COMPENSATION, RETIREMENT AND BENEFITS TRENDS REPORT … Ju… · · 2013-07-18executive compensation and performance management ... The annual Compensation, Retirement and Benefits

COMPENSATION, RETIREMENT AND BENEFITS TRENDS REPORTNON-PROFIT INDUSTRY

2012/2013

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Today’s Agenda

• INTRODUCTIONS

• BACKGROUND

• COMPENSATION PRACTICES

• HEALTH AND WELFARE BENEFITS

• RETIREMENT PLANS

• QUESTIONS

Discover the Verisight difference.Call 855.751.2127, visit www.verisightgroup.com or email [email protected].

12012/2013 Compensation, Retirement and Benefits Trends Report

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POLLING QUESTION #1

• Which best describes your organization type? – Professional/membership/trade association – Charitable organization – Social Services (e.g. United Way, Red Cross, Salvation Army, etc.)– Educational institution – Other

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Today’s Presenters

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Martha SadlerExecutive Vice President, Benefits Consulting, Verisight Inc.Martha has over 20 years of experience in advising businesses on retirement plan matters and leads the Retirement Plan Consulting practice for the firm. Martha specializes in assisting clients in detecting and correcting operational and fiduciary failures. This assistance includes navigating the available self-correction programs, preparing voluntary submissions to the Internal Revenue Service or Department of Labor, and representing the client in the event of a governmental audit.


Jason CaseySenior Vice President, Actuarial, Verisight Inc.Jason joined Verisight in 2012 and is responsible for overseeing the actuarial team and its future growth. Jason brings over 15 years of retirement and health &welfare consulting experience to Verisight. He brings a unique skill set which combines a broad range of benefits consulting and leadership expertise.

Prior to joining Verisight, Jason has held various leadership positions at some of the largest national consulting firms. More recently, Jason spent five years at Fidelity Investments leading their benefits consulting and actuarial practice in Chicago.

Rena Somersan Principal, Compensation Consulting Group, Verisight, Inc.Rena has more than 19 years of consulting experience in Non-Profit organizations, Healthcare, Manufacturing, and other industries. Rena assists clients in executing their strategic human resources and compensation initiatives. Her focus has been in the areas of workforce and executive compensation and performance management initiatives, discussing the strategic direction of the organization and overall Human Resources philosophy.

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Report Background

The annual Compensation, Retirement and Benefits Trends Survey is designed to uncover key trends across the broad spectrum of retirement, health and welfare benefits and employee reward programs. The result is a comprehensive view of firms’ total employee reward programs that is rarely available from a single source.

Nearly 1,000 organizations (958) participated in the survey. The majority of the survey respondents are mid-sized companies; however, small and large firms are also represented. Respondents reflect a wide range of industry types including manufacturing, healthcare, construction, finance/banking, distribution and services, with the majority of these industries organized as “for profit” entities. Nonetheless, not-for-profit organizations participated notably at 12 percent. The online survey was launched on August 21 and closed on October 21, 2012.


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Base = 958


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Base = 757


KEY DEFINITIONS:

Northeast New England: Connecticut, Maine, Massachusetts, New Hampshire, Rhode Island and Vermont Middle Atlantic: New Jersey, New York and Pennsylvania

Midwest East North Central: Illinois, Indiana, Michigan, Ohio and Wisconsin West North Central: Iowa, Kansas, Minnesota, Missouri, Nebraska, North Dakota and South Dakota

South South Atlantic: Delaware, District of Columbia, Florida, Georgia, Maryland, North Carolina, South Carolina, Virginia and West Virginia East South Central: Alabama, Kentucky, Mississippi and Tennessee West South Central: Arkansas, Louisiana, Oklahoma and Texas

West Mountain: Arizona, Colorado, Idaho, Montana, Nevada, New Mexico, Utah and Wyoming Pacific: Alaska, California, Hawaii, Oregon and Washington

Note: Not all respondents provided demographic information


COMPENSATION PRACTICES

2012/2013 Compensation, Retirement and Benefits Trends Report 7

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Factors Impacting DecisionsEmployers continued to turn to a variety of labor cost containment measures in 2012 and anticipate additional actions in 2013.

8Compensation Practices

Which cost reduction and/or containment strategies have you implemented or plan to implement?

All Industries Base = 704

Non-Profit Industry Base = 88

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Factors Impacting DecisionsThe cost of benefits remains the factor most often identified as having a significant impact on organizations’ total compensation decisions for 2012.


What factors had significant impact on your total compensation/rewards (salary, bonus, benefits, and retirement) decisions for 2012?



verisightgroup.com 10Compensation Practices

Includes zeros (i.e., salary freezes)

2013 All Industries Not-For-Profit

Executives

Mean 2.7% 2.9%

Median 3.0% 3.0%

Salaried (Exempt)

Mean 2.7% 2.8%

Median 3.0% 3.0%

Salaried (Non-exempt)

Mean 2.6% 2.7%

Median 3.0% 3.0%

Hourly (Non-exempt)

Mean 2.7% 2.6%

Median 3.0% 3.0%

Hourly (Union)

Mean 2.0% 1.7%

Median 2.3% 2.3%

Base 595 82

Please indicate the percentage amount allocated for base salary increases for 2013, as a percent of base pay.

Salary Increases

*Caution low base

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Salary StructuresThe majority of organizations have a formal salary structure with grades, minimums, midpoints and maximums to effectively manage compensation.


Do you have a formal salary structure (i.e., ranges with a minimum and maximum) to manage compensation across levels within the organization?

Base = 767 Base = 94

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Salary StructuresSalary structures are anticipated to move anywhere from 1.4 – 1.9 percent, depending on the employee group, in 2013.


Please indicate the percentage salary range/structure movement (only enter 0% if no adjustments were made or anticipated for an employee category).

2012 Actual Salary Structure Adjustments 2013 Anticipated Salary Structure Adjustments

All Industries Not-For-Profit All Industries Not-For-Profit

Executives

Mean 2.0% 2.0% 1.7% 2.0%

Median 2.0% 2.1% 2.1% 2.2%

Salaried (Exempt)

Mean 1.9% 1.7% 1.9% 1.8%

Median 2.1% 2.0% 2.2% 2.2%

Salaried (Non-exempt)

Mean 1.7% 1.6% 1.7% 1.7%

Median 2.1% 1.5% 2.1% 2.0%

Hourly (Non-exempt)

Mean 1.7% 1.3% 1.7% 1.6%

Median 2.1% 1.7% 2.1% 2.1%

Hourly (Union)

Mean 1.2% 1.1% 1.4% 1.3%

Median 0.9% 0.9% 1.2% 1.0%

Base 268 52 232 41*

Includes zeros (i.e., no adjustments)

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Compensation Philosophy


What is your organization’s total compensation philosophy?



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Polling Question #2

• How effective are the performance management practices at your organization?– Very effective– Somewhat effective– Hardly effective at all!– We don’t have a performance management system


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Pay for PerformanceA desire to incent performance is among the top factors impacting organizations’ total compensation decisions in 2012. Therefore, it is not surprising that 52 percent of organizations have implemented some type of pay-for-performance program.


Have you implemented any pay-for-performance programs within your organization?


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The gap between salary increases administered to high and low performers continues to widen and increased by 1.2 percent of base pay compared to a year earlier.

Pay for Performance


In general, please indicate the average base salary increases in 2012 for each of the following categories.


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Polling Question #3

• Would you say the variable compensation arrangements in place at your organization are more akin to– bonuses or “after the fact” or – incentives “before the fact” formula driven– We don’t currently offer variable compensation


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Eligibility for short-term and long-term incentive pay is substantially higher for executives and salaried-exempt management than for hourly non-exempt workers.

Incentive Plans


Which employee groups are eligible to participate in a short-term and/or long-term incentive program?


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Incentive Plans


What is the targeted short-term incentive pay opportunity at your company for 2012?


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At the executive level, organization performance is the most common measurement criteria. Performance for exempt employees is typically weighted based on both individual and organization performance. For hourly employees, individual performance is the most common measurement criterion, which allows employees to see a clear line of sight between objectives and rewards.

Incentive Plans


What performance measures are utilized to determine awards?


AllIndustries Non-Profit

Organization Performance

Division/Department Performance

Individual Performance

Other Measures


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Incentive PlansWhile most incentive plans are designed to set expectations up front, spot bonuses, which are usually more subjective, are also utilized by 37 percent of responding organizations.


Do you offer spot bonuses to provide immediate rewards for performance above and beyond expectations?



HEALTH AND WELFARE BENEFITS


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Preferred Provider Organization (PPO) plans are still by far the most widely available health plan option. For the first time, High Deductible Health Plans (HDHPs) edged out Health Maintenance Organizations (HMOs) as the second-most prevalent type of health plan.

23Health and Welfare Benefits

Which of the following plans do you offer as health insurance options?

Health Insurance Options



verisightgroup.com 24Health and Welfare Benefits

For employees, PPOs still remain the most frequently selected health plan followed by HMOs. HDHPs are a distant third.

For 2012, which of the following health insurance options was selected by the largest number of employees?

Health Insurance Options



One-third of organizations say that their health plan costs increased by at least 8 percent from 2011 to 2012, more than double the 3 percent rise in the Consumer Price Index over the same period.

What was the average percentage change in your health insurance plan costs for the 2012 plan year?

Health Insurance Plan Costs



For companies overall, the average monthly premium for family coverage edged up to $1,252 for 2012, with employees contributing a historically high 36 percent of the cost.

For the health insurance option selected by the majority of your employees, what is your average total premium amount? What percentage do your employees contribute to the premium amount?

Health Insurance Premiums

All Industries Not-For-Profit

Average Monthly PremiumFamily $1,252 $1,390Employee + One (Spouse or Child) $940 $1,164

Employee + Children $889 $886Employee Only $539 $627Base 570 65

Employee Share of PremiumFamily 36% 36%Employee + One (Spouse or Child) 35% 35%Employee + Children 33% 33%Employee Only 22% 18%Base 564 65

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Nearly 60 percent of employers indicate they are taking measures in 2012 to reduce healthcare expenses. Once again, the most frequently cited action is raising the employee portion of the premium.


What actions were taken for 2012 in your organization to address healthcare costs?

Actions to Reduce Healthcare Costs



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Many companies intend to shift an even greater percentage of the cost of healthcare to their employees in 2013.


What actions do you plan to take for 2013 in your organization to address healthcare costs?

Actions to Reduce Healthcare Costs




Currently 26 percent of employers are undecided on whether they will continue or discontinue group health coverage in the next 24 months.

Healthcare Reform

Base = 686

Due to healthcare reform, which action are you most likely to take in the next 24 months?

Base = 82

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Polling Question #4

• In light of the “Pay or Play” healthcare reform provisions, what action is your organization likely to take?– Continue current group health care coverage– Discontinue health plan & use state health exchange– Undecided



More than three-quarters of employers claim cost is the most important factor in determining how they will respond to healthcare reform.

Healthcare Reform


What factors are most important in determining how you will respond to healthcare reform?



In addition to health insurance, organizations generally offer a broad range of benefits including dental insurance, life insurance, long-term disability, short-term disability and vision insurance.

Which of the following benefits do you currently offer?

Other Benefits



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To help combat health insurance costs, employers are increasing their focus on wellness programs.


Please indicate which benefits you plan to improve in the upcoming year?

Other Benefits


Non-Profit Industry Base = 16**

*Caution low base **Extremely low base

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Polling Question #5

• How effective have the wellness programs at your organization positively impacting your health care costs?– Very effective (has helped reduce medical trend)– Somewhat effective (has helped keep our medical trend flat)– I don’t know the impact on our health care costs– We do not have a wellness program



RETIREMENT PLANS


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Polling Question #6

• What type of retirement plan does your organization provide? – 403(b)/401(k) (Defined contribution plan(s) w/employee contribs)– Defined contribution plan with employer contributions only– Defined benefit plan (non-frozen plan)– Combination defined benefit & defined contribution plans– No retirement plan

36Retirement Plans

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Defined contribution plans continue to be the dominant retirement savings program across U.S. companies, regardless of company size.

37Retirement Plans

What type of retirement plan(s) do you offer?

Retirement Plan Types



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Managing plan costs continues to be an important issue for most employers. The cost of investments and the cost of services, including plan fees, continue to be key considerations when evaluating retirement plan offerings, regardless of size or industry.

38Retirement Plans

Identify the top three items from the following list that you consider most important when evaluating your retirement plan offering.

Criteria for Choosing Providers



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As employers strive to attain appropriate investment diversification without overwhelming their participants, providing choices to employees remains paramount.

39Retirement Plans

How many investment options are participants able to choose from in your plan, excluding brokerage windows?

Investment Options


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Please indicate your Qualified Default Investment Alternative (QDIA).

Investment Options ̶ Default

All Industries Non-Profit Industry

CashMoney Market 30% 33%Stable Value 17% 14%Asset AllocationTarget Date 44% 52%Balanced 13% 10%Managed Investment Accounts/Model Portfolios 12% 12%Lifestyle 9% 0%Base 642 77

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More than one-third of organizations offer automatic enrollment. This suggests that auto-enrollment is here to stay, as companies strive to secure and retain plan participants. Among organizations that offer automatic enrollment, 31 percent include an automatic escalation feature.

41Retirement Plans

Automatic Enrollment

Does your plan have an automatic enrollment feature?

Base = 750

Yes31%

Base = 91


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More than one-third of organizations offer automatic enrollment. This suggests that auto-enrollment is here to stay, as companies strive to secure and retain plan participants. Among organizations that offer automatic enrollment, 31 percent include an automatic escalation feature.

42Retirement Plans

Automatic Enrollment

If yes, does your plan include an automatic escalation feature?

Base = 280

Yes31%

Base = 38*


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Polling Question #7

• What type of employer contribution does your organization provide to employees under your retirement plan? – Match– Non-match employer contributions– Combination match and non-match– Defined benefit contribution– No employer contribution

43Retirement Plans

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Most employers embrace matching contributions as an effective inducement to plan participation. Most common is a 100 percent match of employee contributions followed closely by a 50 percent match.

44Retirement Plans

Does your company offer matching contributions?

Employer Plan Contributions


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Most employers embrace matching contributions as an effective inducement to plan participation. Most common is a 100 percent match of employee contributions followed closely by a 50 percent match.

45Retirement Plans

Employer Plan Contributions

Please provide the matching percentages your company currently contributes.



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Disclosures are on the forefront of plan sponsors’ minds with 98 percent confirming receipt from their plan service providers.

46Retirement Plans

Did you receive a disclosure from all of your plan service providers regarding plan fees?

Plan Costs and Participant Awareness


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Disclosures are on the forefront of plan sponsors’ minds with 98 percent confirming receipt from their plan service providers.

47Retirement Plans


After reviewing fee disclosures from service providers, do you know the total cost of your plan?


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Despite the survey launching in the midst of the participant disclosure delivery, 91 percent of employers affirm that plan participants are provided with information necessary to understand the full cost of the plan.

48Retirement Plans


Base = 678

Are plan participants provided with information necessary to understand the full cost of the plan?

Base = 81

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Thank You for Attending

Questions/contact [email protected]

Download the complete reporthttp://www.verisightgroup.com/Home/Insight/Compensation,RetirementandBenefitsTrends.aspx

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Join us for the next web seminar:Cash Balance Plans – Maximizing Retirement Assets and Minimizing Your Tax BurdenWednesday, September 18, 2013Register for the web seminar by visiting the Plan Sponsor or Advisor login pages at www.verisightgroup.com.

Documents

COMPENSATION, RETIREMENT AND BENEFITS TRENDS REPORT … Ju… · · 2013-07-18executive compensation and performance management ... The annual Compensation, Retirement and Benefits