Benefit Plan Design Analysis Essay

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Wal-Mart Benefit Plan Analysis

Wal-Mart describes its benefits plan in fairly flowery terms. They state that they offer a comprehensive benefit package that can provide up-front cash to pay medical expenses. Also, they tout bonus incentive programs as well as up to a six percent match for their 401(k) system (Wal-Mart Opportunity & Benefits, 2012)

However, despite the window dressing that Wal-Mart has placed around their benefits, the reality is not quite that simple. Not all of the associates, for instance, are covered by the health plan. Of the 1.1 million employees Wal-Mart has, not even two thirds of them (700,000) are even eligilble for the benefits. Even when the benefits are available, the results for associates, which is what Wal-Mart calls its employees, are mixed. For example, Wal-Mart issued a revised "preferred prescriptions" list in July 2009 and only 128 preferred brands were on that list. Many drugs were replaced with a single brand that was meant to encompass all of the drugs that would normally be used (Edwards, 2009).

In informing the employees about the change, they noted that non-preferred drugs would be eliminated from the grogram and that the prior preferred vs. non-preferred arrangement was being shut down. The only exception to this was specialty drugs. Many employees were very uhappy with this change. One employee noted that no effective alternatives, if any existed at all, to some drugs and that employee cited Athrotec and Ambien CR as examples. The latter is time-released whereas many comparable generics are not (Edwards, 2009).

In 2011, the news worsened with the corporation announcing that it was rolling back its health benefits for part-time workers still further. The new plan stated that Wal-Mart will no longer provide health coverage for employees who work less than 24 hours per week, whiles those who work between 24 to 33 hours per week can still receive coverage for themselves and their children. Their spouse must look for health insurance elsewhere.

In 2012, Wal-Mart proceeded even further by slashing the health care benefits of all of their workers in half. Benefits for family members were reduced to $500 per annum, whilst healthcare costs for employees were subsidized by just $250 per year. Employees have complained that the deductible alone could amount to 20% of the worker's annual pay.

Given those facts, therefore, it is not surprising that more than half of Wal-Mart's employees opt out of the company's so-called health insurance benefits. Many employees find the costs more expensive than the benefits. "Wal-Mart pays 67% of the cost of health insurance for employees, about equal to the retail industry average of 68% for family coverage-but, for individual health insurance, far below the 77% that retailers contribute on average" Deductibles are $1,000 for a plan with a low premium -- and this excludes routine treatments such as flu shots and child vaccinations (Evaluating Wal-Mart's health insurance).

Wal-Mart has always been known as a cheap organization. It has made its money and its notoriety that way. The reputation of its benefits package, consequently, conforms to its general reputation: miserly and poor as the company expands and becomes wealthier. Concerned social activists and simply those with an axe to grind have long criticized the corporation for its miserly habits in general including its poor treatment of employees) and its disreputable health benefits in particular. Many of the benefits, too, that appear on paper (as, for instance, on its website) disintegrate when analyzed more closely. That this is the case was exemplified here in connection with their health plans.

To reform and amend Wal-Mart's benefit package is the beyond the energy of one individual - certainly beyond my realm. A theoretical plan would be to draw public attention to their shortcomings -- which has already been done -- and to provide Wal-Mart's veteran, dedicated and full-time workers with a more generous package that is commensurate with their character and work. Health benefits should be increased and more drugs made available. Details should be worked out so that benefits equitably reflect worker's duration of employment as well as quality of service. These are some of my ideas. To get Wal-Mart to accept them is another story.

Statement of the Issue

The basic issue involved here is whether Wal-Mart is simply being cheap and treating their employees like an expendable commodity or if they simply cannot afford to provide health care coverage on an acceptable scale to 1.1 million employees. After all, Wal-Mart is the largest employer in the world.

The point of this paper is to offer constructive solutions and theories from research that suggest how Wal-Mart could or even should proceed. The major issue is that Wal-Mart has a ton of employees yet they have balance keeping employee benefit costs low and meeting the social responsibility demands of other firms. Wal-Mart is far from being the only firm that engages in these practices but they get the most attention because they are the proverbial elephant in the room which means that no other company could or would do what Wal-Mart is doing on such a massive scale.

The degree to which employee involvement and choice is or is not part of the equation is also worth of review. People often treat this as ancillary to the overall concern but such a viewpoint is short-sighted. That being said, employees not choosing to work at the best corporation in terms of concerns like coverage for children or spouses would be throwing them under the bus and it is a clear divergence from the major points, those being social responsibility and the amount of resources that Wal-Mart has. Especially in tough times, Wal-Mart argues that the retail industry is cut-throat and unforgiving but many others reply by saying that Wal-Mart has the resources to do the right thing and they should do so.

Literature Review

One article the author of this paper founds ties in nicely to the fact that Wal-Mart is far from the only large retail entity that is seemingly giving their retail employees short shrift when it comes to benefits. In an article dated in May 2011, it is noted that many union voices have started hurling their invective towards Wal-Mart's most formidable competitor, that being Target. The United Food and Commercial Workers Union mounted the first broad campaign to unionize the roughly five thousand workers at nearly 27 stores in the greater New York City area. It should be noted that Wal-Mart has next to no presence in that area (Greenhouse, 2011).

An employee of one of the affected stores went on record as stating that she earned nearly twelve dollars an hour but that she believed Target should have union or legal compulsion to pay people a living wage. Target countered this by saying their benefits are competitive with the industry and that, as such, there was no need for a union to be formed (Greenhouse, 2011).

However, in drilling deeper in the results, it was found that a major complaint about Target and its practices was less about insurance and more about a dearth of hours worked per week by each employee. Indeed, many employees were assigned to work only one or two shifts a week which can bring great stress to a person or family that is simply trying to get by. It is finally noted in the story that Target had nearly 1800 stores as of 2011 and Wal-Mart had north of 4400 and none of them were unionized. Wal-Mart in particular has gone so far as to shut down stores instead of being subject to a union (Greenhouse, 2011).

Another story reviewed for this report will most certainly be controversial to many. The story, which appeared on the Forbes website in early 2008, actually was so bold as to say that Wal-Mart and its benefits brings a net benefit to the communities and areas in which it inhabits, rather than being cancerous to the community's smaller businesses and its overall populace. A study conducted from 1985 to 2003 found that personal income, overall employment and retail employment all grew faster in areas with Wal-Mart as opposed to areas that did not have Wal-Mart's. Additionally, nine in ten employees that work at Wal-Mart are covered under some health plan, whether it be their own or a spouse's and that is line with industry averages (Van Riper, 2008).

The story goes on to note that Wal-Mart, by itself, is responsible for six percent of retail and food store goods in the United States and this number grows to seven and a half percent if you include food sales. A Pew study found that more than four fifths of the population thought that Wal-Mart was a good place to shop and roughly nine in ten people around the country live within 15 miles of at least one Wal-Mart. That being said, roughly a quarter of the population thinks that Wal-Mart is bad for the community and/or the country and nearly a third of people hold an… [end of preview; READ MORE]

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