Mary l Nguyen - Crcindustries.fall2011

8/2/2019 Mary l Nguyen - Crcindustries.fall2011

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LOSS EXPOSURE MATRIX

LOSS EXPOSURE COVERAGE? BENEFITS PROVIDED

MEDICAL EXPENSES

Hospital/ Physician YES High-Option PPO; Low-Option PPO; FlexibleSpending Account (FSA)

Dental YES Dental Plan - Delta Dental; FSA

Vision YES Vision Service Plan (VSP); FSA

Prescription YES Prescription Drug Plan Medco; FSA

LTC NO

Retiree Health Care NO

LOSS OF INCOME: DEATH

Non-Accidental, Non-

Occupational Death

YES OASDI; Term Life Insurance; AD&D Insurance;

Supplemental Life Insurance

Accidental Death YES OASDI; Term Life Insurance; AD&D Insurance;Supplemental Life Insurance

Occupational Death YES OASDI; Term Life Insurance; AD&D Insurance;

Supplemental Life Insurance; Workers

Compensation

LOSS OF INCOME:

UNEMPLOYMENT

YES Unemployment Insurance through the state of PA

LOSS OF INCOME: DISABILITY

Short Term, Non-Occupational YES Short-Term Disability Insurance; OASDI; AD&D

Insurance; Workers Compensation; 401(k)

Long Term, Non-Occupational YES Long-Term Disability Insurance; OASDI; AD&D


Short Term, Occupational YES Short-Term Disability Insurance, OASDI, AD&D


Long Term, Occupational YES Long-Term Disability Insurance; OASDI; AD&D


LOSS OF INCOME: RETIREMENT YES 401(k); Pension Plan; Roth 401(k)

OTHER EXPOSURES

Educational Assistance YES Tuition Reimbursement

Work/Life YES Wellness Programs; Health Club Reimbursement;

Employee Assistance Program (EAP); G. Berwind

Scholarship Foundation

Dependent Care NO None

Property/Liability NO None

Legal Expenses NO None


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COMPANY OVERVIEW

CRC Industries is a company that specializes in the in the production of specialty

chemicals for the maintenance and repair of professional, serving automotive, marine,

electrical, industrial, and aviation equipment. As a company with only 175 employees,

motivation, dedication, and overall positive employee morale is needed for this company to

perform at its highest. CRC Industries provides employees with multiple benefits in order to

address the employees everyday needs. Employee benefits range from medical benefits to

work/life benefits. Overall, the majority of these benefits are self-funded by CRC Industries, and

are offered to all full-time employees and or their eligible dependents.

MEDICAL EXPENSES

Preferred Provider Organization

CRC Industries offers its employees a preferred provider organization (PPO) medical

health plan. The plan is self-funded by CRC Industries, and it is administered by Independence

Blue Cross. Independence Blue Cross has received a B+ rating from A.M. Best1. The PPO is

available to eligible employees and their eligible dependents on a contributory basis.

An employee is eligible for medical coverage one month from the date of hire if he or

she is a full-time associate who is scheduled to work at least 40 hours per week. Eligible

dependents include an employees spouse, an employees approved same and or opposite sex

domestic partner, and an employees unmarried children under the age of 26. Coverage for

unmarried children under the age of 26 will terminate at the end of the month in which they

turn age 26. Other eligible dependents are those children who continue to be a tax exemption

1All A.M. Best Ratings in this paper were retrieved from www.ambest.com.


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(i.e., disabled children). A domestic partner is eligible when both partners have registered and

provided proof of such registration of domestic partnership, or when qualifications under the

CRC Industries Domestic Partner Benefit Policy2

are met. Employees can elect for company-

sponsored medical coverage either during open enrollment, when they become first eligible, or

when they experience a qualified change in family status. If an employee experiences a

qualifying change in family status during the year, changes can be made to his or her medical

benefits within 31 days of the event. The requested benefit change must be consistent with the

qualifying change in family status.

The PPO plan has a High-Option and a Low-Option.Under the High-Option plan,

participants receive the highest level of benefits by using a network provider. With this option,

participants save money since rates are negotiated at a discount, and therefore out-of-pocket

expenses are less. Participants using the Low-Option and utilizing out-of-network providers

will experience higher out-of-pocket expenses since there are no discounted negotiations with

these providers.

Dental Plan

Employees of CRC Industries and their eligible dependents can receive benefits for

dental coverage administered through Delta Dental. Delta Dental of Pennsylvania received a

rating of B+ from A.M. Best. The dental plan is self-funded and offered to employees on a

non-contributory basis. Under this dental plan, employees are reimbursed according to

whether or not they use a dentist in the Delta Dental network. Employees receive a benefit

2See page 14 for CRC Industries Domestic Partner Benefit Policy.


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enhancement by staying in the network because fees charged to them will be lower. This is

because the fees are pre-negotiated by Delta Dental. Also, employees will not have to file claim

forms. If employees use a non Delta Dental provider, benefits will be paid in the 90th

percentile

for out-of-network services. Also, dentists who are not in the Delta Dental network may bill

plan participants for the balance above the 90th

percentile fee. Additionally, employees will

have to file claim forms.

An employee is eligible for dental coverage one month from the date of hire if he or she

is a full-time associate who is scheduled to work at least 40 hours per week. Eligible dependents

include an employees spouse, an employees approved same and or opposite sex domestic

partner, and an employees unmarried children under the age of 19. Other eligible dependents

are unmarried children under the age of 25 if they are a full-time student. Coverage for

dependents will terminate at the end of the calendar year in which they reach age 19 or 25 (if a

full-time student). Eligible dependents are also those children who continue to be a tax

exemption.

Prescription Drug Plan

Medco is the prescription drug carrier administering prescription drug coverage under

the High-Option PPO plan. Therefore this plan is also offered on a contributory basis, and

employees and their eligible dependents enrolled under the High-Option PPO plan are also

eligible for this prescription drug coverage. The Medco Containment Group received a rating of

A- from A.M. Best. Since an employee is eligible for coverage if he or she is eligible for and

enrolled in the High-Option PPO medical plan, that employee is eligible for prescription drug


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coverage one month from the date of hire if he or she is a full-time associate who is scheduled

to work at least 40 hours per week. Eligible dependents include an employees spouse, an

employees approved same and or opposite sex domestic partner, and an employees

unmarried children under the age of 26. Coverage for unmarried children under the age of 26

will terminate at the end of the month in which they turn age 26. Other eligible dependents are

those children who continue to be a tax exemption.

For the retail service of the drug plan, participants have fixed copayments of $10 for the

generic formulary, $20 for the brand formulary, or $35 for the non-brand formulary.

Additionally, if a plan participant is taking a prescription drug daily, Medcos direct mail order

program allows for up to a 90-day supply of a drug through the mail order service. For this

service, participants have fixed copayments of $20 for the generic formulary, $40 for the brand

formulary, or $70 for the non-brand formulary.

Vision Plan

CRC Industries offers its eligible employees and their dependents vision benefits on a

contributory basis. The plan is self-funded and administered through Vision Service Plan (VSP).

Vision Service Plan, Inc. has a rating of A according to A.M. Best. Employees who use a VSP

Signature participating provider pay fewer out-of-pocket expenses and do not have to complete

claim forms. Benefits provided are as follows:


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BENEFIT FREQUENCY IN-NETWORK

COPAYMENT

OUT-OF-NETWORK

Eye Exam 1x every 12 months $10 Up to $45

Lenses 1x every 12 months $25 $45 Single

$65 Bifocal$85 Trifocal

Frames 1x every 24 months $150 Allowance Up to $47

Contact Lenses 1x every 12 months* $150 Allowance Up to $105

*Contact lenses in lieu of lenses and frames

An employee is eligible for vision benefits one month from the date of hire if he or she is

a full-time associate who is scheduled to work at least 40 hours per week. Eligible dependents

include an employees spouse, an employees approved same and or opposite sex domestic

partner, and an employees unmarried children under the age of 19. Other eligible dependents

are unmarried children under the age of 25 if they are a full-time student. Coverage for

dependents will terminate at the end of the calendar year in which they reach age 19 or 25 (if a

full-time student). Eligible dependents are also those children who continue to be a tax

exemption.

Flexible Spending Account (FSA)

On a fully-contributory basis, CRC Industries offers its eligible employees two types of

flexible spending accounts: Health Care Flexible Spending Accounts and Dependent Care

Flexible Spending Accounts. The FSA plans are self-funded and are administered by CBIZ. An

employee is eligible for an FSA one month from the date of hire if he or she is a full-time


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associate who is scheduled to work at least 40 hours per week. Employees can enroll only when

they are first eligible, or during open enrollment.

Employees can choose to have a Health Care FSA, a Dependent Care FSA, or both. The

employee must enroll and choose a contribution amount each year in order to participate in

the FSA. Employee contributions are made on a pre-tax basis. For both FSAs, a maximum of

$5,000 may be contributed per year. The plan has a 3 month grace period after the end of

the plan year in order for employees to submit claims. The plan year runs January 1st

through

December 1st

. Also, claims can be submitted for reimbursement that were incurred during the

first 2 months following the close of the plan year. Health Care accounts can be used for

health-related expenses that are not covered by an associated health plan. These expenses may

be incurred by the employee, the employees spouse, or the employees eligible dependent

children. Dependent Care accounts are used to pay for the care of persons that can be claimed

as dependents on an employees federal income tax return. This includes children under the

age of 13. This also includes a disabled spouse or dependent that is mentally or physically

incapable of self-care and spends at least eight hours a day in the employees home. Day care

expenses that allow the employee (if single) or the employee and his or her spouse (if married)

to work are considered eligible expenses.

LOSS OF INCOME DUE TO DEATH

Term Life Insurance with Accidental Death and Dismemberment (AD&D)

After one month of employment, eligible employees are automatically provided with a

Term Life Insurance benefit. This plan is offered on a non-contributory basis, is self-funded, but

administered through the Principal Financial Group. The Principle Financial Group received an


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A- rating from A.M. Best. Eligible employees are full-time employees who are scheduled to

work for at least 40 hours a week. The benefit is equal to two times the employees annual

earnings plus an extra $20,000 up to a maximum of $520,000. Annual earnings are defined as

base salary plus the average of the last two calendar period bonuses.

Basic AD&D Insurance is offered to eligible employees in addition to their Term Life

Insurance. This benefit is equal to two times the employees annual earnings plus an extra

$20,000 up to a maximum of $520,000. The AD&D benefits are payable if the employee dies or

is seriously injured as the result of an accident.

Supplemental Life Insurance

Supplemental Life Insurance is available to eligible CRC Industries employees on a fully-

contributory basis. The plan is fully insured and provided by The Principal Group. The plan may

be purchased for the employee, his spouse, or his dependents. Employee coverage is available

as one, two, three, four, or five times the employees annual salary. The maximum is the lesser

of 500% of salary or $500,000. Guaranteed coverage is the lesser of 300% of salary or $500,000.

Spousal coverage is available in $5,000 increments to a maximum of $50,000. Spousal

guaranteed coverage is $25,000. Dependent coverage is available to eligible children older than

14 days old. Dependent coverage can be elected in the amount of $5,000 or $10,000.


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LOSS OF INCOME: DISABILITY

Short-Term Disability

CRC Industries provides its employees with Short-Term Disability Insurance

administered by Principal Financial Group. The plan is self-funded and is provided on a non-

contributory basis. Only approved eligible employees, which are those who are full-time and

scheduled to work at least 40 hours per week, can obtain this coverage. This coverage is for

full-time employees with more than six months of constant service at the period of disability.

Depending on the employees length of service, he can collect a portion of his normal pay. For

employees who have worked more than six months but less than one year, they will collect two

weeks of full pay and then ten weeks of pay. On the other hand, if the employee worked in

the company for over five years, then he or she will collect the maximum amount of twelve

weeks of full pay.

Long-Term Disability

CRC Industries provides employees Long-Term Disability Insurance that is fully-insured

by the Principal Financial Group. This coverage is offered to employees on a non-contributory

basis, and it offers continuous monthly income during prolonged injury or illness. Eligible

employees, who are full-time and scheduled to work at least 40 hours a week, once approved,

can receive this coverage and at 60% of their monthly earnings. The effective coverage date is

one month after being hired. This coverage will begin on the 91st day of consistent disability

and will continue until recovery or retirement age.


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LOSS OF INCOME: RETIREMENT

Retirement

All employees who are full-time and working at least 40 hours per week are eligible to

participate in CRC Industries 401(k) plan. This future planning will help employees meet their

retirement income needs. This is provided on a contributory basis. The plan is self-funded and

administration is provided by Wells Fargo. Employee contributions are vested 100 percent and

invested pre-tax. At the maximum of 2 percent of annual compensation, the company will

match half of the first 4 percent of an employees contributions. Six years of service will equal

to full vesting in this plan. Eligibility is immediate for all employees at the age of 21 or older.

CRC Industries also provides a Roth 401(k), which allows an employee to contribute to his

401(k) with after-tax dollars in exchange for tax-free withdrawals.

VESTING SCHEDULE

Years of

Service

Percentage

1 0%

2 20%

3 40%

4 60%

5 80%

6 100%

CRC Industries offers its employees a pension plan which is a defined benefit plan. This

is a self-funded plan that is offered on a fully contributory basis. It is optional for employees to

contribute into this pension plan. However, this plan will provide normal and early retirement

benefits along with lump sum distributions.


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OTHER EXPOSURES

Educational Assistance

CRC Industries encourages its employees to increase their job skills and professionalism

through education. All employees are eligible for tuition reimbursement; however this will

require the supervisors approval. CRC Industries will reimburse employees 100 percent up to

$6,000.

Work/Life Exposures

Employees are offered an opportunity to participate in a wellness program that is self-

funded by CRC Industries but offered through Independence Blue Cross. This program is non-

contributory and will have calendar events educating the employees of good health and

wellness. In addition, they will have seminars for healthy eating and a program challenges with

incentives to join. For example, an incentive that the company offers employees is a $200

reimbursement for Weight Watchers class fees upon completion of the program. CRC Industries

also provides a health club reimbursement where the company will reimburse the employee

50% of the cost of a gym membership up to $300 per calendar year. This is only for employees

that have memberships for 90 days or longer. All of these benefits are offered to full-time

employees that have worked for at least 30 days within the company.

In addition, CRC Industries provides Employee Assistance Programs (EAP) on a non-

contributory basis. This program was created to help solve a broad range of personal and work-

related issues that may affect an employees performance. Some issues may include personal

relationship problems, stress, depression, or addiction problems. This program is completely

confidential and is accessible 24 hours a day to employees. The program provides consulting


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services, and it also connects employees to specialists and/or community resources. Lastly, CRC

Industries provides an opportunity for children of employees to receive the Charles G. Berwind

Scholarship. This provides scholarships for students that plan to attend accredited colleges and

universities. These scholarships are based on scholastic achievements and financial needs. All

children of full-time employees are eligible except for children of the vice president, corporate

officers, or members of the foundation.


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Introduction

In 1958, CRC Industries was formerly known as Corrosion Reaction Consultants, founded by

Charles J. Webb II and Norman Larsen. This company started out producing only anti-corrosion and

lubricant spray, but it quickly became a worldwide leader in manufacturing and distributing

chemical supplies for the maintenance of electrical, industrial, marine, automotive, and aviation

equipment. CRC Industries is placed at the top tier in its competitive area because of its ability to

achieve levels of profitability and growth. Companies in this top tier are at constant competition

when it comes to securing highly valued employees. Because of this, CRC Industries offer its

employees multiple benefits to address their health and personal needs. With that being said, the

company seriously takes costs into consideration, especially since most benefits are self funded and

offered on either a contributory basis or a non-contributory basis.

In 1981 the company was acquired by Berwind, an investment management company. With

that being said CRC Industries is still responsible for the design of its employee benefits. In order to

inquire about the design of employee benefits, interviews and constant contact was made with

Cheryl Hayden who is the director of Human Resources. Even though Hayden does not have the

final decision on what benefits are offered, she plays a major role in assisting the President and CEO

when it comes to making the decisions. Hayden has over 20 years of experience, but he has only

been with the company since 2009. Since then has helped with the design of the benefits offered to

the employees.


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Overall Design Considerations and Objectives in Offering Employee Benefits in General

Since 2009, CRC Industries has been offering the same coverage to its employees. It offers

its employees benefits for medical coverage, vision coverage, prescription drug coverage, dental

coverage, life insurance, short-term and long-term disability insurance, a pension plan, and a 401(k)

retirement savings plan. CRC Industries is satisfied with its ability to offer benefits to its employees

with most administration performed by CBIZ. Since CRC Industries wants to maintain the best

quality of benefits and services to its employees, it relies on Cheryl Hayden to be the liaison

between employees and executive decision makers. Hayden believes that it is the companys

responsibility to find ways to offer employees inclusive benefits that not only address their health

needs but also their personal needs. We chose certain options because we feel that giving

employees choices is a major benefit in and of itself, said Hayden. In addition, CRC Industries wants

to attract and retain its employees because of competitive market of business the company is in.

When asked how effective the company is on attracting and retaining employees, Hayden

comments that the employer turnover ratio has been low since she has been with the company

from 2009. She also states that merely choosing to offer benefits is not enough, the benefits must

be satisfactory to employees.

In order to get information about employee satisfaction, Hayden hands out a survey asking

the employee how content they are with their benefits. The survey onlyasks about satisfaction with

current benefits. From recent results, human resources concludes that changes to plans shouldnt

be considered since complaints received are minimal and only about customer service, not

coverage.

In communicating offered benefits, Hayden personally, hands out a company benefits

booklet to all employees once a year with their paycheck. This booklet is 22 pages long and it also


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explains benefits offered to employees in detailed language easily understood by the average

person. Hayden states that by doing this, the company wants it employees to know they are highly

valued and that is why they are being offered these comprehensive benefits.

In addition to offering coverage, the company allows an employee to opt-out of certain

coverages. However, the company has decided that the employee will not receive money in place

of this, and he or she has to sign a waiver stating an employer-sponsored benefit is not wanted.

The percentage of employees choosing to opt-out is around 5% which is around 8 to 9 eligible

employees. This decision was made to try and avert a moral hazard issue. If money was offered,

some employees may opt-out of coverage and chose to receive money instead. They would then

later enroll into the medical plan when they needed health coverage. This would cause an adverse

selection problem to the company. By not offering money when an employee opts out, the

company hopes that employees will be steered to enroll in the benefit anyway.

Hayden states that most plans are self-funded because this allows the company more

flexibility in coverage option and planning for future events. Also, if most plans were fully insured,

the company would be paying more money in premiums since the company is not very large and

credible.

Problems, Issues, Concerns, and Considerations in the Design of Health Benefits

Plan Designs

Every year a meeting is held with the CEO, the CFO, the Director of Human Resources, a

representative from the CBIZ, and a benefit consulting firm. Together, the group reviews statistics

on how the health care coverage has been utilized by plan participants. From this information, the

group then decides on whether any alterations to plan premiums, employee contributions, or

offered coverages will be needed in the future. One thing that is surprising is that the company


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does not inquire about new coverages that employees would like to see offered. Surveys are only

about the satisfaction of current coverages. When asked why these inquiries arent made, Hayden

comments this is because the executive personnel of the company feel that the health benefits that

are offered to plan participants are plentiful and comprehensive on a necessity basis. She also

states that the company will only look into the change of a plan if many complaints incur. She

comments that complaints from employees about the health plans are very low and are not usually

related to coverage or costs. Instead, most complaints received from employees are about

customer service or about service bills not getting paid on time, which is usually due to an internal

error where doctors forget to submit certain bills.

Independence Blue Cross

By Berwind having all nine of the small companies within their portfolio using Independence

Blue Cross, Berwind is able to negotiate discounts for each company within its portfolio. With that

being said, since the acquisition in 2009 CRC Industries has been offering employees a PPO through

Independence Blue Cross. Hayden comments that compared to the previously offered health plan,

this one with Independence Blue Cross is much better in that it offers many more choices to

employees along with a larger network allowance. Ultimately, it was the cheaper cost that made

the company decide to use the PPO provided by Independence Blue Cross.

Medco

By being enrolled in the High-Option PPO plan, employees are automatically given

prescription drug coverage administered by Medco. Hayden states that they have switched to

Medco this year because of issues with the previous prescription drug administrator who was

unnamed. One reason for switching was because of a lower negotiated price with Medco. Another

reason was because of complaints CRC Industries received about the previous prescription drug


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plan. For instance the company received many complaints that pertained to participants being told

that certain drugs werent covered when in fact they were. The company also received numerous

complaints where plan participants were improperly being charged rates that were higher than they

should have been.

Vision Service Plan (VSP) and Delta Dental

Since CRC Industries values its employees and wants to offer them comprehensive coverage

in all areas of health, it chooses to offer vision and dental coverage. The company utilizes VSP and

Delta Dental because both plans have low costs. More specifically, the company stays with these

plans because the negotiated prices that both of these networks have contracted with their

providers have been the lowest that CRC Industries have seen as far.

Funding and Financing Considerations

All of the medical health plans offered to employees by CRC Industries are self-funded.

However, administration of the health plan is outsourced to a third-party named CBIZ. By

outsourcing administration to a third-party administrator (TPA), the company is substantially

reducing its costs. Hayden states that if the company were to do administration on its own, CRC

Industries would be spending a lot of money on acquiring personnel in order to address claims

handling and processing, government compliance issues, and constant customer service. Besides

the other advantages of self-funding such as the elimination of premium taxes and also having no

need to pay an insurers risk charge, another benefit that CRC receives from self-funding is having

control of the plan design. The President and CEO of the company has the final say in any changes

relating to what coverages are offered and the coverage amount that is available to all employees.

CRC industries has around 175 employees and is headquartered in Warminster,

Pennsylvania. Since CRC Industries self-funded health care is governed by ERISA, a federal law, the


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company does not have to offer State-Mandated benefits, a state law. This is beneficial since CRC

Industries does not have to include certain benefits that would cause the cost of the health plan to

increase. This cost increase for the company would inevitably be shifted to the employees as well.

By self-funding, the company continues to avoid costs associated with having to require coverage

for all 57 Pennsylvania state-mandated benefits.

When it comes to funding decisions, medical, vision, and prescription plans are offered on a

contributory basis, while dental is offered on a non-contributory basis. The company chose to cover

the entire cost of the dental plan because the negotiated prices were very cheap. Since CRC

Industries receives low complaints about the dental plan, there will probably be no plan changes in

the near future.

Demographic Issues

Within 175 employees, the average age of the CRC Industries employee is 40 years old. The

company currently does not offer any coverage for Long Term Care (LTC), but should seriously

consider looking into it for the future. The company should look into offering this coverage on a

voluntary basis via full insurance. If this coverage were to be offered, a large number of participants

would be entitled to this benefit around the same time. The company would avoid problems arising

from adverse selection and a potential catastrophic loss by fully insuring this coverage.

Controlling Costs

With the cost of health care rising, it is an advantage that CRC Industries self-funds all of its

health benefit plans. This way, the company can easily make plan changes in response to costs and

claims made. Hayden explains that the company also makes use of claims information in order to

try and control cost. While the Human Resources department of CRC Industries does not receive

information about an employees personal claims, the department is able to obta in general claims


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information about the employees of the company as a whole from CBIZ. In particular, prescription

drug claims information from Medco regarding which types of prescriptions and how many refills

are being administered, are especially useful information. From this information, Human Resources

decides on which areas of health the company should focus more on educating its employees about

in the Wellness Works For You program that is offered to employees. Hayden states that Were

hoping that finding out what ails our employees and helping to address those problems will result in

a reduction of medical and prescription drug claims. And because of this, the company hopes to

see its costs diminish.

Design of Other Types of Non-Retirement Benefits

CRC Industries has a philosophy in offering the best coverage to its employees. This is

reflected in the designing of Short-Term (STD) and Long-Term Disability (LTD) benefits. These

benefits are both non-contributory. When offering Short-Term Disability the company implements

ways to control moral hazard. CRC Industries has safety training programs, because they are a

manufacturing company and they want to educate the employees on safety. However, if an

employee falls and gets hurt at work, CRC industries has a worker compensation doctor to take a

look at the employee. In addition, they will send the employee to physical therapy and when the

doctor says it is okay to come back, CRC Industries will allow this while accommodating the

employees needs. For example, if they employee cannot work in the position he was in before,

they will make accommodations for him to work in another position until he can work at his

previous position. This decision was made because even though the employee may not be able to

work in his previous position, the employer still needs a job in order to meet his income needs.

Furthermore, since the company values its employees and has spent time educating and training


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employees for certain positions, CRC Industries wants the employee to eventually return to his

original position.

In addition, CRC Industries decided to offer a Wellness Program in order to keep employees

healthy while hopefully lowering medical and prescription drug claims costs. To get employees to

participate in this program, CRC Industries decided to give employees incentives to join the program

such as program reimbursements. Also, since the health of an employee is key to not only company

value and lowered costs, CRC Industries decided to offer this on a non-contributory basis.

Additionally, CRC Industries chose to provide and Employee Assistance Program (EAP). This

was because problems outside of the work place can potentially affect the work performance of an

employee, which again is very valuable to the company. CRC Industries chose to provide this

through a third-party because if they didnt, administration costs and customer service needs would

cost the company a lot of money. Hayden states that when employees are better able to focus on

the job than on personal issues, their performance can be maximized. CRC Industries states that

the money and hours spent on providing this program will be well worth the effort in the long-run.

Because CRC Industries encourages all of its employees to increase their professionalism

and job skills through education, it has chosen to provide its employees a benefit that reimburses

employees for money spent on education. By offering this, CRC Industries hopes that employees

will seek out higher education which will then lead to the company to having a valuable and elite

workforce. CRC Industries also offers a Charles G. Berwind Scholarship to children of employees.

The company chose to offer this because most of its employees happen to be parents of children

who will hopefully attend a college or university in the future.


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The Impact of Regulatory Compliance

COBRA

As amended by COBRA, ERISA requires plan sponsors that employ 20 or more employees to

offer continuation coverage to qualified beneficiaries who lose health coverage under an employee

benefit plan for a specified reason. Although much of the COBRA administration is outsourced to

CBIZ, it has become Cheryl Haydens job to notify CBIZ and to tell the TPA who to contact and

provide with information regarding COBRA. For example, recently a CRC Industries employee had

passed away and his spouse was eligible for continuation of coverage through COBRA. It was

Cheryls job to give CBIZ the contact information of the spouse, and then it was CBIZs job to send

an information package to the spouse of the passed employee. Hayden states that most of the

people seeking coverage through COBRA are the spouses who have been recently separated from

an employee. One requirement under COBRA is the continuation of coverage for health care for a

period of up to 18 months which can be extended to 36 months. Hayden states that the company

decides the coverage period depending on the situation. In the previous instance, the spouse of the

passed employee received the full 36 months of coverage. Within the comprehensive benefits user

guide that CRC distributes to employees, there is no information pertaining to COBRA. The company

cannot assume that all employees are aware of this amendmentand furthermore it cannot assume

that employees would know what qualifying events would entitle them or their dependents to a

continuation of health care coverage. A section of the benefits user guide should include an

explanation of COBRA to employees. This is very important because one of the eligibility

requirements for dependents seeking medical and prescription drug coverage is to be unmarried up

to the age of 26. By getting married, a person under the age of 26 is no longer qualified as a

dependent and may wish to continue seeking health coverage. While it may be easy for Human


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Resources to identify terminated employees or the spouse of a deceased employee, it is impossible

for the department to keep track of the status of every single dependent, especially student status

with regards to the eligibility requirement for dental and vision health benefits.

PPACA

The company has already implemented changes regarding benefit coverage and

administration in order to comply with the law regarding the Patient Protection and Affordable Care

Act (PPACA). Hayden has stated that because of the law, her Human Resources department has had

to spend a lot of time adding coverage for adult children on their parents medical and prescription

drug coverage, regardless of the childs student or marital status until he or she turns age 26.

Hayden states that although this has increased the costs for the company, the executive personnel

of CRC Industries, including herself, are for many of the changes brought about by the reform. For

the future, the company should be prepared to employ changes regarding FSA accounts for

employees. Currently, the maximum Health FSA contribution limit for employees is $5,000. In 2013,

PPACA requires a new Health FSA maximum contribution limit of $2,500 a year.

One change that the company should start to implement is the requiring of proof of medical health

coverage for employees who choose to opt-out of the employer-sponsored health benefits. The

company has already addressed the issue of moral hazard by not offering money to employees who

choose to opt-out, and then only enroll when they need health coverage. But because the company

philosophy focuses on the value of employees, the company should make sure that its employees

do have health coverage, especially with the forthcoming individual insurance coverage mandate in

2014.


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ERISA

Because of ERISA, CRC Industries has had to comply with certain requirements. One of these

requirements deals with providing employees with a document of the Summary Plan Description.

Once a year, Hayden physically hands these documents to employees because 60 out of 175

employees are in the production and warehouse sector and do not sit at desks with computers. This

is very wise of the company and definitely exercises fiduciary responsibility because although they

can send these documents out electronically, they cannot assume that every employee has access

to a computer at home. New employees also receive this document physically upon hire. Also,

discrimination testing is needed for the retirement savings plan. All discrimination testing is

performed by Wells Fargo after the company gives them the statistics about the participation rate

and what the deferrals are. Hayden states that the company has recently been passing

discrimination testing. She believes this has been mostly because not only does the benefits

handbook provide employees with details about the pension and 401(k) plans, but also because

most employees are at an age where planning for retirement is essential.

Considerations and Conclusion

Based on the criteria used to make decisions about employee benefits offered, it can be said

that cost is a major factor. It can also be said CRC Industries values its employees, and wants to

offer them essential and high quality benefits. Being a small company, it is very fitting that CRC

Industries utilizes self funding for most of its plans because costs can be easily controlled and

minimized. Furthermore, CRC Industries should take into consideration the offering of benefits that

can be essential to its work force such as the addition of Long term Care. Finally, the company

should look to plan ahead with regards to the future changes surrounding PPACA.


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Work Cited

Bunce, Victoria Craig and JP Wieske. "Health Insurance Mandates in the States 2010." CAHI.

Web. 9 December 2010.

.

CRC Industries. 2011. 9 December 2011. < http://www.crcindustries.com/crcwebmain/>.

Tinnes, Christy, Brigen Winters, and Christine Keller. Preparing for Health Care Reform a

Chronological Guide for Employers. US.practiallaw. Web. 9 December 2010. .

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