The threat of a recession loomed before employers for some time, but they were unsure how to "recession-proof" their benefit plans and, for the most part, received little guidance on the subject from benefit advisers. Now, almost overnight, businesses are dealing with the reality of an economic downturn and the challenges that come with it.

At a recent roundtable dinner with Washington, D.C.-based benefit professionals, participants discussed how the recession is impacting benefit plans and employee needs.

Employees are mostly concerned with how the economy is impacting gas and food prices, say employers.

"Benefits have been getting more expensive relative to employee wages and inflation for the last seven years, and now there are so many additional expenses piling on for employees," says George Lane, a principal at Mercer.

"Gas prices, food prices that's all just piling on to the issue we've been dealing with for a number of years now and that's benefit costs going up faster than payroll and inflation," he says.

Commuter compassion

Employers discussed ways they are relieving some of the pressure employees are feeling at the pump.

Some may argue that it is not an employer's responsibility to adjust for the increasing cost of commodities, but Judy Dale, a senior associate for Mercer, points out that it relates to the overall cost of employment.

"With food prices going up and gas prices going up, that means the commute and the cafeteria are becoming more expensive - it's costing people more money to work," says Dale.

Some employers are promoting teleworking, flex time and compressed work weeks.

Employers need to evaluate the flexible working options available to them, says Kay Curling, VP of HR, compensation, benefits and HRIS for SI International. If executed correctly it can benefit managers, employees and customers, but change management and facilitation skills will be called upon in order to find those solutions, she adds.

Dale says teleworking can quickly move from an HR issue to a management issue. Managers' lack of comfort with having employees working out of the office can be one of the biggest roadblocks employers face to successful programs.

"Managers today have difficulty managing remotely and we need to get them on board to further this initiative," says Marcy Foster, director of HR for Arlington County, Va.

Advisers can forge strong relationships with clients by not always talking benefits, but sometimes talking HR management.

Besides assisting with teleworking plans, some employers are also looking at innovative approaches like carpool boards, shuttle buses - something being organized by employers in the San Francisco Bay area - and helping employees choose more fuel-efficient travel routes.

The financial impact

But gas prices aren't employees' only concern. HR professionals say employees are in greater need of financial coaching.

One benefits manager at a D.C.-based think-tank has been hosting brown bag lunches where financial coaches can speak on a topic and answer questions on improving one's credit and basic budgeting.

"Everyone used to believe that giving specific financial advice and coaching in the workplace was a big liability, so they've stayed away from it, but it's also a huge opportunity," says Lane.

Foster says they only had one onsite financial adviser last year. This year she requested two certified financial planners and two investment advisers.

"The organization who won the contract for this service thought I was over the top on the number - to have four people onsite - but it turns out they're looking to add a fifth due to the volume and interest in getting some more financial coaching," says Foster.

One HR manager said her company has seen an alarming upswing in the number of hardship withdrawal requests from their retirement plan.

Most of the requests are due to the sudden and explosive increase in adjustable rate mortgages and employees trying to prevent foreclosure. Others want to tap retirement funds as a way to help relatives with their housing problems. Unfortunately, hardship rules prohibit such withdrawals.

The economic situation may lead to benefit tradeoffs, says Dale. Employees need help thinking about how to take advantage of their 401(k)s versus FSAs.

Employers used to think they shouldn't offer specific advice to employees, but employees need advice badly. It used to be seen as a liability, but an employer's responsibility for financial education has come full-circle, says Dale.

Alleviating more pain

And as employees are more financially vulnerable, some companies are revisiting the burdens they put on employees. Some are considering tying health insurance premium cost-sharing to compensation levels in a tiered model.

"Employees' percentage of the cost share has been going up and premium costs, in general, have gone up. It's kind of a double whammy. They're paying a bigger share of a bigger number," says Lane.

One HR manager explained how his company is using a tiered model so those who make more take the full brunt of premium increases, but those who make less see their premium payments stay the same.

There isn't any pushback on this policy because it's well established - his company has been doing this for six years and it has not affected senior-level recruitment.

Not just financial

Unfortunately, the recession is affecting more than employee pocketbooks.

Some employers are seeing an increased need for employee assistance plans as employees are under more stress.

"We expanded our internal, employee assistance staff after 9/11 and this year, due to the economy, we finally let one staffer go," says Foster. Now, the calls to their EAP are nearing the post-9/11 numbers. "Everyone is stressed about the economy," say says.

The result of greater financial coaching and advice for nervous employees is hugely appreciated. Still, employees that are not having financial and emotional needs met are seeking stability and the private sector is increasingly in competition with the government.

"Today, the government has become and attractive employer for many reasons including: flexibile work schedules, retiree health plans and competitive pay and bonus structures," says Curling. "With the bleed of baby boomers leaving the government system, the resulting employee shortage is creating a demand. That demand is putting pressure on private sector employers in terms of talent competition."

Addressing the ailing economy in the workplace

"Employees are looking for increased compensation and a shorter commute. Both add cash to their pocket."
- Kay Curling, VP of HR, Compensation, Benefits and HRIS at SI International

 "Employers have resisted giving financial advice, but helping employees through a difficult financial time really is an opportunity for employers afforded to them due to the unfortunate financial situation that we find ourselves in."
- George Lane, principal at Mercer

 "Last year we had one onsite financial adviser and this year I requested we have two certified financial planners and two investment advisers."
- Marcy Foster, director of HR for Arlington County, Va.

"The economic situation may lead to tradeoffs and tough decision-making [on the part of employees]."
- Judy Dale, senior associate at Mercer