Lincoln Financial Group

Part III: Plan Design Analysis

RMI 3501 Dr. Drennan Fall 2011 911976784 914439371

ContentsIntroduction......................................................................................................................................2

Design Considerations and Objectives in Offering Employee Benefits..........................................2

Goals, Competitors, Rising Costs, Non-Discrimination Testing, Communication Issues, Design and Funding Decision......................................................................................................2

Problems, Issues, Concerns, Considerations in the Design of Health Benefits...............................4

Vendor Choice.............................................................................................................................5

Eligibility Issue and Waiting Period............................................................................................5

Self-Funding.................................................................................................................................6

Stop-Loss Insurance.....................................................................................................................7

Four Plan Choices........................................................................................................................7

Dental and Vision Plans...............................................................................................................8

Prescription Drug Plan.................................................................................................................8

Flexible Spending Account (FSA)……………………………………………………………...9

Tobacco Surcharge.......................................................................................................................9

Problems, Issues, Concerns, Considerations in the Design of Other Types of Non-Retirement Benefits..........................................................................................................................................10

Group Life Insurance, Accidental Death and Dismemberment (AD & D) and Spouse and Child Life Insurance Plan....................................................................................................................11

Short Term Disability Plan (STD) and Long-Term Disability (LTD).......................................12

Educational Assistance Program (ETAP) and Employee Assistance Program (EAP)..............13

The Impact of Regulatory Compliance in the Benefit Plan Design and Operation.......................14

Patient Protection and Affordable Care Act (PPACA)..............................................................14

Employee Retirement Income Security Act (ERISA)...............................................................14

Health Insurance Portability and Accountability Act (HIPAA)................................................14

Conclusion.....................................................................................................................................15

1

Introduction

Founded in 1905, Lincoln Financial Group is a nationally recognized full-service

financial corporation headquartered in the greater Philadelphia area that offers a range of

financial services for individuals and businesses. To communicate the spirit of integrity, the

company adopted the name of the 16th President, Abraham Lincoln, to represent the ideals the

new business was founded upon. Robert Todd Lincoln, the President's only surviving son, gave

the founders permission to use his father's name in July 1905, setting the name for the new

company. Lincoln Financial Group’s mission is to help people build and protect their

investments, so they can enjoy their wealth in retirement. Lincoln National Corporation and

insurance company affiliates work together as a single enterprise to provide an array of financial

tools and strategies, including insurance and annuities, individual and group retirement plans,

and group benefits.  It is not surprising that for many years, Lincoln Financial Group has been

one of the top Fortune 500 corporations that offer outstanding benefit packages to its 7,500

employees and 1,000 agents.

Design Considerations and Objectives in Offering Employee Benefits

Goals, Competitors, Non-Discrimination Testing, Communication Issues, Rising Cost, Design and Funding Decision

The Lincoln National Corporation Employees’ Life, Health and Accident Plan includes a

medical plan, dental and vision plans, Long-Term Care and Short-Term Care, and Life Insurance

and AD& D. According to Glenn Alvarez, senior employee benefits analyst, the major goal

behind the comprehensive benefits package offered to workers is to attract top talents, reward,

and retain them, while remaining cost-effective.  Alvarez has been with the company for almost

eight years and he strongly believes that the benefits employees receive, play a very important

role in the overall company’s performance. As he states, if workers are healthy and the company

helps them deal with everyday life problems, they are happier and are motivated to be more

productive since they have more time to concentrate on their job duties. Additionally, Alvarez

states that offering employees their own company’s product such as LTD fully insured by The

Lincoln National Life Insurance Co. is an important marketing strategy.  Alvarez says, “Who is

going to buy our products if we ourselves do not utilize them?”

2

Another strategy behind providing a benefits plan for employees is competition with

other companies. Lincoln Financial Group’s main competitors are MetLife and Prudential. The

company regularly performs benchmarking in order to stay in line with its competitors. Alvarez

says, “Our strategy is to stay competitive, not to be on the cutting edge, but not to lag behind

either.” Additionally, Lincoln Financial Group conducts satisfaction surveys to better understand

employees’ needs and, consequently, to be able to meet them. The company uses Towers Watson

consulting services. For over five years Towers Watson has assisted Lincoln Financial Group

making recommendations of what is the best practice in terms of employee benefits in the

business world. Moreover, the company performs a “speedometer test” that compares the

benefit plan of similar companies (Sun Life Financial and ING Direct, per Alvarez) as well as

companies of a different size and profile (MetLife and Prudential). The test shows how Lincoln’s

plan differs from other companies’ plans.

As any business, Lincoln Financial Group has to deal with many difficulties and issues

arising from designing and implementing a benefits plan. Rising health care costs are one of the

biggest issues right now. Lincoln Financial Group’s goal is to reward their employees with

comprehensive and affordable benefits while staying within the company’s budget. Self-funding

of the medical plan, eligibility dependent audits, utilization reviews, and satisfaction surveys –

are the techniques that Lincoln uses to keep up with the rising health care costs and inflation.

These strategies will be explored in relation to each benefit later.

Because Lincoln’s benefit plan is a grandfathered plan, which will be discussed in detail

further throughout the analysis, PPACA provisions do not require Lincoln to perform non-

discrimination testing. However, being in the process of changing its grandfathered status, the

company is implementing non-discrimination testing arrangements. Alvarez says that the firm

will probably contract with a third party that will perform non-discrimination testing for them.

Additionally, the same variety and level of benefits is offered to all employees without regard to

their income and job title.

Lincoln Financial Group has its own benefits department that utilizes an Oracle-based

system, called CHRIS Knowledge Base. The system contains detailed information about the

medical benefits plan, as well as the other health and welfare benefits the company provides.

Employees can access the CHRIS data base at any time and get all the necessary information

about their benefits and costs. Lincoln Financial employees are mainly “white-collar” workers;

3

therefore, the majority of benefits communication is done online. Additionally, every enrollment

period, Lincoln provides updated SPDs and brochures to keep employees up to date with any

changes. This is the strategy Lincoln uses to communicate the available benefits and their costs.

Proper communication can boost the value of a benefits program in the minds of employees and,

additionally, send a clear message that an employer is sincerely looking out for the employees’

interests .1 Lincoln’s benefits department works directly with vendors, administrators and

consultants. This allows the company to control and manage the structure and cost of benefits,

compliance with various federal regulations and helping efficiently allocate the company’s

funds.

Some of the benefits are self-insured while others are fully-insured. Thus, employees

contribute to certain benefits although quite a few benefits are completely paid for by the

company. In implementing a benefit plan, Alvarez must analyze previous experience, data from

satisfaction surveys and evaluate the company’s budget; based on the gathered data Alvarez

decides which plans should be self-insured or fully-insured, contributory or non-contributory.

The benefit plan is carefully designed to maintain employees’ happiness and satisfaction with the

work place. Overall, Lincoln Financial Group has been successful in meeting their employees’

needs and keeping the personnel motivated and engaged. The turnover rate of 2% is proof of

employee satisfaction.

Problems, Issues, Concerns, Considerations in the Design of Health Benefits

The Lincoln Financial Group’s medical plan is a “grandfathered health plan” which, as

permitted under Patient Protection and Affordable Care Act ( PPACA), can preserve certain

basic health coverage that was already in effect before PPACA regulation was enacted. Yet,

grandfathered health plans still must comply with some consumer protections under PPACA.

Lincoln Financial Group has already implemented certain changes. For example, Lincoln

eliminated life time limits on benefits and increased the age for children to 26 to be covered

under parents’ medical plan. According to Alvarez, Lincoln Financial Group is in line with the

healthcare reform, however, a few changes will still need to take effect in the nearest future to

change the grandfathered status.

4

Vendor Choice

Prior to 2010, Lincoln’s regional carrier (for Philadelphia area and Florida) for the

medical plan administration was Independent Blue Cross. In 2009 the company put the business

out for a bid, looking for better discounts and financial structure. Their national carrier at the

time was Aetna that was not performing up to Lincoln’s expectations due to problems with the

service level. IBC’s pricing turned out to be significantly better. Additionally, IBC’s Blue Card

Network, which was the main concern for Lincoln, was sufficient to provide national coverage

for the company.

Eligibility Issue and Waiting Period

Lincoln employs over 9,000 employees and agents and the medical plan covers

approximately 25,000 lives, including agents and dependents. As any company, Lincoln must

properly define eligibility requirements. Generally, companies provide healthcare benefits to

full-time employees and their dependents. However, despite the high cost, Lincoln offers

benefits to part-timers too. Lincoln strongly believes that offering benefits to part-time

employees helps to attract and retain talented part-time workers. Before implementing these

eligibility requirements, the company carefully evaluated the plan costs vs. the cost of turnover

and concluded it was beneficial to the business in the long run.

Another remarkable and distinguishing aspect of Lincoln’s medical plan is that since

2004 it offers benefits for same sex domestic partners. According to Alvarez, it helps promote

equality, diversity, and innovation in the company. Lincoln is proud to offer domestic

partnership benefits because it attracts innovative talents; it is especially important for the

business units where there is a higher concentration of a younger generation. To be eligible for

the domestic partnership coverage, employees must provide written documentation, proving their

relationship. Alvarez says that the company has not had any problems ever since they started

providing this benefit. However, a dependent eligibility audit will be performed in 2012 to make

sure all the domestic partners currently receiving benefits are eligible to do so. A research

conducted by Ceridian shows that American companies lose an estimated $22 billion annually

paying for the health care of their employees’ ineligible dependents.2 Dependent eligibility audit,

is an important cost containment technique that Lincoln utilizes.

5

Lincoln Financial provides the medical plan with no waiting period for new hires and

their dependents, as long as they enroll in the plan during the first 45 days of hire. By eliminating

the waiting period, Lincoln takes care of the coverage gaps that might arise when people switch

jobs. Usually, eliminating waiting periods increases administrative costs because the company

must enroll every newly hire employee without a guarantee that he or she is going to stay with

Lincoln for a long period of time. This is not an issue for Lincoln Financial with their

historically low 2% turnover rate, as mentioned earlier.

Self-Funding

Lincoln’s medical and dental plans are self-funded (with the exception of Kaiser HMO).

Since it is a large company, Lincoln has significant past loss experience and, consequently, high

credibility. Therefore, it is easier to predict future expected losses. A fully-insured plan would be

much more expensive and irrational due to additional administrative costs and a risk charge.

Furthermore, Alvarez explains that self-funding gives the company full control over the benefit

plan design and may provide extra savings. Under ERISA’s Deemer Clause, self-funded

employer provided benefit plans are exempt from the state regulation which makes it easier to

administer the plan.

Lincoln Financial Group utilizes a Voluntary Employees’ Beneficiary Association

(VEBA) Trust as its self-funding vehicle to protect itself from catastrophic losses and to ensure

that employees are covered in the event of bankruptcy. The VEBA Trust allows the companies

deduct taxes on contributions when they are made. Additionally, if the company suffers

bankruptcy, VEBA will ensure payment continuation to eligible employees. Having a VEBA

Trust poses complexity in its administration. As Alvarez says, the company has to go through a

third party audit every year. Additionally, because VEBA is a non-profit organization, Lincoln

has to file a Form 990 with IRS.

Stop-Loss Insurance

After thorough evaluation of its claims history, Lincoln Financial Group decided that

Stop-Loss Insurance was not necessary. Since Alvarez started to work for Lincoln Financial, the

company has never had a catastrophic loss that would exceed their self-insurance budget. Stop-

Loss Insurance is very expensive and it is not cost-efficient for the company of this size to get it.

6

Additionally, Stop-Loss Insurance is very specific with what it covers, this can pose additional

problems. For example, pre-existing conditions are excluded. Lincoln’s plan, on the other hand,

is written on a guarantee issue to accommodate all its employees without regard to their health

status.

Four Plan Choices

Rising health care costs are a major issue for employers and Lincoln Financial Group is

not an exception. Cost efficiency and quality of care are two major issues an employer must

consider when implementing a medical plan. Lincoln has developed an excellent strategy in

balancing cost, quality, and employee satisfaction with the medical coverage they receive. An

85 % participation rate in the medical plan attests to a successful plan.

Lincoln Financial Group offers four medical plans. The “Core” PPO plan provides higher

copayments and higher maximum out-of-pocket expenses with lower monthly contribution

requirement. The “Enhanced” PPO is more expensive monthly but the out-of-pocket costs are

lower. This way the company transfers some of the financial risk to employees to make sure that

their expenses balance with their actual medical needs.

The third plan is CDHP with HSA. This plan gives employees more control over their

health care spending and encourages them to behave as rational consumers. The CD HP requires

lower monthly contributions from employees, incentivizing them to enroll. According to

Alvarez, the CDHP participation rate is lower than expected because employees are not properly

educated as to what the plan offers and usually workers become skeptical when they see a $1,500

deductible. Currently Lincoln is trying to implement a better communication strategy that will

inform employees about the benefits of this plan and increase the participation rate.

Kaiser Permanente HMO is the only fully-insured plan primarily because it insures only

300 California employees and the Law of Large Numbers will not apply. One of the issues with

this plan is that the company has no control over the plan’s design and structure. Although the

benefits are richer, the premiums are higher. According to Alvarez, the company is looking to

change this plan in the nearest future.

7

Overall, Lincoln implemented a medical plan design that balances its costs with its value.

The fact the company provides four different options gives employees freedom of choice to

select the plan that fits their needs best. This strategy is essential to prevent cost inflation and to

impose employees to be rational in their health care consumption.

Dental and Vision Plans

Lincoln Financial Group offers its employees a dental plan. Because it is the second most

wanted coverage after the medical coverage, the participation rate is 83 percent. The plan is self-

funded and employees pay the full cost. The reason for an employee-pay-all basis is cost

containment. The yearly limit for diagnostic and preventive care is $2000 which is higher than

the standard limit other companies offer to their employees ($1,500). Alvarez believes that it is

important to offer a higher limit in order to encourage employees to utilize dental care services

because dental health is very important and if neglected, dental problems can lead to other health

problems. Also, the “Passive” Dental PPO allows employees to stay with the dentist of their

choice, allowing them to use the doctor they trust. However, if they use in-network PPO

provider, the out-of-pocket costs are lower, which is an example of steerage the plan utilizes.

Lincoln’s Vision Plan is fully-insured and fully paid by the employees. This is a common

way vision benefits are generally offered by different companies, according to Alvarez.

Employees benefit from in-network providers’ discounts which is an example of a service

benefit. If they go out of network, they must file a claim to be reimbursed, which is an example

of an indemnity benefit.

Prescription Drug Plan

Originally, Lincoln’s prescription drug plan was self-insured and imbedded in the three

medical plans where Aetna was the national provider. The strategy proved to be costly and

inefficient. In 2009 Lincoln pooled all the small regional prescription drug plans into a single

plan where Medco took the role of a Pharmacy Benefit Manager (PBM). As a result, Lincoln

decreased the administration costs since the company no longer has to deal with three different

plans and several PBMs in case if a change or update needs to be processed. In addition, Lincoln

gained more control over the plan and increased employees’ satisfaction. The prescription drug

plan is set up to incentivize employees to purchase generic prescription drugs instead of brand

name drugs by providing lower copayments for the first ones. Lincoln has also implemented a

8

mandatory mail order for “maintenance” drugs (drugs that a person will be on for a long period

of time). After the third retail refill an employee is obligated to obtain the mail order refill. The

mail order copayment is twice the retail copayment, although, it provides a 90 day supply instead

of only 30. Thus, the prescription drug plan is designed to be less costly to both employer and

employee.

Flexible Spending Account (FSA)

Lincoln Financial Group offers its employees’ health care and dependent care Flexible

Spending Accounts. It provides an opportunity for employees to use their pre-tax dollars to fund

FSAs so later they can be used to pay for qualified medical, dental, vision and, prescription drugs

expenses. The issue the company has with FSAs is that they constantly must remind employees

about the limitations of the spending accounts and warn them that unused funds are forfeited to

the employer at the end of the coverage year. Another issue is the new PPACA regulation. In

2013, under PPACA the maximum contribution to FSA will be $2,500. Lincoln must apply all

the necessary changes to comply with the regulation.

Tobacco Surcharge

Lincoln Financial Group “penalizes” tobacco users by charging $30 in addition to

monthly contribution for the medical plan. The objective is to encourage employees to quit

smoking and, consequently, to decrease their overall health care costs, since non-smokers are

generally healthier than smokers. There is an issue with this program. Because it is very costly

to test all the employees to find out if they use tobacco, Lincoln requires employees to self-

report. According to Alvarez, some people lie they do not smoke but at the same time they

smoke outside the building during the day. This creates problems of unhappy employees who

honestly report themselves as smokers and pay additional $30 every month knowing that there

are employees who lie to avoid the penalty. Another issue is that an employer must be aware of

the legal requirements for such penalties. Under HIPAA, an individual cannot be required to pay

a greater premium on the basis of any health status-related factor. However, adopting a wellness

program that offers incentives for certain behavior, rather than health status, would be in

compliance with the law3. Thus, Lincoln employees can avoid this penalty by completing the

tobacco cessation program. The workers do not necessarily have to quit smoking, but the

9

completion of the program lets them have the surcharge removed for the remainder of the

coverage year.

Problems, Issues, Concerns, Considerations in the Design of Other Types of Non-Retirement Benefits

Besides the medical plan, Lincoln Financial Group provides its employees Group Life

Insurance, Accidental Death, Dismemberment (AD&D) and Loss of Sight Insurance, and Spouse

and Child Life Insurance Plan, STD, LTD, Educational Assistance Program, and Work/Life

Benefits. However, the company does not provide Long Term Care (LTC) primarily because the

workforce of Lincoln Financial Group is fairly young (between 35-40 years old). Thus, the

benefit is not necessary and it is not cost-efficient for both the company and the employees.

Nevertheless, Lincoln Financial Group has a product that incorporates Life Insurance and LTC

into one policy but it is written on an individual basis. So, if an employee wants LTC, he or she

can get it directly from the company at a discounted rate. This proves that Lincoln Financial

Group cares about their employees and always tries to find ways to satisfy their needs.

According to Alvarez, one of the issues the company faces is “noise,” which as he

explained happens when employees think that they want a certain benefit and they keep talking

about it, but when it comes to utilization, not many people use it. Lincoln Financial Group has

had times when they added a benefit and it was not worth its cost to the company. For example,

a few years ago the corporation implemented legal assistance services for the workers. Very few

employees were utilizing it and after conducting a survey and analyzing the expense of the

benefit, the company decided to rescind it. Additionally, Alvarez says that any time Lincoln

Financial Group contracts with a vendor it needs to go through a security assessment, especially

when the company is going to send out data with personal information. These security

assessments are very stringent and can take months to complete. The whole process is expensive

and takes a lot of resources, so before introducing a new benefit, the company must make sure it

is going to be useful for their employees and cost-effective for the business. Thus, when Lincoln

Financial Group faces a problem of this type the solution comes from conducting the surveys and

following their consultant Towers Watson’s recommendations, as stated earlier.

10

Group Life Insurance, Accidental Death and Dismemberment (AD & D) and Spouse and Child Life Insurance Plan

Lincoln Financial Group provides their employees with a Life Insurance and AD & D

Insurance. The main strategy behind providing this type of benefit is to be competitive with other

companies. Alvarez says that offering this benefit is fairly standard, so that is why Lincoln

Financial Group offers it. Yet, the company differentiates itself by providing a higher limit for

the life policy. The maximum possible limit available is 2.5 million, which is above the standard

limit other companies usually offer their employees. The objective is to accommodate the

executives, since Lincoln Financial Group does not provide a separate health and welfare benefit

plan for top officers. However, the plan is available to all eligible regular employees.

According to Alvarez, life insurance is provided on a guarantee issue basis as long as the

face amount does not exceed 1.5 million. No evidence of insurability (EOI) is needed in this

case. For any higher limit employees need to fill out a medical questionnaire as part of the

guidelines of Lincoln National Life Insurance Company that the plan is fully-insured with.

There are two reason for having a fully-insured Life Insurance and AD&D plan. First, there is a

potential for a catastrophic loss, so the company wants to transfer the liability for deaths or

dismemberment to a third party. Second reason is the administrative costs. According to

Alvarez, Lincoln Financial Group used to have a form of a self-insured life plan some time ago.

However, it was very difficult to administer it; it required a lot of resources and time to track the

claims, process them, and reimburse beneficiaries. With a fully-insured plan, all the company

does is just remitting the premium and all the claim processing is done by the vendor. Thus,

after analyzing and recalculating all the costs, Lincoln Financial Group switched to a fully-

insured plan that turned out to be more advantageous for the company.

The life insurance benefit is provided on a non-contributory basis up to the limit of

$50,000. When the benefit exceeds $50,000, a beneficiary or an employee would have to pay

taxes on the excess amount, which is called the imputed income. As Alvarez explained the

company pays for the life insurance up to the limit of $50,000 to avoid imputed income for their

employees. Any worker who wants a higher limit has the option to get it. If an employee elects

Supplemental Group Life and matching Supplemental AD&D Insurance, he or she pays the

entire cost of the coverage on an after-tax basis. The reason behind this after-tax contribution is

11

an attempt to avoid the deferred taxation for the employees. Overall, Lincoln Financial Group

provides the Life Insurance and AD&D benefit to stay competitive, while cost-efficient. The

company takes into consideration the taxation of the excess benefit and that is why provides its

employees with the basic coverage, leaving the higher limit option up to employees’ decision.

Short Term Disability Plan (STD) and Long-Term Disability (LTD)

STD plan or “salary continuation” is provided by Lincoln Financial Group because of

two reasons. First reason again, is competition strategy. It is common for companies to offer

this benefit. The second objective is to retain employees. For example, recently many employees

have had babies and the company does not want these employees to leave Lincoln. So, according

to Alvarez, the benefit provides a regular paycheck for the temporarily disabled employees to

retain them until they come back to work.

The STD plan is self-insured and is provided on a non-contributory basis. As Alvarez

states, with the years of experience it turned out to be more cost-efficient for the company to pay

for the plan in full than to hire and train new people if the disabled employees leave the

company.  The STD benefit can be received after seven consecutive days of disability and up

until 26-27 weeks, after that the LTD coverage begins.

The disability must be approved by the Group Protection division. One of the biggest

issues right now is abuse of STD plan due to moral hazard. Alvarez says that the company is

already working on a new strategy, trying to find a better way to manage this abuse. Lincoln

Financial Group is going to implement a more stringent way of administering the disability

claims. Many employees over utilize this benefit by going on and off the disability several times

throughout the year due to the same medical conditions. The company intends to look into the

process of approving these claims and, additionally, will probably change the definition of

disability in the plan description. Moreover, the design of the plan is set up to reduce moral

hazard. The amount of reimbursement decreases, the longer employees stay on STD, as

described in the Part II of this analysis.

LTD plan is integrated with the STD plan and, therefore, starts after the “elimination

period,” which is after the 27th week. The plan is fully-insured because of the possibility of

higher losses as opposed to STD. The company provides basic coverage that will pay 50% of the

12

employee’s eligible income (as defined in Part II) to, again, eliminate moral hazard by

incentivizing workers to return to work sooner. Employees, however, can get additional

coverage although they have to pay for it with after-tax dollars. The reason for this, per Alvarez,

is the fact that when the benefit is paid to the employee, it is not going to be taxed since he or she

has paid for it with the after-tax dollars. Overall, STD and LTD plans are designed to

compensate employees for non-occupational injuries and, therefore, retain them. The plans are

designed to be cost-efficient and to control moral hazard.

Educational Assistance Program (ETAP) and Employee Assistance Program (EAP)

Lincoln Financial Group’s main strategy behind providing Educational Assistance

Program is to differentiate themselves from the companies that do not offer this benefit. The

company provides assistance for those employees who want to pursue a college degree or job-

related course. This is a kind of long-term investment because once an employee gets a college

degree or a course certificate, he or she can contribute the obtained knowledge and skills to the

company, bring in new visions and ideas. Before implementing this program, Lincoln Financial

analyzed its benefit to the company and came to a conclusion that it is cost-efficient for them to

pay for the employee’s classes (business expense for tax purposes) to further strengthen their

qualification and productivity at work. Additionally, employees are more committed knowing

that their job pays for their education.

Employee Assistance Program’s strategy is to help employees to deal with everyday life

problems and stay focused on their jobs. For example, family counseling services, alcohol abuse

treatments, and adoption assistance – these services help workers to resolve the problems they

might get and concentrate on the work rather than think about solutions. Moreover, there are

on-site fitness clubs that keep employees active and healthy; the “health advocate” assistance

allows for any health related questions to be answered by professionals. In the long run these

programs lower the health care costs, which is beneficial to Lincoln Financial Group who pays

70% of them.

13

The Impact of Regulatory Compliance in the Benefit Plan Design and

Operation

Patient Protection and Affordable Care Act (PPACA)

As of today, Lincoln Financial Group is in line with the health care reform. Lincoln has

adopted all the necessary PPACA requirements up to this time. All preventive care services are

covered by the medical plan 100%, there is no life time limit for all medical plans, and

dependent coverage for children is extended to the age of 26. These changes increase the

company’s spending on health care by approximately 1.5%, according to Alvarez. Alvarez also

mentioned that Lincoln Financial tries to educate their internal employee benefits department to

ensure all the provided benefits comply with PPACA regulations. Additionally, Towers Watson

helps the company with all the regulations hassle by providing their consulting services.

Employee Retirement Income Security Act (ERISA)

Lincoln Financial Group is subject to several responsibilities under ERISA, most

important being fiduciary responsibility, plan communication, and non-discrimination testing.

Lincoln complies with fiduciary responsibility by offering a variety of medical plans and

different choices of other benefits. Whenever the company is in the process of deciding what

benefit and on what level is needed for their employees, Lincoln uses surveys to determine

employees’ needs and, therefore, act in their best interest. The company also regularly updates its

SPDs and makes sure each employee is aware of the benefits available and their costs, thus,

following ERISA communication requirement. Moreover, Lincoln Financial Group offers the

same benefits to all employees to ensure all workers are treated equally. Every year, Lincoln

hires a third party auditor to make sure there is no discrimination. ERISA regulations impose

some additional administrative costs, however, the company of this size is able effectively fund

the benefit plan administration.

Health Insurance Portability and Accountability Act (HIPAA)

According to Alvarez, the major issue with HIPAA is employee confidentiality. Lincoln

Financial Group assures its employees that their personal health information is safe and is not

subject to disclosure. The stringent security assessments mentioned earlier prove that.

14

Conclusions

While analyzing Lincoln Financial Group’s health and welfare benefit plan we thought of

certain changes that would help strengthen the plan structure as well as help the company to

continue to attract, reward, and retain top talents.

            Despite the fact Lincoln offers a comprehensive benefit plan, we recommend that the

company considers offering voluntary benefits to its employees in addition to the Work/Life

benefits it offers today.  According to Alvarez, the company employs people who are 30-40

years old, which is the average age when people start to have families. Lincoln may consider

on-site day care facilities, back-up home child care, and education planning. These

programs will improve productivity of employees who juggle between work and home.

Additionally, Lincoln should consider adding other wellness programs that will motivate

employees to live healthier lives. Programs such as Healthy Lifestyle, Health Incentive and

Online Health Services will help employees be more conscious about their nutrition and lifestyle.

Work and Life benefits are an excellent investment and a great retention tool that strengthens

employee’s ties with the employer.

Additionally, we recommend that Lincoln considers a partial subsidy for the dental plan,

which is a common practice among the companies of this profile.

Overall, the benefit plan Lincoln Financial Group offers to its employees is

comprehensive and cost-efficient. The 2 % turnover rate and employees satisfaction surveys

prove that.

15

Works Cited

1. Quinn, Richard D. "Views & Vents - Say What? Why Concept Communications Are Critical." Employee Benefit, 16 Sept. 2006. Web. 08 Dec. 2011. <https://blackboard.temple.edu/webapps/blackboard/content/contentWrapper.jsp?content_id=_2334923_1&displayName=Views+%26+Vents+- +Say+what

%3F+Why+concept+communications+are+critical&course_id=_4310_1&navItem=content&href=http%3A%2F%2Febn.benefitnews.com%2Fnews%2Fviews-vents-say-what-39587-1.html>.

2. "Ceridian: Dependent Eligibilty Audits Bring Employers Immediate often Staggering Savings."Blackboard Learn. Ceridian, 22 Feb. 2010. Web. 09 Dec. 2011. <https://blackboard.temple.edu/webapps/blackboard/content/contentWrapper.jsp?content_id=_2334918_1>.

3. "Wellness Works But Beware Legal Landmines." American Academy of Actuaries. Web. 08 Dec. 2011. <https://blackboard.temple.edu/webapps/blackboard/content/contentWrapper.jsp?content_id=_2415942_1&displayName=Wellness+Programs+Work%2C+But+Beware+Legal+Landmines+&course_id=_4310_1&navItem=content&href=http%3A%2F%2Fhr.blr.com%2Fdisplay.cfm%2Fid%2F19254>.

16

December 8, 2011

Glenn AlvarezSenior Employee Benefits AnalystLincoln Financial Group150 N. Radnor Chester RoadRadnor, PA 19087

Dear Glenn,

We would like to thank you for dedicating your time in helping us with our employee benefits project. Our work would not be successful without your assistance and cooperation. We were able to complete an effective analysis and our interview gave us a deeper understanding of the various issues and considerations that relate to a benefit plan design. We greatly appreciate the time you took to meet with us last Friday. It was a great pleasure to meet you and we look forward to speaking with you again. Sincerely,

Sviatlana Serhiyenia&Ludmila Scutaru

*This is a copy of an email “Thank you” letter sent to Glenn Alvarez

17