BENEFITS CHALLENGES AND TRENDS FOR EXPATRIATES · PDF fileMARCH 2012 Mark Price, Roger Herod...
Transcript of BENEFITS CHALLENGES AND TRENDS FOR EXPATRIATES · PDF fileMARCH 2012 Mark Price, Roger Herod...
MARCH 2012
Mark Price, Roger Herod and Callum Burns-Green
BENEFITS CHALLENGES AND TRENDS FOR EXPATRIATES AND INTERNATIONALLY MOBILE EMPLOYEES
MERCER 1
AGENDA
• Overview of survey participants
• Typical expatriate benefits
• Types of assignment
• Benefits challenges
• Survey highlights
• Benefits:
– Retirement
– Expatriate localization
– International medical
– Overview of life & disability
• Questions & contact details
MERCER 2
RESPONDENTS BY REGION288 MNCs REPRESENTING 119,000 EXPATRIATES
Non-EU W. Europe
2%Other
2%Latin
America2%
AsiaPacific
15%
European Union
21%
NorthAmerica
58%
MERCER 3
RESPONDENTS BY ANNUAL REVENUE64% EXCEED $1 BILLION
2% 3%
11%
11%
38%
26%
8%
< $25 M
$25 M – $100 M
$100 M – $500 M
$500 M – $1 B
$1 B – $10 B
$10 B
Not reported
(Data in USD)
MERCER 4
BENEFITS TYPICALLY PROVIDED TO EXPATRIATES
• Retirement
• Medical
• Accident
• Death
• Disability
• Other (dental, vision, maternity, emergency assistance/evacuation, dependent medical, critical illness and short-term disability)
MERCER 5
TRADITIONAL
Assigned for 1–5 years, expecting to return to home country
LONG-TERM
Assigned for > 5 years, not localized to host country programs, not expected to move country to country
GLOBAL NOMAD
Move country to country on varying assignments
FIVE ASSIGNMENT TYPES
MERCER 6
SHORT-TERM
Assigned < 1 year (excluding those who travel frequently on business); most will remain in home country programs and maintain home residence
LOCALIZED
Moved to host country programs; no longer considered a traditional expatriate
FIVE ASSIGNMENT TYPES, CONT’D
MERCER 7
ASSIGNMENT TYPESDISTRIBUTION IN SURVEY
77%
17%
6%
Expatriates Short-term Global Nomads
79%
11%
10%
2008 2012
MERCER 8
CHALLENGES IN EXPATRIATE BENEFIT PROVISIONS
20%18%
14%
2%
36%
27%
5%2%
22%24%
15% 15%
Developingglobally consistent
approach
Ensuring Expatsare not
disadvantaged
Cost containment Ensuring smoothtransition at end of
assignment
Developingpolicies & plans for
new countries
Other
2008 2012
MERCER 9
KEY SURVEY HIGHLIGHTS
• 63% of traditional expatriates are maintained in home country retirement plans
• 12% of companies have established International Pension Plans to ensure continuity of benefits for global nomads and long-term expatriates
• 60% of International Pension Plans are now DC plans vs. only about 20% in 1991
• 53% of companies experienced premium increases of 6% or more in their international medical plan premiums at their last renewal
MERCER 10
RETIREMENT
MERCER 11
KEY RETIREMENT BENEFITS CHALLENGES
LONG-TERM NATURE OF PENSIONS
NATURE OF ASSIGNMENTS
BENEFITS FRAGMENTATION
EMPLOYEE EXPECTATIONS
TAXATIONCOST
ALLOCATION
MERCER 12
• Leave home country, and join host country plans
• Suitable for localization and DC environments
• Equity between expats and locals
• Can fragment benefits
APPROACHES TO PROVIDING BENEFITS RETIREMENT
INTERNATIONAL PLANHOME COUNTRY HOST COUNTRY
• Maintain membership in home country plan
• Suitable for short- and medium-term assignees (up to 5 years)
• Avoids fragmentation• Aligns with employee
expectations• Can be expensive, hard
to administer
• Join dedicated inter-national benefit programs
• Participation in home/host country programs may be waived
• Suitable for global nomads• Provides common design,
addresses home country coverage limitations
• Tax challenges, limits on membership
MERCER 13
RETIREMENT BENEFITS FOR TRADITIONAL EXPATRIATES
2%
10%
2%
6%
5%
7%
63%
5%
Other
We do not have this group
Through a regional plan
Covered under host country plan
Covered under headquarters plan
Case by case; no set approach
Remain in home country plan
Through an international plan
MERCER 14
INTERNATIONAL PENSION PLANSPERCENT OF RESPONDENTS THAT SPONSOR THEM
No88%
Yes12%
MERCER 15
INTERNATIONAL PENSION PLANSTRENDS IN PLAN TYPES
0
10
20
30
40
50
60
70
80
90
DB DC Hybrid
1991 1997 2001 2005 2008 2012
%
MERCER 16
INTERNATIONAL PENSION PLANSFUNDED STATUS
Other19%
Unfunded19%
Externaloffshore
insurance26%
Externaloffshore
trust37%
MERCER 17
INTERNATIONAL PENSION PLANSDC – FORMS OF PAYMENT
48%
24%
14%
10%3%
Lump sum only
Annuity
Employee choice
Lump sum w/annuity option
Other
MERCER 18
INTERNATIONAL PENSION PLANSDC – CONTRIBUTION STRUCTURES
78%
9%
4%9%
% of compensation
Employer matching
Varying rate
Other
Average employer contribution rate is ~ 8.5% of compensation– change from 9% in 2008 and 7.5% in 2005
Average employer contribution rate is ~ 8.5% of compensation– change from 9% in 2008 and 7.5% in 2005
MERCER 19
LOCALIZATION
MERCER 20
LOCALIZATIONWHAT ARE THE TRIGGERS?
3%
73%
39%
27%
Employee request onassignment completion
After specified period Case by case Other
MERCER 21
LOCALIZATIONWHAT HAPPENS TO PENSION BENEFITS WHEN LOCALIZED?
3%
5%
8%
11%
18%
1%
12%
12%
14%
18%
Other
Remain in home plan
Host plan with transfer ofbenefits where possible
Case-by-case
Host plan, no special treatmentof home service
Most cases
All cases
MERCER 22
INTERNATIONAL MEDICAL BENEFITS
MERCER 23
• Equity between expats and locals
• Benefits appropriate to host country
• Local employer costs in line with domestic burden
• Local tax relief – both corporate and personal
APPROACHES TO PROVIDING BENEFITS MEDICAL
INTERNATIONAL PLANHOME COUNTRY HOST COUNTRY
• Aligns with employee expectations
• Reinforces assignment’s temporary nature
• Maintains equity with home country peers
• Aligns with home country Social Security
• Avoids problems with pre-existing conditions
• Common design; equity among expatriates
• Reduces administration effort
• Relieves financial, time resource constraints
• Often anticipated by Social Security reciprocity agreements
MERCER 24
INTERNATIONAL MEDICAL PLANELIGIBILITY CRITERIA
24%
31%
21%
1%
8%
15%Other
Length of service
Employee position/level
Length of assignment
Country / region of origin
Expatriate type
MERCER 25
INTERNATIONAL MEDICALCOVERAGE BY INSURANCE COMPANY
23%
1%
6%
3%
11%
10%
46%
30%
1%
6%
9%
10%
11%
32%
Other
Aviva
AXA
Allianz
Aetna
BUPA
CIGNA
2012
2008
MERCER 26
INTERNATIONAL MEDICALHIGH-VALUE BENEFITS INCLUDED
81%
74% 72%69%
56%50%
2%
Primary care Routinematernity
Chronic Illness Routine dental Evacuation Repatriation Other
MERCER 27
INTERNATIONAL MEDICALPREMIUM INCREASES AT LAST RENEWAL
0 5 10 15 20 25 30 35
None
1-5%
6-10%
11-15%
16-20%
Over 20%20122008
%
MERCER 28
INTERNATIONAL MEDICALCOST CONTAINMENT MEASURES
3%
20%25%
28%
42%
50%57%
Employeedeductible
Co-insurance Annualbenefits limits
Restrictions onproviders /networks
Annual claimscap
Claims pre-authorisation
Other
MERCER 29
OVERVIEW: DEATH AND LONG-TERMDISABILITY
MERCER 30
DEATH BENEFITSMETHOD OF PROVISION BY TYPE OF EXPATRIATE
0
10
20
30
40
50
60
70
80
Home Host HQ International Tailored Other
Short-term Traditional Long-term Global Nomads & Local+ Localised
%
MERCER 31
LONG-TERM DISABILITY BENEFITSMETHOD OF PROVISION BY TYPE OF EXPATRIATE
0
10
20
30
40
50
60
70
80
Home Host HQ International No LTD Other
Short-Term Traditional Long-term Global Nomads & Local+ Localised
%
MERCER 32
MERCER’S OTHER SURVEYS AND RESEARCHWORLD ECONOMIC FORUM, ASSIGNMENT POLICIES SURVEY
TODAY’S GLOBAL BENEFITS SURVEY
AND PRESENTATIONWEF RESEARCH ON TALENT MOBILITY
• Thanks to all who participated
• Copy of presentation and link to recording to be emailed
• Full report available at end of April
• Pre-order report at www.imercer.com/ expatbenefits
• Participation open later this week in English at www.imercer.com/wiapp
• Soon available in Spanish, Japanese, Chinese, Korean
• More than 1,000 MNCs took the last survey
• New this year – assess-ment tool for 7 different common expatriation patternswww.mercer.com/
globaltalent
2012 WORLDWIDE SURVEY OF INT’L ASSIGNMENT
POLICIES & PRACTICES
QUESTIONS?
MERCER 34
CONTACTS
Mark [email protected]+44 (0)20 7178 3652
Roger [email protected]+1 847 847 1542
Callum [email protected]+1 415 743 8777
Pre-order Mercer’s 2011/2012 Benefits Survey for Expatriates and
Internationally Mobile Employees
www.imercer.com/expatbenefits
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