2013 EMEA EXPATRIATE MANAGEMENT CONFERENCE APRIL 2013

Transcription

1 2013 EMEA EXPATRIATE MANAGEMENT CONFERENCE APRIL 2013

2 EXPATRIATE RETIREMENT & HEALTHCARE ISSUES 12 APRIL 2013 Katie Potter London

3 AGENDA Introduction Emerging themes and recent trends Key challenges Retirement Approaches to provision International pension plans International medical Approaches to provision Design Coverage by insurance companies Premium increases Focus on cost / strategies to mitigate premium increases

4 INTRODUCTION BIO Working in International Consulting Group since October 2010 Experience across all aspects of international employee benefits variety of different international clients in various sectors Focus on Global Benefits Management, Expatriate Benefits and Total Reward Management of plans Benchmarking on general market practice and sector specific practice Studying towards Diploma in International Employee Benefits (IEBA)

5 INTRODUCTION EXPATRIATION / MOBILITY CYCLE

6 EMERGING THEMES Governance and Centralisation Initial draft / fundamental re-write of Expat / Mobility policy Existing approaches to expatriate categorisation and retirement benefit provision questioned Re-evaluation of categorisation of expatriate population Increased degree of localisation Historic Packages Increasing focus on those employees who have remained on expatriate-style packages even where localised (local+) Engaging with employees to remove benefits - Either immediately or over time phased reduction in benefits - In some cases, transfers of cost centre from central to local

7 KEY RETIREMENT BENEFITS CHALLENGES NATURE OF ASSIGNMENTS LONG-TERM NATURE OF PENSIONS EMPLOYEE EXPECTATIONS BENEFITS FRAGMENTATION TAXATION COST

8 RETIREMENT 7

9 EXPATRIATE RETIREMENT PROVISION OPTIONS Prevalence Home country / Host country / IPPs Use of domestic plans Localisation Use of cash allowance in lieu of pension reduction in administration and tax concerns IPPs / ISPs

10 INTERNATIONAL PENSION PLANS WHAT ARE THEY? An IPP is an offshore pension or savings plan Typically located in Channel Islands Why a savings plan? Many plans allow for benefits to be taken based on: - Service with the company - Specific eligibility criteria Historically have been used across a number of circumstances Offset any Social Security issues Augment retirement benefits Facilitate pension provision where there is no plan in the host country or for Global Nomads Increasing use of IPPs although eligibility criteria is being tightened Mainly for areas where material loss of occupational or Social Security retirement benefit accumulation Reduction in use in other areas?

11 INTERNATIONAL PENSION PLANS: PLAN DESIGN Normally offshore and relatively flexible, strong trend towards DC Initial decisions: Can be funded or unfunded Trust or insurance contract Eligibility is key Contributions: Employer contributions fixed level or vary by location, category or age May require or allow employee contributions Benefits: Typically payable as lump sums Locked in until retirement (at least while still with sponsoring organisation) Member s account payable on death or disability Investment choice from preselected range of funds

12 INTERNATIONAL PENSION / SAVINGS PLANS CONSIDERATIONS Restrictions Minimum requirements on contributions Membership - often maximum of 10% US citizens / green card holders (ERISA and FATCA reporting requirements) Auto enrolment (AE) in the UK Can be country restrictions where an external trust is being used UN / EU financial sanctions lists countries where expatriates cannot be covered Transfers to individual arrangements

13 INTERNATIONAL PENSION PLAN IMPLEMENTATION PROCESS AND CONSIDERATIONS 1 PHASE 1 PHASE 2 PHASE 3 PHASE 4 Objective setting & delivery IPP design Provider review and selection Implementation Objectives of provision Weighting of objectives to aid selection of a provider Identification of target employee population and eligibility criteria Insurance or trust based DB / DC, funded or unfunded Bundled / unbundled Employee contributions (if applicable) Review of intended benefits for target population sections Financial strength Charges Management information and reporting Administration capability Online functionality Employee communication services Investment consulting and member communications Implementation support

14 INTERNATIONAL MEDICAL 13

15 EXPATRIATE HEALTHCARE TRENDS Companies continuing to globalise throughout recession Domestic markets under pressure Mid-market and SME companies increasingly operating overseas Increasing globalisation trends from developing countries Mix of expatriates changing Benefits evolving due to this Move to central purchasing Consistent benefits benchmarked globally / segmentation strategies Ease of administration Premiums leveraged globally Development of more sophisticated benefits management strategies globally Multinational pooling approach Development of Captive solutions

16 EXPATRIATE HEALTHCARE TRENDS - COMPLIANCE Increasing trend towards admitted insurance locally, which is accelerating Government health budgets under pressure Typically expatriates are caught up in domestic reform Areas of concern include Middle East, Australia, US healthcare reform

17 INTERNATIONAL MEDICAL PLANS: COVERAGE BY INSURANCE COMPANY CIGNA 32% 46% BUPA Aetna 11% 10% 10% 11% Allianz 3% 9% AXA 6% 6% Aviva 1% 1% Other 23% 30% Mercer 2011 / 2012 Benefits Survey for Expatriates and Globally Mobile Employees

18 INTERNATIONAL MEDICAL PLANS: PREMIUM INCREASES AT LAST RENEWAL Over 20% 16-20% % 6-10% 1-5% None % Mercer 2011 / 2012 Benefits Survey for Expatriates and Globally Mobile Employees

19 INTERNATIONAL MEDICAL PLANS: COSTS / STRATEGIES TO MITIGATE PREMIUM INCREASES Partnership approach to negotiations Actuarial analysis of claims fund Negotiations around administration rates which can be as high as 25% Break link with medical inflation at 12% Choose provider with strong hospital network mapped against expatriate locations

20 Pure Risk Cost (PRC) per Life per Year INTERNATIONAL MEDICAL PLANS: ACTUARIAL ANALYSIS 550 XYZ Medical Expenses Projection and 90% Confidence Interval for 2009/ Currently 9,543 risk lives => Expected Fund for 2009/10 of 4,276,000 Long Term Inflationary Trend is 8.3% 200 Jul 03 Dec 03 Jul 04 Dec 04 Jul 05 Jan 06 Jul 06 Jan 07 Jul 07 Jan 08 Jul 08 Jan 09 Jul 09 Jan 10 Monthly PRC 12-Month MA PRC 5% Lower CI 95% Upper CI Expected Fund Long Term Trend Based on our actuarial analysis, we are able to provide a complete risk profile for the full as well as segmented group therefore allowing Benchmark insurer terms against expected claims costs Identify the preferred claims funding mechanism, re-insurance and risk charges in order to support our clients longer terms benefit strategy

21 INTERNATIONAL MEDICAL PLANS: COSTS / STRATEGIES TO MITIGATE PREMIUM INCREASES Cost containment Segmentation / localisation of benefits Benefit redesign copayments etc Reduce areas of coverage Risk Management Medical assistance Some now penalising expatriates for non-preauthorisation of claims Increasing Case management approach More robust risk management generally Increasing development of medical second opinion services Provider has to demonstrate value add to claims process Audit provider processes

22 QUESTIONS?

23 CONTACT KATIE POTTER +44 (0) Order Mercer s 2011/2012 Benefits Survey for Expatriates and Internationally Mobile Employees

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