Flexible Benefit Plans Continue to Gain Momentum in Canada, Says Hewitt Associates

New Study Shows “Flex” Meets Diverse Employee Needs and Helps Contain Future Health Care Costs

TORONTO, ON – July 6, 2005 – Flexible benefit plans, in which employees choose the type and level of benefits that best meet their needs, continue to grow in popularity in Canada, according to new research from Hewitt Associates, a global human resources services firm.

In a survey of nearly 200 Canadian organizations, Hewitt found more than half (52 per cent) currently offer, or plan to offer, flex plans in the next two years. Another 33 per cent anticipate offering them in the future. Of those employers using flex plans, nearly all say they are meeting or exceeding their expectations in addressing employees’ needs. Other key benefits include improving employee recruitment and retention and containing rising benefit costs.

“It comes as no surprise that flexible benefits continue to grow in popularity among Canadian employers,” said Sarah Beech, benefits practice leader for Hewitt Associates. “Employees want options when it comes to choosing their benefits and Canadian employers are doing whatever they can to meet their needs. At the same time, these plans are curbing the threat of escalating health care costs.”

The Latest in Flex Design

The most popular benefit options organizations offer through flex continue to be medical and dental benefits. Eighty-five per cent of employers also provide Health Spending Accounts (HSAs), in which employees can receive tax-free reimbursement for health care expenses in most provinces. Another growing area of choice is in group RRSPs, with 38 per cent of companies including them in flex plans compared to 28 per cent in 2002.

An increasing number of companies are also offering flexible benefit options to retirees (36 per cent), more than double three years ago. “Significant cost escalation and accounting requirements for post-retirement benefits have put more pressure on employers than ever to control benefit spending,” said Beech. “Given the success companies are having managing benefit costs with flex plans for current employees, many are now starting to do the same with retirees.”

Challenges and Solutions With Flex

As more companies plan to implement flex benefits, their biggest challenges are how to administer (33 per cent) and communicate (21 per cent) them to employees. Nearly half of survey respondents are looking to third party administrators or insurance carriers to help them with transactional activities for flex such as enrolment and recordkeeping and/or participant inquiries.

On the communications front, organizations are also utilizing online capabilities to help educate, inform and interact with employees about their benefits. In fact, 30 per cent of employers currently provide online enrolment capabilities to employees. Nearly 50 per cent plan to do so in the next three years.

“Communication and access to the right information plays a key role in the success of any flex plan,” said Beech. “Working with a third party administrator and providing information online gives employees the ability to become more self-sufficient when choosing their benefits, allowing an organization’s HR department to focus its efforts on more strategic initiatives.”

Emerging Benefits: A Sign of the Times

Providing benefits that encourage employees to lead a healthier and more balanced lifestyle is also becoming increasingly important to organizations. Additional changes employers are making to their flexible benefit plans include:

  • Twenty-eight per cent offer sabbatical leaves, up from 12 per cent in 2002

  • More than half offer, or plan to offer, fitness memberships to employees

  • Over the next three years, 21 per cent more employers expect to incorporate lifestyle or wellness accounts in their benefit programs

  • Thirty per cent plan to offer critical illness coverage for employees in the future

Hewitt’s study, “Flex-ability: Employer Attitudes toward Flexible Benefits,” collects and analyzes employer experiences and emerging trends in flexible benefit plan design, communication and administration in Canada. Employers from coast to coast were invited to take part in the online survey. This year, 194 Canadian organizations participated representing more than 542,000 active employees and 223,000 retirees.

About Hewitt Associates

With more than 60 years of experience, Hewitt Associates (NYSE: HEW) is the world�s foremost provider of human resources outsourcing and consulting services. The firm consults with more than 2,300 companies and administers human resources, health care, payroll and retirement programs on behalf of more than 300 companies to millions of employees and retirees worldwide. Located in 35 countries, including Canadian offices in Toronto, Montreal, Vancouver, Calgary and Regina, Hewitt employs approximately 20,000 associates. For more information, please visit www.hewitt.com.