The Benefits Tango : Workers Spinning Over Cuts, Changes in Health Care, Pensions

When Debra Kruszka’s company tried to link her benefits to her performance, the telemarketer complained and the threat was rescinded.

*

But that hasn’t stopped Kruszka’s employer from trying to limit employee benefits in other ways, she said, including limiting her hours each week to 25--the minimum she must put in to keep her benefits.

“I’d prefer to work more hours but that’s all they give me,” said Kruszka, who asked that her company not be identified. “It’s a continuous game to keep my benefits.”

The policy at Kruszka’s company is not the national norm. But like her employer, many companies continue to cut back or restructure health, pension and other employee programs, usually in hopes of curtailing years of double-digit cost increases.

Although in some cases the results for employees have not been dramatic, with health care simply folded into managed-care programs, in others they have--some employees have lost coverage for their dependents or spouses.

“Over the last three to four years, companies have moved toward shifting the costs of health insurance toward employees,” said Sylvester Schieber, vice president at Watson Wyatt Worldwide. “They have moved toward managed care, away from offering benefits to retirees and toward curtailing or charging more for spouse and family coverage.”

Labor Department research shows that among medium- and large-sized companies, employee health care coverage dropped from about 90% in 1988 to 82% in 1993.

Workers with coverage are paying more. In 1988, 57% of employees were in plans wholly paid for by their companies, but in 1993, that was true for only 37%, according to the Labor Department.

There is a tremendous and often unseen social cost to declining coverage, advocates for children say. In 1993, one in seven children--more than 9.4 million--were uninsured, usually because a parent lost a job or benefit, according to the Children’s Defense Fund.

Pension plans also have been squeezed, reducing retirement income security.

Traditionally, pensions were paid for by employers and benefits were promised for employees who stayed with the company long enough to be vested. If a worker met the requirements, the pension would represent a percentage of pre-retirement income.

But whereas 63% of employees were covered by such a “defined benefit” plan in 1988, only 56% have one now, according to Labor Department research.

Part of the reason is companies have come to favor the less costly pretax savings plans, such as 401(k) plans. While access to the traditional pension plan has fallen, participation in the so-called “defined contribution” plans has risen from 36% in 1988 to 49% in 1993.

Under 401(k) plans, employees set aside money from their paychecks that may be matched by the employer. Employees unable to contribute receive no benefits when they retire. The risk of the investment is borne by the employee.

Part of the restructuring of benefits reflects changes in the economy as unionized manufacturing jobs are lost to the less unionized service industry. Moreover, the cost-cutting that companies have gone through this decade has led many to substitute full-time positions with contract or part-time workers who often don’t receive benefits.

“Many employers are consciously creating new terms of employment to eliminate or lessen benefits,” said Ellen Bravo, executive director of 9 to 5, National Assn. of Working Women, a group representing clerical workers.

Still, some companies and management consultants argue the changes are merely aligning benefits to better mirror new corporate cultures--cultures that emphasize mobility and flexibility rather than loyalty and stability.

“Companies are putting more responsibility on the employees’ shoulders,” said Alan Glickstein, a partner with the Fort Lee, N.J., benefits consulting firm Kwasha Lipton.

Making benefits applicable to the new reality of a dual-earner household is also important, said Emmett Seaborn, a principal at Towers Perrin, the management consulting firm.

For some employees, he said, help now with child or elder care, for example, is preferable to a traditional retirement plan with a company the employee probably won’t be with at age 65.

Many companies also now tout a range of optional insurance that can be deducted straight from the paycheck at pretax dollars and a cheaper group rate.

“Benefits need to attract and retain employees,” Seaborn said. “They haven’t been doing that.”

Indeed, “the trend in the marketplace is toward employers offering a more varied package that employees must pay for themselves,” said Margie Spyers, vice president of marketing at Cigna Group Insurance.

Many workers are worried by the trend. An April survey taken by Cigna showed only 36% of workers felt their benefits met their needs today as they did five years ago.

Part of the problem, Spyers said, is a lack of adequate communication between companies and employees that has created a panic of sorts. The new packages at large companies are not as bad as many employees believe.

Like many large corporations, Xerox has gone through significant cost-cutting that has included the revamping of benefits. The company now provides financial incentive for workers to join the managed health care plan and offers a series of so-called “family friendly” offerings.

“Corporations like Xerox are still spending a lot on benefits but they are changing what they pay for with that money,” said Helen Darling, Xerox Corp.’s manager of health care strategy. “We are not reducing the total benefit pie, rather we are changing some aspects of the benefit pie.”

International Business Machines Corp. has similarly reformulated employee offerings, said Paul Stoddard, the company’s manager of health benefits.

Previously, IBM offered free health insurance and only 8% of employees were enrolled in a health maintenance organization. Now, employees pay $60 a month for family coverage under the old plan or $45 a month for the HMO. Now, 30% are enrolled in managed care. Retirees, who still pay nothing for health-care insurance, have been told that at some point that will change.

New, so-called flexible benefits for pretax dollars are also part of the new IBM package.

In pensions, the company restructured its incentives under the 401(k) plan, increasing the company match from 30 cents on the dollar up to 9% of annual pay to 50% on the first 6%.

IBM also changed how it calculates defined benefit awards. Greater weight is given to earnings over an employee’s entire career rather than just salary at retirement.