Aon Consulting’s 2009 Benefits and Talent Survey

Overview
For the fourth consecutive year, Aon Consulting surveyed employers across the United States to examine their benefits and talent management practices and challenges. This survey of more than 1,300 individuals, representing a broad organizational cross-section, was conducted in March 2009, during a period of unprecedented economic change.

In Aon Consulting’s 2009 Benefits and Talent Survey, we examine the data in three areas: Health and Benefits, Retirement, and Leadership and Talent Management. To aid you in developing strategies to position your organization for future recovery, we report on:

For a copy of Aon Consulting’s 2009 Benefits and Talent Survey, including detailed survey data, go to aon.com/recovery.

Summary of Findings
Health care trend shows modest declines and plan sponsors continue to investigate programs to reduce health care spend.

• While there have been modest declines in medical trend since 2008, health care spend is still increasing faster than the general rate of inflation.
• Employers are taking a two-pronged approach to reducing health care spend: looking for ways to cut costs in the near-term while analyzing the root cause of health care spend (such as chronic illness, obesity, etc.) to address costs long-term.
• Many employers consider voluntary benefits an important cost-reduction tool. Nearly two-thirds (65%) of respondents consider the use of voluntary benefits to offset employee out-of-pocket costs, 40% consider the use of voluntary benefits to offset the bad news of a benefit cost increase or benefit reduction, and 28% consider the use of a voluntary benefit option when replacing an employer-provided benefit.
• The number of employers who offer consumer-directed health plans, which emphasize wellness programs and encourage employees to take a more active role in their health care decisions, increased from 27% in 2008 to 32% in 2009.

Call to Action
Even with the provisions of health care reform unknown, employers can and should take action to reduce their health care spend. Their short-term focus should be on identifying opportunities to quickly reduce plan costs through audits and vendor negotiations. Longer term, this is an ideal time for employers to:

• Look for industry-specific benchmarking data to get a 360-degree perspective on whether their programs are competitive
• Make significant investments in business-wide wellness and prevention programs to encourage a focused, engaged, and productive workforce that increases their competitive edge in a growing global business and labor market   

The vast majority of survey respondents are not changing their retirement programs in response to the economic downturn.

• Most defined contribution (DC) plan sponsors have not made changes to their benefits, with 90% reporting no change in 2009 contribution levels compared to last year. 
• More surprisingly, 92% of survey respondents who sponsor defined benefit (DB) plans said that they are not making any changes to their defined benefit plans.
• Non-qualified retirement plans continue to become more prevalent, particularly among large employers.
• While the turmoil in financial markets highlights the financial volatility of pension plan costs, two-thirds of respondents continue to employ traditional investment strategies and take investment risks, with most sponsors appearing to have a wait-and-see attitude.
• Plan sponsors are generally confident that they are managing and administering DC plans well, with more than 90% evaluating plan fees, expenses, and investments. However, sponsors are significantly less confident about their employees' ability to understand retirement needs and plan for retirement. Close to 90% of respondents feel that employees are delaying retirement in light of the economic downturn.

Call to Action
A clearer picture for DB plans may emerge as more plan sponsors evaluate and implement alternative retirement program designs in response to the financial market turmoil. However, in the short-term, it is understandable that plan sponsors may be less willing to change their investment policy given the high cost of funding the pension deficit. That said, we do not subscribe to the wait-and-see approach that many are taking and submit that companies should be actively managing their pension risks.

Much can be done to improve the efficiency of DC plans. Primarily, companies can maximize their organizational value by aligning plans with their workforce policies as well as the emerging needs of their current and future workforce cohorts. It is also important to understand and manage risks from multiple perspectives, ranging from fiduciary liability to workforce management. And finally, to help employees effectively manage the retirement paradigm shift, companies must ensure best-in-class services from vendors through active vendor management and monitoring.

HR leaders must support organizational change.

• The current economic climate creates a mandate for HR leadership to support organizational change and drive innovation; however, respondents report that their effectiveness/organization change capabilities are not strengths.
• The need for strong leadership is at a premium. However, respondents feel they are not doing enough to improve their bench strength of leaders, and are self-reporting a weakness in delivery of key human resource outcomes that include the ability to meet the talent/skill needs for leadership roles, talent management, and succession planning.
• In this time of rapid change, communication can be a vital component of survival. However, 46% of respondents do not have a formal communication strategy. Of those who do, they report more corporate communication in 2009 (66%) than in 2008 (38%), but a significant drop in communications about health care (67% in 2009 compared to 86% in 2008) and retirement benefits (54% in 2009 compared to 72% in 2008).
• With increasing cost pressures, HR is looking for better ways to reduce infrastructure-related costs. For example, our survey found an increased interest in managing a virtual workforce, with 44% looking to increase their virtual workforce in the coming years.

Call to Action
Today's challenging environment is forcing organizations to make a large-scale transformation to cut costs, increase access to capital, and streamline products and services. HR leaders must support the change, develop strategies, communicate the vision, and help to ensure that employees’ attitudes and aptitudes support the new way of doing business.

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For a copy of the complete Aon Consulting’s “2009 Benefits and Talent Survey”,
go to aon.com/recovery.

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