Employee Benefit News

March 2, 2006

Paid leave no longer most expensive employee benefit

Paid leave used to be hands-down the most costly benefit
employers provide, but health benefit expenses caught up last year.
That's one finding of a recent study by the Government Accountability
Office, requested by Sens. Ted Kennedy (D-Mass.) and Patty Murray
(D-Wash.).

Inflation-adjusted total compensation costs for private employers
grew by 12% from 1991 to 2005, researchers found. Benefit costs,
representing about a quarter of total compensation, jumped by 18%,
while wages grew by 10%. Since 2002, increases in benefit
expenditures outpaced those for wages among all types of
employers.

Health and retirement benefits spurred most of the rising cost for
total benefit packages between 1991 and 2005. Health insurance
costs skyrocketed by 28% since 1991, causing health benefit
expenditures in 2005 to equal those for paid leave, which grew by
only 5% since 1991. Retirement plans were the least costly of the top
three benefits, although employer spending on them grew by 47%,
mostly between 2003 and 2005, when investments failed to deliver
sufficient returns to maintain funding levels in defined-benefit plans.

Employee access to benefits remained stable during this time
period, but participation rates declined in health benefits, some
medical costs were shifted to workers, and workers assumed more
investment risk, researchers noted.