Survey finds flexible benefits on the rise, particularly among public employers.

• Author: Hunt, Kelly A.

During the past five years, flexible benefits have become increasingly popular, according to KPMG Peat Marwick's most recent annual health benefits survey. Sixty percent of all employers offered a flexible benefit plan in 1996, increasing from 53 percent in 1995. Among state and local government employers, 65 percent offered a flexible benefit plan to workers.

The survey, conducted in the spring of 1996, was of a random sample of the nation's private and public employers with 200 or more employees. To increase precision, the sample was stratified by industry and number of workers and the data sorted by region. Repeat interviews were attempted with the 1,037 firms interviewed in 1995, replacing nonresponding firms with other firms from the same industry, region and size. Thus, 592 firms in the 1996 sample also participated in the 1995 survey. The 1996 survey had an overall response rate of 50 percent, or 1,151 respondents, 185 of whom were public-sector employers. The firm has conducted this survey of health benefits annually since 1991.

The survey data show a steady rise in flexible benefit offerings among employers in recent years, with the percentage of employers who offer flex plans rising from 47 percent in 1993 to 60 percent in 1996. As illustrated in Exhibit 1, state and local government employers are more likely to offer flexible benefit plans than employers in a number of other industry sectors and do not lag far behind the leading industries: finance, high tech, and health care. Among all employers that offer flexible benefit plans, an average of 30 percent of employees are enrolled in the plan. This figure is higher for government workers; 38 percent of state and local governments were enrolled in their employer's flex plan in 1996.

Flexible benefit plans allow employees to tailor their benefits according to their needs, usually in addition to a primary health plan and pension coverage. Generally, each employee participating in a flex plan has an account of tax-free money that can be used to defray expenses for benefits not covered by the employer (e.g., employee-paid health insurance premiums, unreimbursed medical expenses such as deductibles, or child care expenses). Employers choose which expenses (restricted by the Internal Revenue Service) can be paid for using this money. Some employers allow employees to set aside a limited amount of their pretax salary into the account, while other employers may provide the pretax money...