Both Clairson and Quill held a series of meetings and distributed notebooks, pamphlets, and paycheck inserts explaining the finer points of flexible benefits. Many contained examples of how benefits packages could be designed and tax charts from which to gauge the impact of the salary-reduction portion of the program. Each management team encouraged its supervisors to discuss the plans with their coworkers on the job.
"I think it helped that I was too excited about the program to keep my mouth shut," says Ross with a laugh. "I was talking about it for more than a year, and it got to be that somebody would ask me when we were going to get those new benefits whenever I walked into the plant. By the time we signed everybody up" -- in a yearend gathering resembling a stockholders' meeting -- "they were ready to go."
But both companies are quick to point out that the planning that took place behind closed doors, before any announcements were made, was at least as important. "There were, and are, many decisions to make," says Ross. "For example, do you allot the same amount of flex-dollars for a single employee as for a married employee? I say yes -- to do otherwise is discriminatory, morally if not legally, I think." Quill made the same decision, although both companies became acquainted with others -- most notably, PepsiCo Inc. -- whose programs do provide for differing amounts.
Each of the two companies wrestled over the matter of medical insurance and whether it should be mandatory for those who would otherwise have no coverage. Both answered yes. "You can't let them risk a catastrophic illness without it," says Jack Miller.
Clairson allows employees to claim reimbursements quarterly; Quill every six months. Ross has made the flat decision that employees will be allowed to alter their benefits packages only once a year -- despite what hardship conditions might arise. At Quill, however, that matter is still under debate. "What happens if a spouse who works somewhere else dies," muses Arnold Miller, "leaving one of our employees without medical coverage? That's one I can't answer yet."
Another unresolved issue at Quill is whether to design the final version of the reimbursement account in such a way that employees can opt to take only cash -- no benefits. Some managers say yes -- that flexibility and freedom of choice ought to mean just that. But Arnold Miller says, "I'd rather see them roll it into a profit-sharing fund or spend it on benefits. I think if we started paying cash, employees would start seeing that as salary -- and that's not the intention of the plan at all." But both companies have decided that employees who quit should be entitled to whatever is left in the flex fund. "That's their money -- they've already earned it," says Ross.
As time goes on, each company will have to consider how far to expand the flexibility of the benefits package. Should the benefits allotment, or flex-dollars, be increased? Should new options be added? The two companies say they are certain they will do both. Clairson and Quill are discussing such additional coverage as personal legal expenses and costs connected with car or homeowner's insurance.
But the biggest unanswered questions for any company that has, or is about to install, a flexible-benefits plan involve the government. The section of tax code that has been interpreted to permit the proliferation of reimbursement accounts has been on the books since 1978, yet its definition has not progressed beyond the proposed-rule stage -- and almost nobody is betting on when it will. What is more, there are indications that the Treasury Department is looking at sections of the tax code enacted many years earlier that could be read as prohibiting the sort of transformation of benefits into cash or deferred compensation that reimbursement accounts are based upon. If that were to happen, benefits packages would have to revert to the more cumbersome cafeteria plan -- or, worse, the old group plan -- in which, in both cases, insurance coverage is only worth money if there is a claim.
Still, Gifford and other consultants say there is little risk in installing a reimbursement-account-based plan, so long as a couple of precautions are taken in their design. First, he advises, companies should make sure that there is nothing discriminatory about the plan, either in terms of the groups covered by it or the benefits offered within it. Second, Gifford sees merit in restraining the use of salary reduction. A figure he is "comfortable with" is $250 a month, or $3,000 a year per employee, although he has little quarrel with those who might choose to go up to $5,000. Just be prepared, he says, to justify the policy and, perhaps, change it.
"I'm reasonably certain that Congress or the Department of the Treasury is going to want to cap the amount of money that can be taken off the tax rolls via salary reduction," Gifford explains. "It's inconceivable to me that it's going to remain as wide open as it has been."
Be that as it may, Gifford is one of many consultants who is proceeding under the assumption that any penalties the government might attach to future rules and regulations pertaining to flexible benefits would be prospective, and not intended to punish those that have installed plans thus far. "We're telling our clients that, to the best of our knowledge, all they'll have to do is make some changes for the future."
That prospect doesn't bother Ross in the least. "Whatever changes the government comes up with, I'm sure I can modify the plan to meet them," she says. After all, it is flexible, "and that's the beauty of it."
