Download Outlined below is a summary of the meeting

International Benefits Committee
October 16, 2003
Outlined below is a summary of the meeting. Participants included representatives from:
AIG
AllNet
Aon Consulting
Avon
Black Mountain Group
Bristol-Myers Squibb
BUPA International
Equant
General Electric
Generali
Gillette
GMAC-RFC
Hewitt Associates
Honeywell
Johnson & Johnson
Mastercard International
NCR
Prudential Financial
Swiss International
Towers Perrin
Watson Wyatt
Wyeth
XN Holdings
Open-Forum Discussion
Topics discussed included:
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Benchmarking competitive practices in foreign operations
Pension plan COLA adjustments; challenge of overcoming entitlement mindset of
employees
Review of global procurement of benefit services and insurance
Governance: process and oversight procedures (plan design, investment management,
trustee training)
Process management: establishing regional shared-service centers
Challenge following acquisitions of identifying plan features, liabilities, assets,
opportunities for cost savings
Impact of new mortality tables on pension plans which produce lower benefits
combined with DC plans where assets have been reduced by poor stock performance
has resulted in lower than intended benefits
South Africa: new legislation which focuses on pension plan surpluses that now
require benefit recalculation for employees who left company from 1980 forward and
who may be difficult to locate
Use of benefits plan analysis software helped not only determine programs in current
locations but also a tool during cross-border acquisition due diligence
Offshoring of service activities to India, the Philippines, and China
Terrorism and other catastrophic risk coverage may have local limits; combined with
reduced capacity in marketplace, requires attention to risk exposure
Benefit plans for expatriates who retire in a country other than their original home
country
Managing local health care costs which are rising at up to 20% p.a. (Brazil)
FAS 132 requires greater disclosure perhaps as early as late December 2003
Employee benefit and compensation value statements for employees around the world
Mexico: introduction of flexible benefits
Post merger benefit plan harmonization
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International Benefits Committee
October 16, 2003
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Challenge of “underwater” stock options
Japanese pension plan redesign to address challenge of current plan where liabilities
are two times assets; may evolve into two part plan (cash balance and DC); can fund
the DC over 4 to 8 years to cushion the initial cost
Question about Housing Allowances for mid-level managers in the Middle East and
Africa
Eastern Europe as an active area of business growth increases the need to
understand/develop benefit plans for local national employees
Spain: Update on Corporate Benefit Plans
Arturo Fisher of Hewitt Associates described Spain’s progress during the last ten years in
catching up economically with other European countries.
In Spain, a major challenge is how low birth rates will affect the future financing of
pension benefits. He reviewed government- and employer-provided retirement benefits.
In March 2004 there will be national elections so not much social insurance reform will
occur until after then.
Currently the national social insurance system does not have a deficit, but that will
change in the not too distant future if current demographic trends continue. The
government is considering ways to reduce its liability, i.e. by requiring longer
participation in the system.
Employer-provided pension plans fall into two tiers: (1) qualified plans and (2) insured
plans. The insured plans allow greater design flexibility, especially for higher paid
employees.
In Spain, the trend for the last few years has been towards DC plans. Unlike in the US, in
Spain employees do not have an investment choice. The focus is moving towards plan
administration and investment performance.
India: Update on Benefits and India
Monica Nawal of Towers Perrin described current trends, which vary by industry sector
and by job level.
GDP growth for 2004 is projected to be at 6% (second highest in the world). Of the one
billion Indian nationals only 10 million have college degrees, so there still is a relative
shortage of educated workers to draw from.
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International Benefits Committee
October 16, 2003
Monica reviewed the traditional approach to compensation and benefits and the current
trends within high growth sectors such as IT. The demand for tailored benefits or
compensation is rising.
There is a need to understand the key elements of Cost to Company expenses (base
salaries: 30 – 40%; cash allowances: 30 – 35%; variable bonuses: 5 – 25%; perquisites:
25 – 35%; benefits: 30%). One trend is to move to non-financial rewards such as on-site
health clubs and short-term international assignments.
IT sector employees actually have lower total compensation than their counterparts in
Financial Services and Consumer Goods where there is a smaller pool of qualified
employees.
Monica then described the growth of the Business Process Outsourcing (BPO) industries
and how BPOs are expanding into new cities. She also pointed out that staff turnover
within call centers is relatively high at 35 – 40%.
For 2004, salaries are expected to grow about 7 – 12% in most industries.
France: Update on Benefits Plans
Erwin Janush of Aon Consulting described the new tax-advantaged pension account, the
Plan d’Espagne Retraite Populaire (PERP).
Most employees currently receive primary retirement benefits through the national social
insurance system. However, private retirement plans are emerging. The PERP is the first
significant attempt to encourage individuals’ savings towards retirement.
Under the PERP, 10% of gross income can be saved (up to 23,500 euros). Note: there is
a requirement to test interaction with other plans for tax efficiency. While the legislation
has been passed, the administrative regulations are yet to be promulgated.
Erwin then described trends in executive and general employee retirement planning. In
France there are not many tax advantaged opportunities for employees. Potential
solutions will be reviews of options for executives vs. general employee groups.
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International Benefits Committee
October 16, 2003
Risk Management Facilities for Globally Mobile Employees
Ed Pazicky and Anthony Alberico described XN Holdings, which was formed in 2001 to
provide expatriate-related risk management services. They assist employers in providing
a full range of insurance and risk products and services, with considerable flexibility for
the employers and the expatriates in plan design, options, and cost-sharing.
The next meeting of the International Benefits Committee will be in New York City
on February 25, 2004.
For information about the International Benefits Committee, contact Bill Sheridan
at 212-399-7128 or [email protected].
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