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115 ),1$1&,1* (03/2<(( %(1(),76 352*5$0 The development of EB plan is similar to any other corporate expenditure which entails risks. Thus, in managing these EB plans on a global basis, it is useful to consider a risk framework in order to capture a holistic view of the risks. There are several universal risks attached to the provision of employee benefit plans, namely the financial, accounting, compliance, talent, governance, operational and reputational risks. Many of these risks are redundant but considering each in turn provides a useful structure for working through a potential EB plan. Employee benefits program can be funded by traditional insurance, self-funding or other alternative funding methods. Self-funding via pooling arrangement brings together a company’s local EB plan into single central account.This arrangement allows companies to achieve financial consolidation and reduced volatility. With self-funding, the employer has full control of the fund, including the financial return of the invested fund. Pooling solution has proven effective and of great values for a wide range of organization since the 1960s. However, over the years, risk evolved and the financing of an attractive EB plan becomes more complicated and costly. The investment strategy must ensure the right balance between return, security and liquidity. Conventional or traditional risk transfer via insurance externalizes risk, but simultaneously means that the company loses a degree of control over the risk itself, and also potential data that may be able to assist them in managing the risk more efficiently. Risk transfer via insurance also includes a transfer of the profit margin to the insurers that might otherwise be retained within the company itself. Thus, companies are seeking an alternative approach to finance the EB plan, which offers numerous benefits and useful flexibilities in designing the whole package. To employees, it usually makes little difference whether a benefit plan is funded with an insurance contract or through some type of alternative arrangement. However, for employers, it is important to differentiate the cost and benefits of different financing strategies. It is proven by Fronstin, Helman and Greenwald (2003) that employer tend to adapt the company’s EB structure in adjusting to the increased costs. Employers may decide to pass the bulk of the costs to employees by increasing the share of premiums payable for health care or to reduce benefits offered to workers. This can be done by decreasing the quantity and quality of benefits. The second option is by reducing the number of workers who are offered such benefits. The third option is to employ temporary workers. 7UDGLWLRQDO ILQDQFLQJ WKURXJK JURXS LQVXUDQFH YV 6HOI IXQGLQJ Discretionary benefits, particularly life and health insurance can be financed through group insurance. By using insurance, an employer transfers the financing of the benefits program to an insurance company in an exchange of a premium payment. By transferring the risk to an insurance company, the employee benefits expenditures are limited to the premium payments thus ensuring stability in the company’s profit. Under group insurance, only one insurance contract is issued to the employer. Group insurance has specific underwriting characteristics that differs from individual insurance. Group insurance is beneficial to employees as it does not require individual evidence of insurability. The experience, size and composition of the group will determine the premium. An employer may decide to pay the premium to the insurance company or share the cost of the premium with the employees. Premium contribution from employees may be deducted from their monthly payroll. To ensure that the benefits program is sustainable, the workforce should have a stable proportion of younger workers. In other words, there is a stable flow of new and younger workers entering the workforce replacing the retiring older workers.