The changing role of global benefits teams 

The management of employee benefits is still highly manual when compared to other areas of business operations. This has been driven by a complicated history and complex benefit plan rules, which have prevented full automation from being cost-effective, particularly for smaller populations and where many legacy plans are in place.

AI offers the possibility of feeding unstructured data in multiple languages into a unified structure. This should facilitate vastly improved automation of administration and employee communication, but the required investment in technology will likely necessitate a global approach. Realistically, there is still a long way to go before we reach a truly digital world for all employee benefits, where we can be sure that the data is secure in terms of both privacy and protection.

We expect a further acceleration in the outsourcing of self-administered plans, particularly retirement plans, both to reduce costs and reduce risks. This is particularly true for retirement plans, where the investment, admin, and compliance risks have become unmanageable, especially given the push to reduce local headcount and avoid key-person risk from the small teams of experts needed to manage non-core business activities.

We have already seen a major move to outsource fiduciary investment management responsibilities to Outsourced Chief Investment Officer (OCIO) solutions. The assets under management by OCIO providers afford leverage that leads to significant savings in investment management fees and reduces the internal management time required, while simultaneously improving reporting and reducing the risk to the plan sponsor. As plan sponsors see the opportunity to simplify plan management, reduce internal costs and improve outcomes for members, we expect this trend to continue, even for the largest plans.

In many markets, we have seen consolidators in the form of third-party master trusts, pooled employer plans, and product-based solutions, which use economies of scale to offer better value for plan members and improved member communication and modelling tools. In some countries, such as the UK, the Netherlands, and Ireland, local regulators have been pushing openly towards the greater use of consolidators in order to improve the quality of plan management and member outcomes. Again, we expect this trend to continue as plan sponsors see the opportunity to reduce costs, risks, and the required management time, with an improvement in outcomes for members in the process.

Global benefits teams may now find themselves needed by local countries to assist in making changes to benefits, help with automation and digital employee communication, and ensure that the plans offer good value for money for both the local plan participants and the local company. In this more collaborative role, it should be much easier for the global benefits team to ensure that potential risks and costs are identified in advance of proposals and that global policy is followed. Often, a formal approval mandate will no longer make sense, as this was needed at a time when central teams had a poor line of sight on potential changes under consideration locally.

This means that in the future, the global benefits team may play a stronger advisory role when potential changes are being considered. As a positive by-product of this development, an extra check can be made that any local conflicts of interest are properly managed long before proposals become final. Local teams would be expected to involve the global benefits team early in the process to ensure that global policy and principles are followed when changes are made, instead of a formal request for approval being required at the end of the process.

To ensure proper oversight, we also believe that local teams will be required to nominate a contact to take responsibility for plans locally. The contact would be responsible for ensuring that the global database of benefit plans is up to date for their country, or that documentation fed into AI-generated databases is complete and correct. This person may come from any of the functions, not just HR, and may require some training and upskilling at the beginning. We believe the contact’s responsibility will extend to ensuring that key risk factors are reported to the global benefits team (such as investment returns and fees in DC retirement plans), as well as the number and nature of any formal complaints relating to the benefit plans.

With the changing role (or even partial removal) of a formal committee at the global level to retrospectively review and sign off on benefit changes comes a risk of reduced global consistency, lower cross-functional involvement, and the potential loss of one or more senior executive sponsors. To ensure continued global consistency, while also allowing a more agile approach to benefits changes (as explained above), global organizations are moving towards a more principle-based approach by introducing global minimum standards.

Global minimum standards establish a universal framework of guiding principles and mandatory design elements to ensure consistency across the organization, while leaving sufficient room for adaptation to meet locally relevant market practice and employee needs. With global minimum standards, the worldwide strategy-setting process and cross-functional alignment are removed from the formal global approval process for material benefits changes, to the extent that local plans are within the global framework.

There are many advantages to this new combination of global minimum standards and the more consultative approach of the global benefits CoEs. Until now, in most organizations, global pension or benefits committees have, in practice, generally had veto rights for changes to defined benefit (DB) retirement plans, due to the long-term and uncertain cost and liability pattern. These central approval requirements for DB retirement plans were introduced as a result of the major balance sheet and cash contribution shocks recorded in times of market turbulence in the first decade of this century. In some cases, responsibility was also extended to include medical benefits and defined contribution retirement plans. The new consultative model, fortuitously made possible through HR transformation, provides the opportunity to influence benefit strategy locally to a much greater extent than previously.