The economy recently hurled a curveball in the direction of Steven Farish, a broker for Purchasing Power, which sells big-ticket items such as computers, electronics and household appliances to employee populations on a voluntary basis.

One of his clients, a manufacturing plant with 1,500 employees in South Carolina whose 8.4% unemployment rate was the nation's third highest at the height of open enrollment in November, decided to shut down for two months, during which there would be no payroll deductions.

"It is going to have to go back to direct billing to each of the carrier providers involved," reports Farish, who's also a senior vice president and national worksite segment leader for Wachovia Insurance Services in Columbia, S.C.

The episode might prove to be much more than an inconvenience, as it brings into a focus a moral dilemma some benefit advisers have struggled with for a long time. It's a struggle that is all the more pronounced during periods of economic uncertainty and recession.

The question is simple: Should brokers and advisers who serve the worksite market be looking for new ways to profit off of expensive products or services when so many working Americans are struggling to make ends meet?

Roots of the crisis

Many ordinary folks have been enticed to live beyond their means, notes Jennifer Anderson, an independent broker of discounted supplemental medical plans for AmeriPlan USA, based in New Windsor, N.Y. She's mindful of the damage payroll deduction can do.

Locking into such a contract, for many Americans, is just more of the same irresponsible living that precipitated today's economic turmoil. "People have been criminally led to their own slaughter," she says. "And when they are offered something too good to be true, sometimes they are just so desperate, even though it isn't in their best interest."

Alex J. Plinio, a former HR professional who's now co-chair of the Institute for Ethical Leadership at Rutgers Business School, says it's more important for employers to spend money on good health care coverage and other basic benefits, rather than covering the administrative costs associated with big-ticket purchases through payroll deduction.

Group benefits innovation of opportunism

Another emerging area along the nontraditional voluntary product landscape — one that veers far from mainstream offerings — involves selling new and used cars through strategic partnerships with insurers and third parties that serve the group benefits market. The arrangement relies on conventional sources of financing rather than payroll deduction, though it leverages the power of group purchasing.

Zag, an online consumer automobile and dealership matching service, last year forged a strategic alliance with Administaff, a provider of HR services for small and midsize businesses. The relationship allows Administaff client-company employees access to Zag's technology platform and national network of more than 1,700 certified car dealers to shop for a new or used car.

Liberty Mutual, a provider of voluntary auto/home coverage, also joined forces with Zag to help roughly five million employees and members of more than 10,000 companies, associations and other groups enjoy exclusive dealer savings.

Critics question whether professionals dedicated to helping employers attract and retain a healthy and productive workforce should really be donning the guise of new or used car salesmen. Others sneer, arguing that innovation trumps the accepted thinking about what constitutes a bona fide worksite benefit.

John Pack, an independent broker in Dana Point, Calif., believes brokers need to branch out into other areas, not only because of the recession, but also because of the possibility for universal health care coverage within the next five years and the effect it could have on certain traditional product lines.

As for any ethical considerations associated with building a voluntary benefit around big-ticket purchases in a difficult economy that stray from mainstream benefit offerings, Pack isn't so sure there is any difference between these items and traditional lines like group medical, critical illness, long-term care or life insurance.

Credit cruncher or extender?

Since Purchasing Power's programs are based on employment status, job tenure and annual salary rather than individual credit scores, many lower-paid workers have an opportunity to buy something that they otherwise would not have been able to acquire.

"Payroll deduction is a very important conduit to our model, knowing that typically from major manufacturers we have 40% to 75% of credit applicants who are declined for poor or insufficient credit," says Doug Rooker, the Atlanta-based company's national sales director.

He cites a recent report by Reuters suggesting that the U.S. credit card industry may pull back more than $2 trillion in credit during the next 18 months because of risk aversion and regulatory changes.
The issue has proven a double-edged sword of sorts for Zag, which has negotiated $32 million in savings for consumers since April 2007, but has seen a decrease in sales the past few months because of the nation's credit crunch.

More than 90% of purchases traditionally require some sort of financing, reports Jason Nierman, director of business development for Santa Monica, Calif.-based Zag. "People are not getting loans like they used to," he says.

Advisers do make money on the car sales. Commission rates vary between each broker and Zag, which declined to provide details about how they're structured. He does say that the average customer saves more than $2,000 off the MSRP through Zag's affinity partnerships

Bruce Shutan, a former EBN managing editor, is a freelance writer based in Los Angeles.