MARCH 2012

Mark Price, Roger Herod and Callum Burns-Green

BENEFITS CHALLENGES AND TRENDS FOR EXPATRIATES AND INTERNATIONALLY MOBILE EMPLOYEES

MERCER 1

AGENDA

• Overview of survey participants

• Typical expatriate benefits

• Types of assignment

• Benefits challenges

• Survey highlights

• Benefits:

– Retirement

– Expatriate localization

– International medical

– Overview of life & disability

• Questions & contact details

MERCER 2

RESPONDENTS BY REGION288 MNCs REPRESENTING 119,000 EXPATRIATES

Non-EU W. Europe

2%Other

2%Latin

America2%

AsiaPacific

15%

European Union

21%

NorthAmerica

58%

MERCER 3

RESPONDENTS BY ANNUAL REVENUE64% EXCEED $1 BILLION

2% 3%

11%

11%

38%

26%

8%

< $25 M

$25 M – $100 M

$100 M – $500 M

$500 M – $1 B

$1 B – $10 B

$10 B

Not reported

(Data in USD)

MERCER 4

BENEFITS TYPICALLY PROVIDED TO EXPATRIATES

• Retirement

• Medical

• Accident

• Death

• Disability

• Other (dental, vision, maternity, emergency assistance/evacuation, dependent medical, critical illness and short-term disability)

MERCER 5

TRADITIONAL

Assigned for 1–5 years, expecting to return to home country

LONG-TERM

Assigned for > 5 years, not localized to host country programs, not expected to move country to country

GLOBAL NOMAD

Move country to country on varying assignments

FIVE ASSIGNMENT TYPES

MERCER 6

SHORT-TERM

Assigned < 1 year (excluding those who travel frequently on business); most will remain in home country programs and maintain home residence

LOCALIZED

Moved to host country programs; no longer considered a traditional expatriate

FIVE ASSIGNMENT TYPES, CONT’D

MERCER 7

ASSIGNMENT TYPESDISTRIBUTION IN SURVEY

77%

17%

6%

Expatriates Short-term Global Nomads

79%

11%

10%

2008 2012

MERCER 8

CHALLENGES IN EXPATRIATE BENEFIT PROVISIONS

20%18%

14%

2%

36%

27%

5%2%

22%24%

15% 15%

Developingglobally consistent

approach

Ensuring Expatsare not

disadvantaged

Cost containment Ensuring smoothtransition at end of

assignment

Developingpolicies & plans for

new countries

Other

2008 2012

MERCER 9

KEY SURVEY HIGHLIGHTS

• 63% of traditional expatriates are maintained in home country retirement plans

• 12% of companies have established International Pension Plans to ensure continuity of benefits for global nomads and long-term expatriates

• 60% of International Pension Plans are now DC plans vs. only about 20% in 1991

• 53% of companies experienced premium increases of 6% or more in their international medical plan premiums at their last renewal

MERCER 10

RETIREMENT

MERCER 11

KEY RETIREMENT BENEFITS CHALLENGES

LONG-TERM NATURE OF PENSIONS

NATURE OF ASSIGNMENTS

BENEFITS FRAGMENTATION

EMPLOYEE EXPECTATIONS

TAXATIONCOST

ALLOCATION

MERCER 12

• Leave home country, and join host country plans

• Suitable for localization and DC environments

• Equity between expats and locals

• Can fragment benefits

APPROACHES TO PROVIDING BENEFITS RETIREMENT

INTERNATIONAL PLANHOME COUNTRY HOST COUNTRY

• Maintain membership in home country plan

• Suitable for short- and medium-term assignees (up to 5 years)

• Avoids fragmentation• Aligns with employee

expectations• Can be expensive, hard

to administer

• Join dedicated inter-national benefit programs

• Participation in home/host country programs may be waived

• Suitable for global nomads• Provides common design,

addresses home country coverage limitations

• Tax challenges, limits on membership

MERCER 13

RETIREMENT BENEFITS FOR TRADITIONAL EXPATRIATES

2%

10%

2%

6%

5%

7%

63%

5%

Other

We do not have this group

Through a regional plan

Covered under host country plan

Covered under headquarters plan

Case by case; no set approach

Remain in home country plan

Through an international plan

MERCER 14

INTERNATIONAL PENSION PLANSPERCENT OF RESPONDENTS THAT SPONSOR THEM

No88%

Yes12%

MERCER 15

INTERNATIONAL PENSION PLANSTRENDS IN PLAN TYPES

0

10

20

30

40

50

60

70

80

90

DB DC Hybrid

1991 1997 2001 2005 2008 2012

%

MERCER 16

INTERNATIONAL PENSION PLANSFUNDED STATUS

Other19%

Unfunded19%

Externaloffshore

insurance26%

Externaloffshore

trust37%

MERCER 17

INTERNATIONAL PENSION PLANSDC – FORMS OF PAYMENT

48%

24%

14%

10%3%

Lump sum only

Annuity

Employee choice

Lump sum w/annuity option

Other

MERCER 18

INTERNATIONAL PENSION PLANSDC – CONTRIBUTION STRUCTURES

78%

9%

4%9%

% of compensation

Employer matching

Varying rate

Other

Average employer contribution rate is ~ 8.5% of compensation– change from 9% in 2008 and 7.5% in 2005

Average employer contribution rate is ~ 8.5% of compensation– change from 9% in 2008 and 7.5% in 2005

MERCER 19

LOCALIZATION

MERCER 20

LOCALIZATIONWHAT ARE THE TRIGGERS?

3%

73%

39%

27%

Employee request onassignment completion

After specified period Case by case Other

MERCER 21

LOCALIZATIONWHAT HAPPENS TO PENSION BENEFITS WHEN LOCALIZED?

3%

5%

8%

11%

18%

1%

12%

12%

14%

18%

Other

Remain in home plan

Host plan with transfer ofbenefits where possible

Case-by-case

Host plan, no special treatmentof home service

Most cases

All cases

MERCER 22

INTERNATIONAL MEDICAL BENEFITS

MERCER 23

• Equity between expats and locals

• Benefits appropriate to host country

• Local employer costs in line with domestic burden

• Local tax relief – both corporate and personal

APPROACHES TO PROVIDING BENEFITS MEDICAL

INTERNATIONAL PLANHOME COUNTRY HOST COUNTRY

• Aligns with employee expectations

• Reinforces assignment’s temporary nature

• Maintains equity with home country peers

• Aligns with home country Social Security

• Avoids problems with pre-existing conditions

• Common design; equity among expatriates

• Reduces administration effort

• Relieves financial, time resource constraints

• Often anticipated by Social Security reciprocity agreements

MERCER 24

INTERNATIONAL MEDICAL PLANELIGIBILITY CRITERIA

24%

31%

21%

1%

8%

15%Other

Length of service

Employee position/level

Length of assignment

Country / region of origin

Expatriate type

MERCER 25

INTERNATIONAL MEDICALCOVERAGE BY INSURANCE COMPANY

23%

1%

6%

3%

11%

10%

46%

30%

1%

6%

9%

10%

11%

32%

Other

Aviva

AXA

Allianz

Aetna

BUPA

CIGNA

2012

2008

MERCER 26

INTERNATIONAL MEDICALHIGH-VALUE BENEFITS INCLUDED

81%

74% 72%69%

56%50%

2%

Primary care Routinematernity

Chronic Illness Routine dental Evacuation Repatriation Other

MERCER 27

INTERNATIONAL MEDICALPREMIUM INCREASES AT LAST RENEWAL

0 5 10 15 20 25 30 35

None

1-5%

6-10%

11-15%

16-20%

Over 20%20122008

%

MERCER 28

INTERNATIONAL MEDICALCOST CONTAINMENT MEASURES

3%

20%25%

28%

42%

50%57%

Employeedeductible

Co-insurance Annualbenefits limits

Restrictions onproviders /networks

Annual claimscap

Claims pre-authorisation

Other

MERCER 29

OVERVIEW: DEATH AND LONG-TERMDISABILITY

MERCER 30

DEATH BENEFITSMETHOD OF PROVISION BY TYPE OF EXPATRIATE

0

10

20

30

40

50

60

70

80

Home Host HQ International Tailored Other

Short-term Traditional Long-term Global Nomads & Local+ Localised

%

MERCER 31

LONG-TERM DISABILITY BENEFITSMETHOD OF PROVISION BY TYPE OF EXPATRIATE

0

10

20

30

40

50

60

70

80

Home Host HQ International No LTD Other

Short-Term Traditional Long-term Global Nomads & Local+ Localised

%

MERCER 32

MERCER’S OTHER SURVEYS AND RESEARCHWORLD ECONOMIC FORUM, ASSIGNMENT POLICIES SURVEY

TODAY’S GLOBAL BENEFITS SURVEY

AND PRESENTATIONWEF RESEARCH ON TALENT MOBILITY

• Thanks to all who participated

• Copy of presentation and link to recording to be emailed

• Full report available at end of April

• Pre-order report at www.imercer.com/ expatbenefits

• Participation open later this week in English at www.imercer.com/wiapp

• Soon available in Spanish, Japanese, Chinese, Korean

• More than 1,000 MNCs took the last survey

• New this year – assess-ment tool for 7 different common expatriation patternswww.mercer.com/

globaltalent

2012 WORLDWIDE SURVEY OF INT’L ASSIGNMENT

POLICIES & PRACTICES

QUESTIONS?

MERCER 34

CONTACTS

Mark Pricemark.a.price@mercer.com+44 (0)20 7178 3652

Roger Herodroger.herod@mercer.com+1 847 847 1542

Callum Burns-Greencallum.burnsgreen@mercer.com+1 415 743 8777

Pre-order Mercer’s 2011/2012 Benefits Survey for Expatriates and

Internationally Mobile Employees

www.imercer.com/expatbenefits

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