THE VIABILITY OF DEFINED CONTRIBUTION BENEFIT PLAN DESIIGN
IN RESPONSE TO A QUESTION ON LINKEDIN ABOUT THE VIABILITY OF DEFINED CONTRIBUTION FOR THE OVERALL BENEFIT PLAN DESIGN WE POSTED THE FOLLOWING
The Future - Some form of Defined Contribution Plan Design has become almost inevitable if Employers are to continue contributing to Employee's overall benefits. By budgeting their "Benefit Dollar" contribution to the Employee's plan and working with the Broker/Consultant to build an acceptable menu of "Benefit Choices" the Employers, Employees, and Brokers win! The Education, Communication, and Enrollment process can be outsourced to an unbiased third party.
Employers are enabled to budget their benefit costs and still compete for attracting Employees with the benefit package they offer - now it is in the form of "Benefit Dollars" with a menu of "Choices" that are relatively easy to compare.
Employees are empowered to become "consumers" utilizing their "benefit dollars" - as well as their own contribution - to select from a menu of benefit "Choices" to meet their individual and family needs.
Brokers are enabled to focus on assisting the Employers and Employees in building a "Best-of-Class" menu of benefits to meet the Needs and Price Points of the Employees.
The Alternative - Without a shift to some form of a Defined Contribution design - which should include Pre-Taxing under Section 125, Reimbursement Accounts, HSAs and other Tax Incentives - the existing Employer based system of benefits may shift to an individual marketplace that would be chaotic and lack a proper focus on education and communication.