Navigating the new normal

With the cost of living rising and inflation remaining stubbornly high, employee benefits plans are more important than ever. However, with technology becoming ever-more intrinsic, ESG rising in importance to employees and questions around pension planning abundant, employers are scrambling to keep up with the ongoing industry changes. 

Speaking to Benefits and Pensions Monitor, Tony Conte, senior partner, and co-founder at Prime Benefits Group, says that there are three specific factors that have contributed to the evolution of his sector which employers need to take note of.

The first is the development and introduction of high cost specialty drugs.

“The impact to our industry has been significant,” says Conte. “Not only has the development of specialty drugs improved the lives of the patients that they're treating, but they have really impacted the bottom line cost to plan sponsors. The management of drug expenses in benefit plans has become a key issue that advisors and plan sponsors need to pay attention to”.

Secondly, Conte says that the digital revolution and the rise of new technologies have had a great impact on how employers manage their benefits plans.

“The evolution of technology has allowed greater creativity and flexibility in the design and management of plans, regardless of size” he adds. “It wasn’t that long ago, that flexibility was available only to very large employers with larger budgets to invest in benefit plans. With the advent of technology, true flex plans are now available to all plans regardless of size.  This flexibility now allows employers to tailor plans specific to the demographic of their employee population”.

Lastly, Conte comments on the pension planning side of things – something that’s seen dramatic change over the past two decades.

“We've gone from an era when defined benefit plans were common and employers were completely responsible for the management of pension plans and assumed all the risk, to one where the employees now assume both control and risk with the growth of defined contribution and group RRSP plans, also known as Capital Accumulation plans or CAP’s.  The development of technology, has allowed employees to take greater control over their destiny with respect to retirement savings, however, the risks involved in doing so remains a concern as many employees may not have sufficient income at retirement.”

Taking that technology aspect one step further, Conte believes that AI is poised to transform the realms of environmental, social, and governance (ESG) investments, as well as the challenge of decumulation—a pivotal issue for an aging population.

“Two areas come to mind immediately, which are ESG and decumulation,” he told BPM.

The shift from Defined Benefits (DB) plans to CAP’s has put a greater responsibility on individuals to accumulate wealth for retirement. Yet, as Conte points out, the real challenge emerges as the employee approaches retirement.

“Assuming you have been successful in accumulating sufficient capital for retirement in your CAP, the question then becomes, how do you collect the income from the plan? With DB plans it was easy – everything was done for you but with a DC pension plan or Group RRSP, collecting your retirement becomes a big issue. There are several risks that a retiree must consider and manage, such as Longevity, Inflation, Market, and Sequencing risks. The help of a professional financial advisor becomes a very important factor in understanding and managing these risks. As such, we have developed a process to help employers and employees in the decumulation phase. We foresee AI taking that process, which is primarily manual at this point and automating it, which will be a great help for all stakeholders.”

Turning to the topic of ESG investments, Conte acknowledges the growing demand for sustainable and responsible investment options. Despite the efforts of fund managers, achieving true ESG compliance remains a challenge – as does transparency.

“Employees are demanding transparency and greater access to information. ESG compliance monitoring and reporting has improved [but] there is still a long way to go towards achieving true ESG. Several fund managers have done a good job in communicating how ESG is an integral part of their fund management strategy, however more is needed.  In the meantime, individual investors need to continue to demand verifiable proof that ESG is part of a fund’s management process.”

At Prime Benefits Group, it’s Conte and his team’s ability to evolve with these seismic shifts that’s ensured their ongoing success. He explains that Prime Benefits is strong because of the people.  They are dedicated and care about the clients they serve.  The firm was founded on the principles of innovation, knowledge, and experience – three tenants that have allowed them to thrive in the current market.

“Our people and the principles that drive us are at the core of everything that we do. We work with our clients by taking the time to clearly understand their needs and then we use the knowledge and resources that we have, to create optimal solutions.”

For example, Conte says that as Canadian companies continue to grow and expand their operations overseas there’s been a shift from the traditional expatriate roles to more frequent business travel by Canadian employees. Something which posed a challenge where insurance is concerned.

“The only way to cover these employees, given the risks that were involved, was using blanket [insurance] policies,” he tells BPM. “[Employers] would put a deposit down; everyone would be covered, and travel would be tracked throughout the year. At the end of the year, there was a reconciliation that was completed. Many employers were shocked at the bill they received as a result of that travel.”

To combat these unexpected costs and eliminate surprises that could strain cash flow, Conte and his team partnered with insurance providers to create a novel program [at the time] tailored to the modern needs of global business travel. The program allowed companies to insure employees and pay premiums monthly for the exact days they were abroad, eliminating unexpected costs at year-end.

“This helped employers tremendously in preparing proposals for bidding on contracts overseas, because they were able to more accurately estimate the costs of insurance and build them into the bid for those projects.”

And the innovation doesn’t stop there. Conte reveals that, as one of Prime Benefit’s core values, that innovation saw them tackle the challenges of the pandemic head on, taking steps to address the burgeoning wellness concerns among employees and employers alike. Because, as companies grappled with the sudden upheaval, the need for a consolidated resource became evident.

“We saw that many employees were really struggling with overall wellness, whether it was physical or mental. [The industry made it so] literally every day you could wake up and there was a new resource available to employers and their workforces. Our team created a guide [in which] we took all of these resources and put them in one place. So, whether you’re an employer or an employee, the guide would direct you to the resources that were available specific to your needs.”

And this was all done in line with Conte’s team’s mantra of innovation, knowledge, and experience.

“We were proactive” he adds. “Using the knowledge, innovation and experience that we have, we were able to put that into play very quickly for our clients.”