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Latest trends in compensation retirement and benefits management

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Managing compensation, retirement and benefit programs is a challenge for all businesses, and nonprofit (NFP) organizations are no exception. To gain insight into how these entities are currently managing these programs, RSM partnered with Verisight on a survey of 958 organizations and businesses. The online survey was undertaken in the summer and fall of 2012. The majority of survey respondents were mid-sized companies from a wide range of industries, including manufacturing, healthcare, nonprofit, construction, finance and banking, distribution and services.

Of that group, nonprofit organizations were 12 percent of the total, ranking third after manufacturing and healthcare in terms of number of participants. The survey results offer interesting details into how NFP organizations are managing their compensation, retirement and benefits programs. They highlight the strategic approaches the NFPs are using to improve productivity and financial performance in these areas, as well as consider their plans for 2013.

On April 17, 2013, RSM held an NFP webcast to present the findings of the survey, with a special focus on how the information can be applied to business planning in NFP organizations.

If you would like to listen to the entire presentation, which reviews more survey findings, the Compensation, Retirement and Benefits Trends Webcast is available online. You can also download the complete Compensation Retirement and Benefits Trends Report on Verisight’s website.

The webcast focused on three key areas:

  • Compensation Practices
  • Health and Welfare Benefits
  • Retirement Plans

Below is a brief summary of the key points discussed at the webcast, focusing just on the responses of the NFP organizations.

Compensation practices

  • Which cost reduction and containment strategies have you implemented or plan to implement?

Takeaway: NFP employers embraced a number of different labor cost reduction measures in 2012, citing the increased share of Employee (EE) health and welfare costs as the most common cost containment strategy utilized.

(Percentage of total NFP respondents)

Increase share of EE health and welfare costs – 53 percent
Overtime reduction – 28 percent
Staff reduction – 26 percent
Pay freeze – 15 percent
Hiring freeze – 14 percent
Reduce health/welfare benefits – 23 percent
Reduce/suspend 401(k) match – 12 percent

  • What factors had significant impact on your total compensation and rewards (salary, bonus, benefits and retirement) decisions for 2012?

Takeaway
The challenge of retaining key employees is most often identified as having a significant impact on NFP organizations’ total compensation decisions for 2012.

(Percentage of total NFP respondents)

Benefit costs – 40 percent
Corporate performance – 32 percent
Challenge of retaining key employees – 46 percent
Challenge of attracting key employees – 37 percent
Desire to incent employee performance – 40 percent
Labor costs – 18 percent
Challenge of motivating key employees – 30 percent
Retirement plan costs – 16 percent

  • What percentage amount have you allocated for base salary increases for 2013, as a percent of base pay?

Takeaway
Planned budgetary allocations for 2013 range from 1.7 percent to 3 percent, depending on employee group.

(Percentage of base salary)

Executives
Mean – 2.9 percent
Median – 3.0 percent

Salaried (Exempt)
Mean – 2.8 percent
Median – 3.0 percent

Salaried (Non-exempt)
Mean – 2.7 percent
Median – 3.0 percent

Hourly (Non-exempt)
Mean – 2.6 percent
Median – 3.0 percent

Hourly (Union)
Mean – 1.7 percent
Median – 2.3 percent

  • Do you have a formal salary structure to manage compensation across levels within the organization?

Takeaway
A strong majority of organizations have a formal salary structure with grades, minimums, midpoints and maximums to effectively manage compensation.

(Percentage of total NFP respondents)

Yes – 71 percent
No – 29 percent

  • Please indicate the percentage salary range and structure adjustment you anticipate for 2013.

Takeaway
In 2013, NFP salary structures are projected to move anywhere from 1.0 – 2.2 percent, depending on the employee group.

(Percentage of base pay)

Executives
Mean – 2.0 percent
Median – 2.2 percent

Salaried (Exempt)
Mean – 1.8 percent
Median – 2.2 percent

Salaried (Non-exempt)
Mean – 1.7 percent
Median – 2.0 percent

Hourly (Non-exempt)
Mean – 1.6 percent
Median – 2.1 percent

Hourly (Union)
Mean – 1.3 percent
Median – 1.0 percent

  • Have you implemented any pay-for-performance programs within your organization?

Takeaway
A desire to provide a reward based upon performance is among the top factors affecting NFP organizations’ total compensation decisions in 2012. Therefore, it is not surprising that 54 percent of organizations have implemented some type of pay-for-performance program.

(Percentage of total NFP respondents)

Implemented throughout organization – 42 percent
Implemented with some employee groups – 12 percent
Considered implementing in next 12 months – 8 percent
Not implemented – 35 percent
Previously implemented but eliminated – 3 percent

Health and welfare benefits

  • Which of the following plans do you offer as health insurance options?

Takeaway
Preferred Provider Organization (PPO) plans are still the most widely available health plan option, with Health Maintenance Organization (HMO) plans in second place.

(Percentage of total NFP respondents)

PPO Plans – 73 percent
High Deductible Health Plan (HDHP) – 28 percent
HMO Plans – 46 percent
Traditional Indemnity Plans – 8 percent
Do not offer health insurance – 1 percent

  • For 2012, which of the following health insurance options was selected by the largest number of employees?

Takeaway
For NFP employees, PPOs continue to be the most frequently selected health plan, followed by HMOs. HDHPs are a distant third.

(Percentage of total NFP respondents)

PPO Plans – 47 percent
HDHPs – 10 percent
HMO Plans – 38 percent
Traditional Indemnity Plans – 5 percent

  • What was the average percentage change in your health insurance plan costs for the 2012 plan year?

Takeaway
Fifty-six percent of NFP organizations say that their health plan costs increased from .1 to 12 percent from 2011 to 2012.

(Percentage of total NFP respondents)

Decreased – 14 percent
No change – 17 percent
0.1 percent - 4 percent - 18 percent
4.1 percent - 8 percent - 18 percent
8.1 percent - 12 percent - 20 percent
12.1 percent - 16 percent - 8 percent
16.1 percent - 20 percent - 1 percent
Over 20 percent - 4 percent

  • For the health insurance option selected by the majority of your employees, what is your average total premium amount?

Takeaway
For NFP organizations, the average monthly premium for family coverage edged up to $1,390 for 2012.

(Average monthly premium)

Family – $1,390
Employee + one (Spouse or child) – $1,164
Employee + children – $886
Employee only – $627

  • What actions were taken for 2012 in your organization to address healthcare costs?

Takeaway
Forty-eight percent of NFP employers indicate they are taking measures in 2012 to reduce healthcare expenses. The most frequently cited action is raising the employee portion of the premium.

Raised employee portion of premium payment – 29 percent
Raised employee deductibles – 18 percent
Raised employee co-payment or co-insurance – 21 percent
Implemented wellness program – 16 percent
Offered consumer-driven healthcare option – 12 percent
Offered opt-out incentive – 7 percent
Discontinued coverage for dependents, retirees – 1 percent
No actions taken – 52 percent

Retirement plans

  • What type of retirement plan(s) do you offer?

Takeaway
Defined contribution plans with employee contributions continue to be the dominant retirement savings program among NFP organizations.

(Percentage of total NFP respondents)

Defined contribution plan or employee contributions – 95 percent
Defined contribution plan or no employee contributions – 14 percent
Defined benefit plan (traditional) – 14 percent
Defined benefit plan (hybrid) – 1 percent
Payroll deduction IRA – 2 percent

  • How many investment options are participants able to choose from in your plan, excluding brokerage windows?

Takeaway
Most NFP employers strive to provide a variety of investment choices to employees, aiming to offer appropriate investment diversification without overwhelming the participants.

(Percentage of total NFP respondents)

` 1 to 5 – 7 percent
6 to 10 – 14 percent
11 to 20 – 53 percent
21 or more - 26 percent

  • Does your plan have an automatic enrollment feature?

Takeaway
More than forty percent of NFP organizations offer automatic enrollment. This suggests that auto-enrollment is a popular feature, as companies strive to help employees accumulate funds for retirement.
(Percentage of total NFP respondents)

Yes – 42 percent
No – 58 percent

  • If yes, does your plan include an automatic escalation feature?

Takeaway
Among NFP organizations that offer automatic enrollment, only 24 percent include an automatic escalation feature.
(Percentage of NFP respondents answering yes)

Yes – 24 percent
No – 76 percent

  • Does your company offer matching contributions?

Takeaway
Most NFP employers embrace matching contributions as an effective inducement to plan participation.
(Percentage of total NFP respondents)

Yes – 72 percent
No – 28 percent

  • Please provide the matching percentages your company currently contributes.

Takeaway
Most NFP employers embrace matching contributions as an effective inducement to plan participation. Most common is a 100 percent match of employee contributions followed by a 50 percent match.
(Percentage of total NFP respondents)

25 percent of employee contributions – 8 percent
50 percent of employee contributions – 25 percent
100 percent of employee contributions – 42 percent
100 percent of first 3 percent, 50 percent of next 2 percent – 5 percent
Other – 27 percent

  • Did you receive a disclosure from all of your plan service providers regarding plan fees?

Takeaway
Understanding plan costs are on the forefront of plan sponsors’ minds with 100 percent confirming receipt of fee disclosures from their plan service providers.
(Percentage of total NFP respondents)

Yes – 100 percent
No – 0 percent

  • After reviewing fee disclosures from service providers, do you know the total cost of your plan?

Takeaway
The majority of respondents felt they understood the total costs of the plan prior to receiving the disclosure, while 20 percent felt they needed additional assistance in understanding the total plan costs.

(Percentage of total NFP respondents)

Yes, I didn’t realize the total costs before the disclosure – 16 percent
Yes, I already understood the total costs – 64 percent
No, I still do not understand the plan costs – 20 percent
For more information

For more information, please contact Verisight.