Compensation Systems and Ppaca Essay

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Pages: 7
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Mr. Blakeley
Compensation Final As compensation professionals it is important to keep abreast of the latest compensation trends not only in regards to what will make the employer competitive in the eyes of prospective employees, but also what will keep the employer in line with government regulations, especially as it applies to the Patient Protection and Affordable Care Act (PPACA) that is to go into effect in 2014. One of the key future changes that almost all employers are moving towards is the move from defined benefit plans to defined contribution plans. The reason for the move away from defined benefit plans can be traced to how the benefit plan is funded, when investing needs to begin to have the cash available, and how much should be invested. Other reasoning involves the disproportionate cost increases related to these plans and unfavorable accounting rules. In contrast to defined benefit plans, defined contribution plans come in many makes and models. The most popular of the defined contribution plans is the 401(k). This plan has proven to be very popular in part because it is a savings plan in which employees are allowed to defer pretax income. 401(k)s also serve to be portable as employees who change jobs can take their pension accruals along to their next job. This move towards defined contribution plans displays the employee of the future’s desire for increased benefit flexibility and greater individual choice and control. By offering a wide range of benefits to choose from employers are catering to employee’s desire to craft their own benefits plans. Due to the recent economic volatility our country has experienced the desire by employees for increased levels of control is understandable. While employees may not necessarily be any better at choosing their benefits plan or investing for retirement as their employer is, there is a certain degree of comfort and desire for control that today’s employee craves to be in control of their own future financial situation. This desire by employees for increased benefit flexibility has also led to an increase in voluntary benefits being offered by employers such as daycare services, long-term care, and auto or homeowner insurance. Such offerings as daycare have proven extremely beneficial when targeting a niche group of employees. This can come into play if a business employs a large contingent of young women who place a great deal of emphasis on childcare. While increased benefit customization and flexibility is a trend for the future there is also another trend for the future concerning health benefits and the dramatically changing nature in the source of and variety of choices that will be available to employees in the near future with the advent of the PPACA in 2014. Before discussing the impact the PPACA will have on health benefit offerings it is important to view the evolving nature of health benefits outside of act’s context. There has been a recent move away from full coverage and a movement towards employment based coverage that consists of premiums, deductibles, copays, and limitations on covered services. This change in employment based coverage offerings is rooted in employers’ inability to pay for full coverage for their employees in part due to economic instability and the volatility of the stock market. In order to counter-act diminished service offerings and less comprehensive coverage, employers have begun to engage in practices that seek to assist employees in their efforts to save for the future and maintain healthy lifestyles. With the increased volatility of healthcare service offerings in recent years and with the advent of the PPACA in 2014 employees have begun to place an increased level of importance on health insurance. This can be seen in the increasing percentage of total employee benefits that health benefits have begun to consume in recent years as well as employees’ desire for increased variability in health coverage. Some
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