Most district leaders hate building, selecting and managing employee benefit plans. Maybe there’s a better way.

I have had the privilege of working with many school districts on their benefits plans over the past three decades. Often, I will start the conversation by asking administrators a simple question: Why do you have the employee benefits you have? 

They usually look bewildered and then provide one of three answers:  

“They were here when I got here.” 

“It's what __________ (insert insurance agent) told us we ought to take.”  

“We tell people, 'If you get 25 people to take it, we'll give you a payroll slot,' which is the worst of the three.

Set up to fail  

School administrators aren’t in the insurance business. Typically, when a school system needs to choose a benefits plan, they just ask agents or companies to submit proposals for those specific plans, without specifying much of anything. 

As a result, what comes back is typically low-quality, BUT lower-priced junk. Very few of these plans meet the needs of the district, but the school system chooses those benefits plans anyway. 

Why is this a big deal? What is at stake if you get it wrong?   

As a Certified Financial Planner®, I know that most Americans do most of their financial planning through the benefits offered at work, whether that is protecting your health, your life, your income or even ability to retire successfully (which is not hard). As an employer, the school district is the de facto financial planner for potentially thousands of employee families, an entire community. That has a huge impact. It is vitally important to get benefits right. How you build and manage benefits can get the most efficient use of their dollars, or it can waste their dollars.

A solution to the politics and pressure 

The process of choosing benefits or benefit advisors can also be highly political and stressful for superintendents and other district leaders. My father was a school superintendent for 22 years. Watching him face this truth, I know that administrators can face a lot of pressure from salespeople, from community members who might work in the insurance industry, or from anyone else with an agenda. Most superintendents I talk to say they hate the politics of it, but they don’t know how to get out of it. 

The solution is to have a defined, transparent process that explains why you chose what you chose and takes the burden of that decision off the shoulders of the district administrator. That process should go as follows: 

1. Form an Employee Benefits Committee made up of 9-13 staff members, having a representative cross-section of your employee population represented—teachers, staff, custodians, paraprofessionals, bus drivers or others—to determine the needs and priorities most important in a benefits plan.  
2. Hire a qualified insurance advisor or broker (through a formal, open and transparent public bid) to work with the Committee and, together (led by the advisory firm) build the products you desire, then have that firm represent you in the marketplace, using the needs and priorities identified by the Committee, to solicit bids from insurance companies. 
3. After that RFP is performed by the advisory firm, have them lead the Benefits Committee to select the best benefits plans for the school system, based on their criteria, from the options presented by the broker or advisor. The advisor will (or should) lead the Committee through this process. Any quality advisory firm/broker can give you their specific process how they will manage building your better benefits path. 

This simple, equitable process removes the weight of responsibility from the superintendent or anyone else, and it removes politics from the equation. It gives you an answer when those insurance sales agents call you to try to sell you a plan: “Hold on. Let me explain our process and how we make our decisions. You’re welcome to submit to that process if you want. But we don’t decide any other way at this school system.” 

District administrators have played in the insurance companies’ sandbox for far too long. If you don’t understand the complexities of the insurance industry and just ask the market for bids, you’re at their mercy and the insurance companies are in control. It’s time to turn things around and put school system leaders in control, instead of insurance companies and sales agents. The stakes are too high.   

Dale Alexander is the founder and President of Alexander & Company/Hub International, an employee benefit firm focused entirely on school systems. Over 70,000 employees are benefiting from employee benefits services that his firm provides through their individual client school districts. 

 A Certified Financial Planner, Chartered Life Underwriter and Chartered Financial Consultant, Dale is the inaugural recipient of the national Employee Benefit Adviser of the Year by Employee Benefit Adviser magazine, and is the author of the nationally acclaimed book, “The Talk” (about money).