Small plan sponsor report MALL

Small plan sponsor report MALL lans ith BIG

Sydney Ryan, VP of sales and partner Cindy Roma, CEO and partner Telelink, St. John s, Nfld. Terry Rice In the world of small businesses, plan sponsors must make do with what they have in order to keep employees healthy, happy and financially secure. By Andrea Davis Sydney Ryan is carrying on her father s legacy at the company he founded 42 years ago. This family-owned and -operated company, Telelink, has grown from a small three-employee answering service to a full-service call centre with 80 to 100 employees (120 in peak summer months), who provide inbound and outbound customer service programs. In 1965, when Telelink was founded, Ryan s father recognized the importance of healthcare benefits. It s a commitment that Ryan and company chief executive officer, Cindy Roma, are determined to continue. In addition to the traditional healthcare benefits the company offers, Roma and Ryan have implemented a corporate wellness program. The call centre industry is a notoriously unhealthy one, notes Ryan, the company s vice-president of sales. It s a sedentary industry, with employees sitting at their desks, talking on the phone, for the bulk of their eight-hour shifts. There s a tremendous amount of people in our industry who smoke, she says. It s high stress and low activity levels. It s not a healthy industry. Two components of the wellness program include a brand new smoking cessation program, and a Weight Watchers program, which is now in its second session. Telelink pays half the cost for employees to attend Weight Watchers meetings on-site. And while the Weight Watchers program isn t cheap, it s a benefit well worth the cost for this small employer. We found a direct correlation between people s weight loss and their being at work and being happy and being part of a team and really feeling a renewed sense of energy and motivation, says Roma. It was one of the best things we did. Another recent addition to Telelink s benefits package is the employee assistance program, which has been in place for two years. plans march 2007 13

At a glance Telelink Call Centre Number of employees: 80 to 100 (depending on the time of year and contracts in place) in St. John s, Nfld. Healthcare benefits basics: Life insurance, accidental death and dismemberment coverage, drug benefits, vision plan, dental plan, some paramedical services, employee assistance program. One of the things we found was that our employees needed healthcare beyond the medical and dental, says Roma. We needed a place to refer them to for shortterm distress, whatever it might be in their lives. We seemed to have a tremendous amount of people who were struggling in their personal lives, and it was affecting their ability to be at work. The company s focus on wellness has had a direct impact on its bottom line. Last year, Telelink s turnover rate was under 5%, a number virtually unheard of in this business. ECONOMIC DRIVERS Despite turnover rates being generally high in the industry as well as in other small industries, small business owners drive the economy. This is the fastestgrowing segment, says Vinni Soni, assistant vice-president, Sun Advantage, with Sun Life Financial in Toronto, estimating that only about 30% of small businesses provide group health benefits to their employees. The challenges facing small businesses when it comes to providing group healthcare and retirement benefits to employees are numerous. Many small organizations have no human resources staff whose sole responsibility is looking after these plans. The cost of pension and benefits plans may seem prohibitive to some small companies, while there is also a real dearth of products available particularly on the healthcare side to very small employers. For the very small employer there are very limited [health benefits] plans, says Stephen Wise, president, Wise Financial Group Inc. in London, Ont. A lot of those companies with What s offered, what s not Generally speaking, the same products and services can be offered to small employers as to large ones. On the healthcare side, securing coverage can sometimes be more problematic for small groups than larger ones because when you re looking at spreading risk, it s more attractive to traditional benefits carriers to have a larger pool of people generating premium dollars. What we find from our research is that really small employers, those with three or four employees, approximately 60% of those employers don t have a benefits package, says Stefan Kristjanson, senior vice-president, group operations, with Great-West Life London Life Canada Life in Winnipeg. As size grows, their take-up of a benefits package grows significantly. Defined contribution (DC) plans Small employers are less likely to opt for a traditional DC plan because of concerns about getting locked into the ongoing commitment of contribution dollars, coupled with the regulatory costs associated with DC plans. And for really small companies, the availability of a DC plan may be out of reach. For really small organizations, under 30 lives, it can be a challenge to even set up a DC plan, even if the employer wants to, because the carriers that provide those products have contribution minimums, says Dara Shaw Brachman, benefits consultant with King Benefits Consulting in Kingston, Ont. Meaning that [the carrier] might want to see $15,000 a year collectively coming from that organization before it s even willing to set up the plan. The advantage of a DC plan over a group RRSP, though, is that the employer does not have to pay payroll taxes on contributions to a DC plan or deferred profit sharing plan. The employer can realize savings when making a contribution to the pension plan, says Michael Campbell, vice-president, marketing, group retirement services, Great-West Life London Life Canada Life in London, Ont. Group RRSPs Group RRSPs are attractive to small businesses because they can be set up easily and cheaply, and there are no requirements for employer contributions. Still, Stephen Wise, president, Wise Financial Group Inc. in London, Ont., maintains that a lot of small companies are shying away from providing retirement savings plans altogether. For employers who feel morally obligated to their employees, it s a matter of educating them on the pros and cons so they can get a plan that s sensible for them, he says. Administrative-services-only (ASO) plans ASO plans are a business contract under which the insurance carrier agrees to perform specific administrative duties for the maintenance of a self-funded health insurance plan. Health spending accounts (HSAs) HSAs can be offered as a complement to a traditional insured plan. What [a HSA] does is, you don t have to pay for a vision care benefit for all your employees if only five are going to use it, says Vinni Soni, assistant vice-president, Sun Advantage, with Sun Life Financial in Toronto. The other five may have different needs. So you can have a basic healthcare plan, which is insured, and then have a healthcare spending account to spend whichever way they wish. HSAs can be capped monthly or annually. Employee assistance programs (EAPs) EAPs are now available for groups of as few as three people. www.benefitscanada.com march 2007 15

five to seven employees are starting to go toward individual plans where you have to qualify medically. There s a lot of that happening. Employee benefits consultant Dara Shaw Brachman of King Benefits Consulting in Kingston, Ont., agrees that securing health coverage for small employers can sometimes be a challenge. But, she maintains, there are far more non-traditional options available than there were 10 or 12 years ago. So we may use healthcare spending accounts, for example, for clients where there s just not an option of having a traditional insured product for them. And as a small business, Telelink has struggled with things such as its experience rating. Experience rating is the process used by insurance carriers to set the plan s rates. It takes into consideration the previous claims experience for a specific group or pool of groups. It has become very expensive in the last few years to provide a benefits package, says Roma. We re not a large group, and when people use the benefits package a lot, your experience rating can go through the roof. So in the past few years, we ve really been doing our homework and shopping around and trying to get the very best rates we can. To that end, the company joined a call centre association to avail itself of a much cheaper rate. Companies like ours across the country pooled their resources. Overall, our experience rating gives us a much better rate now, says Roma. Additionally, some small organizations may struggle with cultural issues, such as a reluctance on the part of employees to share in premium costs. Small companies might not necessarily have the corporate hierarchy that even a 100-employee organization might have. If you have a 20-employee company and a couple of those employees don t perceive the value of the benefits program, that can be a challenge, notes Shaw Brachman. Those challenges aside, however, many agree that providing group benefits plans even for a small group makes good business sense. Both health benefits and defined contribution (DC) plans offer a tax-effective way to compensate employees. Moreover, these plans can help a education matters The Agronomy Company of Canada owns and operates Agromart franchises, which supply crop nutrient products, crop protection products and seeds to farmers in Ontario and the Maritimes. While each franchise operates as a separate company, the organization s administrative office in Thorndale, Ont., administers the pension plan and group benefits for all employees. Human resources administrator Sharon Kubinski says the biggest challenge is getting employees to take responsibility for their own investments. The plan offers nine different funds: three are suitable for investors with a high tolerance for investment risk, three are suitable for investors with a medium tolerance for risk, while three are suitable for investors with a low risk tolerance. And while the company has had great success at getting employees to join the plan, it still struggles with getting them to take an interest in their investments. The odd time I get phone calls and I have to say I can t advise you [about where to put your money]. I m not a financial planner, Kubinski says. It s educating people and getting them to realize the importance that they have control of where their money goes. The Agronomy Company of Canada is addressing the education challenge with the help of its provider, Sun Life Financial, which held some pension information sessions last year. But even with the help of its provider, this plan sponsor struggles to reach everyone. It s really hard in our business because it s so busy and seasonal, says Kubinski. There are really bad times when no one is going to have time for us. We have so many locations that it s going to take a few years to get to everybody. And it s not just current plan members who need to be educated about the company s plan. The company used to offer a traditional defined benefit plan and has approximately 20 to 25 retirees who draw on benefits from that plan. Those who ve retired in the past 10 years, however, have retired with the defined contribution (DC) plan. Yet some of those DC retirees there are between 20 and 25 of them seem to be confusing the two. A few still don t understand that years of service, salary and age don t play into the calculation of the amount of money they will receive at retirement, says Kubinski. They now have the onus on them to have a personal financial planner assist them with their decisions of purchasing a LIRA or a LIF and help them also with their RRSP account. Kubinski says she offers retiring employees the name of a financial planner, but also strongly encourages them to talk to a few advisers. At a glance Agronomy Company of Canada Ltd. Number of employees: 400, mostly in Ontario, with some employees in New Brunswick, Nova Scotia and Prince Edward Island. Pension plan basics: DC plan. Employees are eligible to join after one year of service. Plan members can contribute up to 5% of their salary, which is matched by the company at 50%. Between five and 10 years of service, company match rises to 100%, dollar for dollar. After 10 years of eligible service, company match rises again to 125%. Employee contributions go into a group registered retirement savings plan (RRSP); employer contributions are locked in to the DC plan. www.benefitscanada.com march 2007 17

TEAM EFFORT Isabel Alexander calls her benefits consultant one of her certified smart people. As the president and founder of Phancorp, a chemical wholesaler based in Brampton, Ont., that employs 12 people, Alexander says she made the intelligent decision a few years ago to retain the services of somebody who would navigate those [benefits] waters for me and explain it to me in layman s terms. Greg Bell, vice-president, corporate accounts, group retirement services, with Sun Life Financial in Waterloo, Ont., says that benefits consultants play a particularly valuable role in small businesses. They may not have the resident expertise in their organization to work with benefits, he says. So they really rely on providers and advisers that are specialists in the pension and benefits business to really help guide them through plan design and product selection, and to effectively meet their needs. For the small business owner, a benefits consultant can be an integral part of her professional services team, much like her lawyer or accountant. For Alexander, her consultant s advice has been a critical component to the growth of her business. She started offering a healthcare benefits plan about seven years ago. I ve got a lot of things to focus on, so having a consultant was critical to knowing what was out there, what the options were, [having] someone to shop for me competitively and look at things comprehensively, she says. growing business set the corporate policy for what the organization will do for employees and their dependents in the event that an employee dies, is disabled or is facing a catastrophic health cost. Oftentimes, employers haven t thought about this, and when a situation arises, they re making decisions on the fly and they don t realize they re setting a precedent, which can have a bigger impact in a smaller organization than a larger one, says Shaw Brachman. A benefits program effectively becomes the corporate policy for how all those situations will be dealt with. For small companies such as Telelink, benefits packages can be viewed as a powerful attraction and retention tool. Competitively, we have to offer a benefits package, says Ryan. We would anyway, we always have. But the quality of that package is important in attracting and retaining employees, there s no question. BC Andrea Davis is a freelance writer in Guelph, Ont. andrea.davis@rogers.com