsibility, plan communication, and non-discrimination testing.
Lincoln complies with fiduciary responsibility by offering a variety of medical plans and
different choices of other benefits. Whenever the company is in the process of deciding what
benefit and on what level is needed for their employees, Lincoln uses surveys to determine
employees’ needs and, therefore, act in their best interest. The company also regularly updates its
SPDs and makes sure each employee is aware of the benefits available and their costs, thus,
following ERISA communication requirement. Moreover, Lincoln Financial Group offers the
same benefits to all employees to ensure all workers are treated equally. Every year, Lincoln
hires a third party auditor to make sure there is no discrimination. ERISA regulations impose
some additional administrative costs, however, the company of this size is able effectively fund
the benefit plan administration.
Health Insurance Portability and Accountability Act (HIPAA)
According to Alvarez, the major issue with HIPAA is employee confidentiality. Lincoln
Financial Group assures its employees that their personal health information is safe and is not
subject to disclosure. The stringent security assessments mentioned earlier prove that.
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Conclusions
While analyzing Lincoln Financial Group’s health and welfare benefit plan we thought of
certain changes that would help strengthen the plan structure as well as help the company to
continue to attract, reward, and retain top talents.
Despite the fact Lincoln offers a comprehensive benefit plan, we recommend that the
company considers offering voluntary benefits to its employees in addition to the Work/Life
benefits it offers today. According to Alvarez, the company employs people who are 30-40
years old, which is the average age when people start to have families. Lincoln may consider
on-site day care facilities, back-up home child care, and education planning. These
programs will improve productivity of employees who juggle between work and home.
Additionally, Lincoln should consider adding other wellness programs that will motivate
employees to live healthier lives. Programs such as Healthy Lifestyle, Health Incentive and
Online Health Services will help employees be more conscious about their nutrition and lifestyle.
Work and Life benefits are an excellent investment and a great retention tool that strengthens
employee’s ties with the employer.
Additionally, we recommend that Lincoln considers a partial subsidy for the dental plan,
which is a common practice among the companies of this profile.
Overall, the benefit plan Lincoln Financial Group offers to its employees is
comprehensive and cost-efficient. The 2 % turnover rate and employees satisfaction surveys
prove that.
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Works Cited
1. Quinn, Richard D. "Views & Vents - Say What? Why Concept Communications Are Critical." Employee Benefit, 16 Sept. 2006. Web. 08 Dec. 2011. <https://blackboard.temple.edu/webapps/blackboard/content/contentWrapper.jsp?content_id=_2334923_1&displayName=Views+%26+Vents+- +Say+what
%3F+Why+concept+communications+are+critical&course_id=_4310_1&navItem=content&href=http%3A%2F%2Febn.benefitnews.com%2Fnews%2Fviews-vents-say-what-39587-1.html>.
2. "Ceridian: Dependent Eligibilty Audits Bring Employers Immediate often Staggering Savings."Blackboard Learn. Ceridian, 22 Feb. 2010. Web. 09 Dec. 2011. <https://blackboard.temple.edu/webapps/blackboard/content/contentWrapper.jsp?content_id=_2334918_1>.
3. "Wellness Works But Beware Legal Landmines." American Academy of Actuaries. Web. 08 Dec. 2011. <https://blackboard.temple.edu/webapps/blackboard/content/contentWrapper.jsp?content_id=_2415942_1&displayName=Wellness+Programs+Work%2C+But+Beware+Legal+Landmines+&course_id=_4310_1&navItem=content&href=http%3A%2F%2Fhr.blr.com%2Fdisplay.cfm%2Fid%2F19254>.
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December 8, 2011
Glenn AlvarezSenior Employee Benefits AnalystLincoln Financial Group150 N. Radnor Chester RoadRadnor, PA 19087
Dear Glenn,
We would like to thank you for dedicating your time in helping us with our employee benefits project. Our work would not be successful without your assistance and cooperation. We were able to complete an effective analysis and our interview gave us a deeper understanding of the various issues and considerations that relate to a benefit plan design. We greatly appreciate the time you took to meet with us last Friday. It was a great pleasure to meet you and we look forward to speaking with you again. Sincerely,
Sviatlana Serhiyenia&Ludmila Scutaru
*This is a copy of an email “Thank you” letter sent to Glenn Alvarez
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