Case Studies

Employee Benefit Program Developed for NewCo in 45 Days

Business Challenge

A 10,000 employee company was spinning out a business unit to private equity buyers. Since the parent had outsourced benefit delivery and administration, the business unit had no Human Resources or benefit infrastructure. In order to meet the closing date, NewCo would need to build an HR platform from scratch. This included having to:

  • Develop a strategy for benefit design, funding, administration, employee transition, communication and compliance
  • Select and contract with a vendor that could provide HRIT, payroll and benefit administration systems support
  • Balance the need to minimize employee disruption with budget tolerances
  • Implement all programs to include enrolling employees in the plans in less than 45 days.

To help maintain key employees, it was desirable to mirror the legacy plans wherever possible. However given smaller size of NewCo, it was recognized that the cost and customization required to duplicate the parent’s plans would not be feasible. None of the NewCo executives on the transition team had a human resources or employee benefits background.

Pentra was selected for the assignment and was accountable for leading employee benefits strategy, design, pricing and implementation. Pentra team members reported to both the private equity buyer as well as the executive team of NewCo.

Solution

Pentra immediately completed a thorough review of existing programs to include a disruption analysis. The existing plan designs and employee contribution strategy were extremely complex, thus it quickly became apparent that replicating the existing program would mean saddling NewCo with a foundational strategy that was not appropriate for the new firm.

Pentra examined alternatives and presented the leadership team with several strategies that met the business objectives of balancing employee disruption, cost, and effective plan design. We then obtained commitments from vendors to meet all required deadlines. Our ability to obtain these commitments resulted from our strong track record of performance with key vendors and insurance carriers.

Outcome

Performance

  • Working through the winter holidays, the Pentra team kept the process moving and met every deadline.
  • Through aggressive negotiation supported with data, we were able to reduce the cost structure by 4% on medical and 13.5% lower on dental without reducing benefits relative to the legacy plans.

Competitiveness

  • All plans were benchmarked to key competitors and were competitively designed and priced
  • The cost savings were shared with employees

Minimize Disruption

  • Simplified health care offering, without compromising employee choice
  • Maintained comparable plan designs (including some that were more favorable)
  • Overall plan offering was the same or better