For most CFOs, benefits are an obligatory cost of doing business—and now more than ever, rising healthcare costs are putting real pressure on the bottom line. But what if by adopting a shift in perspective, CFOs could capture cost savings and also transform these programs into consequential levers of workforce composition, productivity, and risk?
Here are three strategic questions that can unlock benefits programs’ potential to explicitly support the organization’s cost base, margin profile, and growth agenda:
1. “How do retirement risk, health cost drivers, and benefits programs contribute to future pressure on our P&L?”
Retirement plans, healthcare, HSAs, reskilling and career promises, severance constructs and other people-related commitments don’t belong exclusively on HR’s agenda. They merit CFO consideration as a connected risk and cost for the balance sheet and P&L. Risks related to these programs can have significant implications, for example:
- Legal/fiduciary risk related to retirement plan design and investment oversight and associated remediation costs;
- Healthcare risks stemming from medical cost volatility, high cost claimants, benefit inflation, and stop loss thresholds;
- Talent and reputational risk with cost implications, such as late retirements that block progression and unmet reskilling promises that drive regretted attrition; and
- Long tail financial risks associated with delayed retirements, higher healthcare spend, and upward pressure on late career pay structures due to inadequate savings among employees.
To mitigate these exposures, CFOs must adopt a forward-looking view of how these factors affect cost, volatility and workforce shape and size. From this perspective, CFOs can model how different risk transfer strategies can reduce earnings volatility and balance sheet sensitivity over time, as well as explore options like guaranteed lifetime income, risk-sharing plan designs, stop loss, and pooled structures. This perspective shift can also help CFOs determine which risks to keep under the oversight of their HR and benefits teams, which to transfer to enterprise risk, and which to shift to external partners under SLAs with clear cost and performance guarantees.
2. “How can we reduce complexity related to people-related commitments and reinvest that capacity to drive value?”
Navigating the complexities of retirement plans and other benefits programs can be a time-consuming administrative responsibility that diverts the attention of highly-paid talent away from high-value tasks.
“Managing a 401(k) program—and the fiduciary responsibility it entails—requires ongoing time from treasurers, CFOs, legal departments, and CHROs, whose time would otherwise be spent focusing on their core business,” says Rick Jones, senior partner at Aon.
Outsourcing administration of these programs enables CFOs to redirect resources toward activities that can meaningfully reduce future labor, healthcare and external hiring costs such as:
- Workforce planning and scenario analysis (what workforce can we afford under different economic conditions?);
- Retirement readiness and health trend insights by segment (where future cost pressure is building);
- Reskilling and internal mobility design that reduces external hiring spend and ramp up time; and
- Targeted financial wellbeing and navigation strategies that can reduce avoidable claims and productivity losses.
The alternative to managing high-touch, bespoke benefits programs in-house is delivering them on a trusted partner’s platform. For example, adopting a pooled employer plan (PEP) for 401(k) benefits transfers the risk and complexity of managing retirement benefits to a pooled delivery platform that leverages economies of scale and improves efficiency.
Shifting to a PEP can save an organization 50-75% of the time previously spent managing its 401(k) plan while also improving outcomes for plan participants. In the case of one U.S.-based government contractor with 900 eligible 401(k) participants and $80 million in 401(k) assets, enrolling in a PEP resulted in a 59% cost reduction. Additionally, Aon found a 5% increase in employee savings and a 9% increase in employee participation for companies using their PEP program.
"PEPs offer businesses the ability to provide a customized, comprehensive and well-run 401(k) program with less work required of management teams, less risk for compliance and fiduciary requirements, and better outcomes for people," says Jones.
3. “Where is each benefits dollar generating measurable ROI, and how do we shift capital to the highest-value levers?”
To evaluate benefits programs as a human-capital portfolio with clear, measurable returns, CFOs should establish and track metrics that demonstrate their ROI, including cost savings, productivity, retention, workforce composition, and others. CFOs can also assess the value of these programs via metrics like financial security, health outcomes, and resilience. Understanding these measures can illuminate opportunities to shift spending on benefits programs from low-yield features to high-impact levers, such as:
- Stronger employer contributions paired with auto enroll, auto escalation, and income oriented defaults to improve retirement readiness and enable timely exits;
- Healthcare designs and navigation that steer to high value care and support chronic condition management, reducing future claims; and
- Reskilling programs tied to specific future roles and transitions to avoid “pay and exit” cycles.
Factors like retirement risk, health cost drivers and workforce productivity have meaningful financial implications—many organizations overlook benefits programs as consequential levers of risk and productivity. Asking these three strategic questions can enable CFOs to shift perspective and manage people-related commitments in ways that generate measurable ROI for the business and its employees.
