Editorial ¦ March 3, 1997
Valuing all benefits of employees

By Barry B. Burr

Beyond their salary or wages, arguably few employees, or even executives, know the comprehensive value of their benefits, from pension and 401(k) plans to health care and death benefits, such as Social Security.

These benefits are obscure assets for employees, and calculating their value is a daunting exercise, not only because of the mathematics but also the research of the terms of coverage. Without such knowledge, it's hard for employees to plan their finances, as they are increasingly being asked to do, such as in 401(k) plans.

But King Industries Inc. in Norwalk, Conn., has prepared for its employees a neat information report it calls a coordinated statement of benefits, personalized for each employee and their families, according to Floyd Wilbur, King vice president-controller. David Langer, Co., a New York actuarial firm, developed the coordinated statements for King, its client.

The King statement includes not only benefits provided directly by the company but also non-employer benefits, such as Social Security. Plus, it projects out the value of all the benefits, year by year.

The statement goes far beyond the benefits statements sent out annually by employers to employees, listing their total salary and the value of their accrued pension fund benefits.

A typical statement runs 24 pages.

"The thought was to provide more comprehensive information to encourage employees to provide for the future," Mr. Wilbur said. "It wasn't done to benefit the company."

The catalyst for the idea was the company's concern over the health of a fairly young employee. "We wondered what he had in the way of financial resources," Mr. Wilbur said.

The innovative statement enables "employees to see at one time all the applicable benefits relating to each event triggering benefit payments," according to David Langer, president of the actuarial consulting firm.

"In order to see the total picture at present, an employee needs to assemble a variety of benefit plan data, and these may not be readily available," he noted. For example, "if a married male employee wants to know the health benefits currently payable to his wife and children, he has to read his group life insurance certificate, obtain his account balance in any defined contribution plan, try to decipher his death benefit in any defined benefit pension plan, and will likely be in the dark on Social Security's substantial death benefits."

With this coordinated benefit statement, the employee can see a comprehensive listing of death-related benefits, how much they will pay out now in the event of a death and how much the payout will be each year in the future to each of his beneficiaries until the benefits end. The statement lists the name and age of each beneficiary that will receive benefits.

The statement gives employees a better picture of their financial value. It helps them see how much insurance they might need to supplement their expected annual income from pension or death or health care benefits to maintain a certain level of income.

"I don't know if we will do it every year," Mr. Wilbur said of the statement. "It's an expensive project. It would depend on how quickly things change. We might do it again every few years or for new employees or for employees whose marital status has changed." Regardless, it's a great idea.

Copyright 1997 Crain Communications, Inc. Pensions & Investments, March 3, 1997
Reproduced with permission.