In our previous article in this series (see Part I here) we examined a case in the Netherlands that demonstrates how the head office of an organization can help subsidiaries with an international approach.

We will now analyse another example in which an international solution added value to local Employee Benefits (EB) provision. Maintaining the example of the German Group, we are assessing a subsidiary located in the United States, where it is customary to provide employees with a wide range of benefits.

If an employer pays life insurance premiums on an employee's behalf, any payments for coverage of more than $50,000 are taxed as income. As such, employers very often set the level of life insurance benefits no higher than the tax-free value.

Employees are allowed to join the group life insurance plan to top-up cover. The pricing of such top-up cover is agreed upon amongst insurers, also because of the risk of anti-selection. This makes the top-up cover relatively expensive. Additionally, if the company’s population is big enough to be experience rated, the top-up cover’s experience rate can affect the employer’s basic benefits premiums.

To help reduce the cost of the top-up cover for the employees AND eliminate the effect on the basic cover’s claims experience, the top-up cover can be reinsured via a multinational insurer and virtually pooled with other Employee Benefits plans of the organisation.

Engaging the services and expertise provided by Employee Benefits specialists will support the process of identifying and implementing the correct solution, resulting in gaining control over employee benefits data and costs. This support is necessary in placing the control of EB organization back into the hands of C-level management, at local as well as at Head Office level.