Change and communication: case study

The Challenge
Schering-Plough, a Montreal-based pharmaceutical company, wanted to reduce its costs associated with its benefits plan and have employees make better use of it.

Also, Schering-Plough acquired a new company and needed to change its pension plan to align with the organization’s future objectives. Decreasing the volatility of the defined benefit (DB) component of the hybrid pension plan was also a priority.

The Changes
The pharmaceutical manufacturer’s hybrid plan was, and still is for those who remain in it, fully funded by the company and in 2007 a voluntary RRSP was added. The RRSP has a matching component for those who wish to contribute.

However, in 2008, the hybrid plan was closed to all new employees. Those hired after Dec. 31, 2007, are in the defined contribution (DC) plan. The DC plan has a mandatory employee contribution rate of 1% to 8%, depending on the employee’s age and years of service. Employees in the plan can also contribute to the group RRSP but do not receive a company match.

Schering-Plough’s benefits plan also had a major overhaul in 2008. The organization moved from a company-paid, traditional benefits plan to a modular plan with some cost-sharing components.

Under the new plan, employees receive $1,000 in flex dollars to “spend” on benefits coverage. If employees choose the top level of coverage in each module, there are associated out-of-pocket expenses. If employees choose more moderate coverage levels, they can allocate their excess flex dollars to a healthcare spending account or a lifestyle account, or transfer them into the voluntary group RRSP.

For prescription drug coverage, regardless of the level chosen, there is a $900 out-of-pocket maximum for single adults. After the maximum is reached, prescriptions are covered under the plan at 100%. Also, all Schering-Plough drugs are covered 100% under the plan.

Val Pietrantonio, vice-president, HR, with Schering-Plough says that the organization dedicated a significant portion of the resources for the redesign to communication, which included brochures, face-to-face presentations and an update of the online resources for employees. “I would say we spent a fair amount of time, money and effort in making sure we had a very broad and comprehensive communication strategy,” he says. “We spent six months on the communication stage. That was probably, from my perspective, critical to the success of managing the project.”

Results
Natalie Adat, compensation and benefits manager with Schering-Plough, says the new plan gives employees more choice and better suits the demographics of the organization’s workforce.

“It was a significant change. But the response was good,” Adat says. “We did face-to-face presentations across the country. We met with employees and explained the rationale for the change. All in all, except for prescription drugs, [employees] have better coverage [now] than what they had with the one-size-fits-all plan we had before.”

The pension plan changes also went over well with employees. “Given all the market pressure and financial pressure, when you’re going from an exclusively company-paid to a cost-sharing arrangement, that’s a big change-management exercise. I think we were quite fortunate that employees understood,” says Pietrantonio. “We were surprised at how well the changes were received among our older population—we thought we would get a lot more resistance.”

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