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Small Business Essentials Cost Containment Playbook:How Small Businesses Can Save Big on Benefits

Table of Contents SECTION 1: INTRODUCTION & EXECUTIVE SUMMARYIntroduction & Executive Summary .............................................................................................3Using the Cost Containment Playbook .......................................................................................5SECTION 2: EMPLOYER HEALTH BENEFITSUnderstanding Your Health Plan OptionsHealth Insurance 101: Funding Models, Protection, and Control ...............................................7Administration & Plan DesignHealthcare Navigation Services ................................................................................................12Medicare & COBRA Education .................................................................................................13Risk Mitigation ProgramsGroup Captives .........................................................................................................................15SECTION 3: WORKFORCE OPTIMIZATIONThe Importance of Benchmarking ............................................................................................. 17Strategic Compensation Planning ............................................................................................19Professional Employer Organizations (PEOs) ...........................................................................21Retention as a Cost Containment Strategy ...............................................................................22Retirement Plan Options ........................................................................................................... 25SECTION 4: CONCLUSIONConclusion ...............................................................................................................................28Contributors .............................................................................................................................29

SECTION 1Introduction & Executive SummaryYears of sustained market volatility and chronic economic uncertainty have caused many business leaders to worry about the financial resiliency of their organizations. One of the most concerning factors for employers to contend with is the seemingly endless rise of people-associated busi-ness costs, which can quickly overwhelm even the most financially responsible companies. The goal of this playbook is to address these rising costs with an array of concrete and actionable cost containment policies that small employers can use to save money on people-associated expenses.3

4Section 1: Introduction & Executive SummaryThe contents of this document have been limited to suggestions that do not negatively impact the employ-ee experience. This means that “nuclear options” such as mass layoffs, pay cuts, and the reduction of core benefits are not covered here. While these practices offer immediate cost savings and may be necessary in emergency situations, they also have lasting negative effects on morale and productivity and are therefore generally inadvisable.This paper groups cost containment mechanisms into two main categories: 1. Employer Health Benefits, and 2. Workforce Optimization. An executive summary of each of these sections is below:Many of the policies explored here are complex and may require multiple conversations with stakeholders and workforce experts to determine whether they are a good fit for your business. While this document is by no means a complete list of every option available to employers, our intention is to deliver a brief overview of the key options that leaders have available to them. Employers that adopt a strategic approach to cost containment will be well-positioned to weather rising healthcare costs, insulate themselves from economic turmoil, and serve employee needs in an efficient and effective manner.Employer Health Benefits A strong employer health benefits strategy includes a clear understanding of health plan funding options - such as fully insured, self-funded, and level-funded models - along with thoughtful plan design and administrative support. Providing employees with access to services like healthcare navigation, Medicare guidance, and COBRA education can improve overall benefits engage-ment and satisfaction. Employers can also manage costs and reduce risk through solutions like group captives, strategic vendor partnerships, and programs that support employee retention and long-term savings opportunities.Workforce Optimization Cost containment mechanisms in this space include potential administrative streamlining with PEOs, the use of benchmarking for vendor contracts, and strategic compensation planning. Businesses can also realize significant savings in recruiting, hiring, and onboarding costs by increasing retention and reducing turnover in their organizations. Retirement plan expenses can be reduced with changes in pricing structures and asset management models, as well as by leveraging the provisions of SECURE 2.0 legislation, which creates many savings opportunities for both businesses and individuals.

5Section 1: Introduction & Executive SummaryUsing the Cost Containment PlaybookThe remainder of this playbook contains two types of entries: Strategic and Tactical. Strategic entries, indicated by data and visuals in the right column, are intended to be read as miniature thinkpieces or explainers. Rather than focusing on the pros and cons of a single cost-containment policy, these entries cover multiple policies or broad topics that have wider business management ramifications. Examples of strategic entries include Health Insurance 101: Funding Models, Protection, and Control, and Retention as a Cost Containment Strategy.Tactical entries, indicated by keys, are laser-focused on individual cost containment policies and follow a consistent template. An example of a tactical entry is Professional Employer Organizations (PEOs). Most tactical entries include four metrics at the top of the page, which use a scale of one to four to provide a broad indication of the following: $$$$Savings Potential: The amount of money employers may be able to save by implementing a given policy.Change Management Difficulty: The amount of difficulty that employers may face whenimplementing a given policy within their organization.Disruption to Employees: How significant the impact of implementing a policy may be on the employee or plan member experience.Good Fit For: Which types of organizations are most likely to benefit from implementing a policy. The body of tactical entries are organized into the following sections:� What is it/are they? This provides a high-level overview of the cost containment tactic in question.� How does it/do they work? This discusses how a given tactic functions on a nuts-and-bolts level and provides additional context on how it can be adopted by employers.� How does it help control costs? This zeroes in on the specific ways that a given tactic can work to save money for organizations that decide to implement it.� Key considerations for adopters: This details potential issues or areas of concern that leaders should be cognizant of as they consider adopting a given tactic.Readers who are feeling intimidated by the volume of material in this document will be relieved to know that the Cost Containment Playbook is not necessarily intended to be read cover-to-cover. The following entries contain information on a wide array of different subjects, some of which will naturally be more ap-plicable than others. When considering the strategies and tactics detailed in the remainder of this docu-ment, readers should feel free to skip around, pursue the entries that seem the most relevant to the con-cerns of their organizations, and choose their own cost containment adventure. If at any time you would like to pause and receive a consultation from one of our workforce consultants, click HERE for help.

6SECTION 2Employer Health BenefitsA strong employer health benefits strategy includes a clear understanding of health plan funding options - such as fully insured, self-funded, and level-funded models - along with thoughtful plan design and administrative support. Providing employees with access to services like healthcare navigation, Medicare guidance, and COBRA education can improve overall benefits engage-ment and satisfaction. Employers can also manage costs and reduce risk through solutions like group captives, strategic vendor partnerships, and programs that support employee retention and long-term savings opportunities. By aligning benefit offerings with organizational goals and employee needs, businesses can create a more sustainable and impactful benefits program.

7The cost of healthcare in the United States is among the highest in the world, and it continues to rise. Small business owners, like everyone else, are feeling the burden of these costs, with employers paying more to insure their employees while receiving less in return.1. Average annual employer contributions for a family health plan have exceeded $25,000 and are expect-ed to keep climbing.12. Premium renewals are increasingly in the double digits, outpacing payroll, GDP, inflation, and corporate revenues.3. The average annual premium for employer-sponsored single coverage in 2024 was $8,951, with employees contributing about 16% of that cost. 4. Total U.S. healthcare spending reached $4.9 trillion, or $14,570 per person, accounting for 17.6% of GDP.These rising costs are forcing businesses to redirect resources that could otherwise go toward employee salaries, new projects, and other key business investments. The impact on both individuals and employers is severe and shows no signs of slowing down.Health Insurance 101: Funding Models, Protection, and Control For most non-exempt, full-time workers in the United States, access to health insurance is an expected, non-negotiable condition of employment. Unfortunately, as mentioned in the Cost Drivers section of this document, the cost of health insurance and healthcare itself has exploded in recent years and is becoming increasingly unsustainable for employers everywhere. You have more control over your healthcare costs than you might think. With the right guidance, it’s pos-sible to find a plan that fits both your budget and your employees’ needs. The key is understanding your options and knowing how different funding models work—because the structure of your health plan can have a big impact on what you pay and what your team gets in return.To help you make the best choice for your business, we’ll walk through two important topics: 1) The three main ways you can fund your health plan, and 2) The trade-off between cost protection and control that comes with each option.1 “2024 Employer Health Benefits Survey." Kaiser Family Foundation, October 9, 2024. 2 “NHE Fact Sheet." Centers for Medicare & Medicaid Services, June 24, 2025.UNDERSTANDING YOUR HEALTH PLAN OPTIONS Section 2: Employer Health Benefits1 2

8FULLY FUNDED PLANS: Fully funded plans are what most small employers think of when they consider health insurance. That said, there has been an increase in employers looking for al-ternative funding arrangements in recent years due to rising costs. In a fully funded plan, employers outsource 100% of the financial risk associated with health claims to a third-party insurance provider, which offers protection if claims utilization is higher than expected. Employers pay these providers a negotiated annual premium per enrolled employee, and employees access healthcare services at fixed rates within their provider’s health network.This option is attractive to employers because it presents the lowest amount of financial risk. In a year when employees submit many expensive health claims, the cost for said claims will be assumed by the insurance provider rather than by the employer. While circumstances like these would likely lead to a sizeable premium in-crease the following year due to the high level of use, business owners can rest easy knowing that they are shielded from the direct cost of catastrophic health claims. However, the opposite can also occur in a year where employees are largely healthy and claim costs are low, employers can wind up paying more to their insurance provider in premiums than their workforce used. When this happens, the insurance provider pockets the difference.Another drawback of fully insured plans is their near-total lack of transparency and control. When employers decide to outsource financial risk, they are also outsourc-ing input over plan design, discretion over which medical providers and pharmacy networks to use, and information about how their health dollars are being spent. While fully funded plans are certainly the best option for some employers (particu-larly smaller ones), they can leave much to be desired.LEVEL-FUNDED PLANS: Level-funded plans function more like a hybrid between fully funded and self-fund-ed models. They are designed to offer more cost control and transparency while still protecting employers from large, unexpected claims.With level-funded plans, employers pay a fixed monthly amount that covers pro-jected healthcare claims, administrative fees, and stop-loss insurance. The stop-loss insurance acts as a financial safety net, protecting employers if actual claims exceed a certain threshold. This structure allows for greater predictability in budgeting, making it easier for businesses to manage healthcare costs over the course of the year.You have the power to significantly of your health plan as longas you are willing to adopt the one that is right for your organization.lower the costSection 2: Employer Health Benefits

9At the end of the plan year, if actual healthcare spending is lower than projected, employers may receive a refund for a portion of the unused funds. If spending is higher, the stop-loss coverage kicks in, shielding the employer from excess costs beyond the predetermined limit.Who is this a good fit for? Level-funded plans are often well-suited for small to mid-sized businesses – typically those with at least 10–50 enrolled employees – that are financially stable, willing to engage more directly in benefits planning, and looking for a middle ground between cost savings and risk protection. While there’s no uni-versal financial threshold, employers should be prepared to handle steady monthly payments and consider their ability to absorb some variability in claims if stop-loss thresholds are approached.Small businesses also might choose a level funding strategy for their medical benefits due to several advan-tages compared to other funding options:• Predictability and Limited Liability: Fixed monthly costs help with budgeting and reduce financial sur-prises.• Potential for Cost Recovery: Employers may get rebates if claims are lower than expected.• Intermediate Control: More customization than fully insured plans, with less risk than self-funding.• Attractiveness for Cost-Conscious Employers: Helps manage rising healthcare costs with potential sav-ings.• Easier Transition: Acts as a bridge to self-funding, offering control without full financial risk.Level funding offers small businesses a balanced approach to healthcare - combining predictable costs, potential savings, and moderate control. Additionally, this model is especially attractive to business own-ers who are dissatisfied with rising fully funded premiums and are seeking a more transparent, potentially cost-effective way to offer competitive health benefits.ALTERNATIVE HEALTHCARE COST CONTAINMENT OPTIONS:ICHRA: Individual Coverage Health Reimbursement Arrangement (ICHRA)An ERISA-compliant ICHRA is a type of health insurance benefit that allows employers to reimburse em-ployees for a portion of their individual health insurance premiums.It is an alternative to traditional group health insurance plans.Key features include:• Flexibility:Employees can choose their own health insurance plan from the individual market.• Tax-Free Reimbursements:Employers can reimburse employees for their premiums on a pre-tax basis.• Eligibility:Employees must have an individual health insurance plan that meets certain requirements.• Employer Size:ICHRA is available to employers of all sizes.• Medicare Eligibility:Employees who have Medicare can also participate in an ICHRA.In terms of how ICHRA’s work, the employer provides a fixed monthly reimbursement amount to the em-ployee.The employee uses this money to pay for their individual health insurance premiums.Section 2: Employer Health Benefits

10An employee can also use the reimbursement for qualified medical expenses, such as copays and deduct-ibles.Benefits of an ICHRA are:• Cost Control:ICHRA may be a more affordable option for employers than traditional group healthinsurance.• Employee Choice:Employees have the flexibility to choose the health insurance plan that best meetstheir needs.• Tax Advantages:Both employers and employees can receive tax benefits from ICHRA.Overall, ICHRA is a flexible and affordable health insurance option for employers and employees who want more control over their health insurance coverage.It is important to carefully consider the eligibility require-ments and potential limitations before participating in an ICHRA.Reference-Based PricingReference-based Pricing (RBP) in healthcare is a reimbursement method that uses a benchmark price, often Medicare rates, as a starting point for pricing medical services, rather than negotiating discounts off billed charges.For example, traditional PPO health plans negotiate prices individually with each health care pro-vider in their network. Prices can vary widely in the same community for the same care. Instead of tradition-al PPO networks where discounts are negotiated, RBP establishes a maximum price for a service based on a benchmark, like Medicare rates.This signifies the maximum amount the health plan will cover, regardless of the provider’s actual charges. RBP aims to address pricing and variable costs, potentially leading to more affordable healthcare for both employers and employees.It promotes transparency by making healthcare costs more predictable and understandable.RBP incentivizes providers to charge fair prices and helps patients make more informed decisions.From a network utilization perspective, RBP plans typically don’t require, allowing members to choose any accepting provider.For example, if a CT scan has a billed charge of $1000, but the Medicare reimbursement rate is $250, an RBP plan might pay 100% or 150% of the Medi-care rate, potentially resulting in a lower overall cost for the member.UNDERSTANDING THE TRADE-OFF BETWEEN PROTECTION AND CONTROL:When weighing the pros and cons of different plan types, it is beneficial to conceptualize each plan model as existing within a continuum. This continuum is defined by a central trade-off between plan protection and plan control. Here, “protection” refers to protection from the financial risks that can result from higher-than-expected plan usage or catastrophic claims. High-protection levels tend to correlate to higher premium costs, more stable and predictable health expenditures, and less transparency into how an organization’s health dollars are being spent.“Control” refers to the ability of plan sponsors to customize their plan design according to the needs of their organization, determine what is covered and how, and pick which vendors they would like to work with. High-control plans tend to correlate to lower costs, a higher degree of financial risk (although this can be mitigated), and greater access to health spending information.Section 2: Employer Health Benefits

11Figure A shows Fully Funded, Level-Funded, and both Bundled and Unbundled Self-Funded Plans organized along the continuum of Control and Protection:As you can see, these four plan models are not created equal. Fully funded plans offer employers total protection from price instability and catastrophic claims, but essen-tially no opportunities for input, customization, or control. Unbundled plans provide the greatest amount of control, the highest degree of customization, the largest potential for savings, with the greatest opportunity for downside risk. Level- Funded plans and Bundled Self-Funded plans lie somewhere in the middle but generally skew in favor of prioritizing protection and stability over control and transparency.Figure B shows a Fully Funded plan in the leftmost column, a Bundled Self-Funded plan in the next column, and different iterations of Unbundled Self-Funded plans in the remaining three columns. Section 2: Employer Health Benefits

12Healthcare Navigation ServicesWHAT ARE THEY?Healthcare Navigation Services are third-party service providers that work with plan participants to effectively access healthcare services. These services work to guide employees and covered dependents through their healthcare journeys and have a vested interest in achieving both positive health outcomes and reduced healthcare costs. WHAT DO THEY DO?Healthcare Navigation Services advocate for patients rather than for insurers, hospitals, pharmacies, or other entities within the healthcare system. Healthcare Navigation Services act as a liaison between plan participants and these entities, providing a concierge-style feel and helping employees to understand their benefits, find the right providers for their needs, and access health services in the most efficient and effective manner possible. Some solutions solely focus on care coordination and advocacy, while the more comprehensive options include clinical support features to assist patients in selecting treatment options. These services can be offered virtually, powered by AI through an app, or through live, one-on-one coaching.HOW DO THEY HELP CONTROL COSTS?Employers should consider contracting a Healthcare Navigation Service provider because these services are able to uncover hard dollar, measurable savings for the employer and offer care, convenience, and support for employees. These services also assist in gaining more value out of existing programs and resources by educating employees about the company sponsored benefits available to them. Here are some examples of how Healthcare Navigation Services help to contain costs:� Changing places of service – for example, sending a member to a free-standing surgery center for acolonoscopy instead of an outpatient hospital.� Avoiding unnecessary care and looking for inexpensive equivalents to costly treatments andprescriptions.� Educating employees on their benefits, reminding them to stick to treatment plans, and encouragingthem to access routine and preventative care, which lowers the likelihood of negative long-termhealth outcomes and associated expenses.� Reducing absenteeism and increasing productivity by alleviating stress and worry for employees whoare experiencing medical issues.KEY CONSIDERATIONS FOR ADOPTERS:� As with any other service provided by a third-party vendor, employers should be thoughtful about thelikely return on investment when considering Healthcare Navigation Services. For some, the price ofcontracting a Healthcare Navigation Service provider may be greater than the savings that said serviceprovides, especially in years when plan usage is low.Savings Potential: $$$$ Change Management Difficulty: Disruption to Employees: Good fit for: This can benefit almost any group with significant health plan usage and expenditures.Section 2: Employer Health Benefits

13Medicare & COBRA EducationMedicare is a federally funded entitlement program that provides health insurance to senior citizens. All Americans become eligible to sign up for Medicare three months before their 65th birthday, and Americans with certain medical conditions are eligible at even earlier ages. In some cases, Medicare may be a better fit for eligible employees than their company-provided health insurance. However, some employees may not be aware of Medicare or may not be aware that they are eligible for it.While employers are forbidden from providing incentives for employees to move off of their plan and onto Medicare, it is perfectly legal and ethical for employers to provide information and educational resources to employees about this topic. Employees who are aware of their options may voluntarily choose to switch to Medicare due to reasons of lower costs or superior coverage. Situations like this can be a win-win, with better health outcomes for employees and reduced costs for employers.Educating employees about their options can be as simple as providing written materials about Medicare eligibility or having a dedicated Medicare expert speak to employees. These resources can be provided either at open enrollment or on a referral basis to employees as they approach age 65. Ensuring that employees have access to this type of information empowers them to make an informed choice that may also be better for their physical and financial wellbeing. It costs employers nothing to refer employees to a Medicare expert, and employees will be grateful to have a source of accurate and unbiased information.COBRA (Consolidated Omnibus Budget Reconciliation Act) is a federal law that allows some workers who become ineligible for their existing employer-provided health insurance to stay on their group’s health plan for a limited period of time. This is most frequently used in situations of involuntary job loss, but eligibility can also stem from reduction in hours worked, transitioning to a new job, or other qualifying life events.In a similar vein to the Medicare discussion above, employees who are eligible for COBRA may not be aware of all of their options and could choose to elect COBRA coverage without considering alternatives. Though employers are obligated by law to provide notice of COBRA eligibility to qualifying plan members and are forbidden from providing incentives for them to decline COBRA, it is permissible to provide information and resources about other health coverage options.In some cases, Medicare may be afor eligible employees than their insurance.better fit company-providedIt costs employers to refer employees to a Medicare expert.$0Section 2: Employer Health Benefits

14Employees usually assume their employer-sponsored plan is better than what they might be able to get elsewhere, but this may not actually be the case. Purchasing coverage from state healthcare exchanges may be a better option for some COBRA-eligible employees because involuntary job loss can possibly qualify them for income-based subsidies that they were not previously eligible for. In most cases, it is advisable for employers to provide educational resources about state healthcare exchanges, Medicare and Medicaid, and the potential of migrating to their spouse’s health plan. Many people don’t know where to learn about these options, and employers who provide this type of information may find fewer people electing COBRA, which can help to contain plan costs. It is advisable for employers to provideeducational resources about state healthcare exchanges, Medicare and Medicaid, and the potential of migrating to their spouse’s health plan. Section 2: Employer Health Benefits

15Group CaptivesWHAT ARE THEY?A Group Captive is a strategic and financial arrangement between a group of like-minded employers to pool risk, leverage economies of scale, and create their own high-performing health plan.WHAT DO THEY DO?Group Captives are a financial strategy that gives participating employers a high degree of transparency, flexibility, and control over health costs and plan design. Member employers pool their resources, cooperate to manage risk, and share in the rewards of increased flexibility, transparency, and choice. By participating in this arrangement, member employers can reimagine the value of their health plan and potentially achieve greater price stability than would be possible alone.HOW DO THEY HELP CONTROL COSTS?Employers must be self-insured in order to participate in a Group Captive. This eliminates some insurance carrier and state mandated costs like carrier risk charges, state premium taxes, state mandates, etc. Also, it is important for participating employers to implement value-based plans and networks and/or risk manage-ment programs that engage employees, manage risk, and reduce costs. Examples include Consumer-Based Health Plans, value-based networks or alternative network options, member advocacy platforms, wellbeing programs, and more. These actions generally result in lower claim costs, resulting in improved cost and claim trends over time. When the group captive performs well, employers have the potential to get cash back. With sustained cost reductions and savings, member employers can re-invest these dollars back into their most important asset, employees. KEY CONSIDERATIONS FOR ADOPTERS:� If the employer is already self-insured, their burden is very low for moving into a Group Captive.For fully insured groups transitioning to self-funding, there are some transitional items that need tobe managed before joining a Group Captive. In most cases, the burden is communicating the changefrom a traditional carrier to a third-party administrator, which is most optimal to utilize in a groupcaptive.� Employee disruption is very low and most won’t know they are in a group captive. The main burdenfor employees is working through any carrier or third-party administrator (TPA) change.� Willingness to collaborate with other like-minded employers to optimize the health plans foremployees and your company� Are you willing to move to self-funding with a TPA and carve out your PBM?RISK MITIGATION PROGRAMSSavings Potential: $$$$ Change Management Difficulty: Disruption to Employees: Good fit for: Small to mid-size businesses that are frustrated with the lack of transparency, flexibility, and control in most “off the shelf” health plans.Section 2: Employer Health Benefits

SECTION 3Workforce OptimizationCost containment mechanisms in this space include potential administrative streamlining with PEOs, the use of benchmarking for vendor contracts, and strategic compensation planning. Employers may also move towards an audit of existing benefit offerings in order to uncover opportunities for the strategic pruning of expensive and underutilized benefits in favor of cost-effective alternatives that are more popular with employees. Businesses can also realize significant savings in recruiting, hiring, and onboarding costs by increasing retention and reducing turnover in their organizations. Retirement plan expenses can be reduced with changes in pricing structures and asset management models, as well as by leveraging the provisions of SECURE 2.0 legislation, which creates many savings opportunities for both businesses and individuals. 16

17The Importance of BenchmarkingWHAT IS BENCHMARKING? Benchmarking is the process of comparing an organization’s benefits, performance, and outcomes against those of similar industries, size, and demographics. Benchmarking can be used to evaluate the competitiveness and effectiveness of an employer’s benefit programs, such as health insurance, retirement plans, or other employee benefits. WHY IS IT IMPORTANT?1. Attracting and retaining top talent:Employees today expect competitive benefits packages. By evaluatingthe benefits offered by other companies in the same industry or region,employers can ensure that their benefits are on par with or better than theircompetitors.2. Controlling costs:By comparing their benefits against industry averages, companies can identifyareas where they may be overspending or where they may be experiencinghigher utilization rates than their peers, allowing them to make data-drivendecisions on how to adjust their benefits programs to be more cost-effectiveThis is particularly true for a group on a self-insured plan.3. Improving engagement and productivity:When employees feel that their employer values their health and wellbeing,they are more likely to be engaged in their work and less likely to seekemployment elsewhere. By providing valuable information that can beleveraged to achieve these positive outcomes, benchmarking helps toimprove benefit offerings, boost employee wellbeing, and improve retentionand productivity.4. Making informed decisions about overall benefits strategy:By analyzing data on what benefits are most important to employees,how benefits are being used, and what benefits are costing the company,employers can make strategic decisions on how to allocate resources andadjust their benefits package to best meet the needs of their business andemployee population.HOW DOES IT HELP CONTROL COSTS? In some instances, employers may find that they are overpaying for services and discover opportunities for savings via vendor management and consolidation, changes in plan design, and benefits optimization. By evaluating the benefits in the same industry or region, employers can ensure that than their competitors.their benefits are on par with or betteroffered by other companies Section 3: Workforce Optimization

18Benchmarking reports can be used to contextualize expenses and make compari-sons within the following categories, as well as many others:� Administrative Claims and Costs� Ancillary/Voluntary Benefits� Benefit Levels/Employee Contribution� Compensation and Total Rewards� Employee Population Demographics� Employer-Type (Industry and Market Segment)� Funding Arrangements: Alternative Funding, Self-Funding, Captive, etc.Managed Care Platforms (HMO, ACO, PPO, POS, etc.)� Pharmacy� Retirement Plans� Risk/Property & CasualtySUMMARY Benchmarking provides employers with insights that enable them to assess their benefits program relative to those of similar companies. In the same way that retailers consider competitors’ rates when setting prices for their products, benchmarking enables the comparison of an organization’s spending to external data in order to understand this spending within the context of the wider market. This enables leaders to identify organizational shortcomings and make decisions that improve the overall health, productivity, and competitiveness of their business. For these reasons, those who do not already use benchmarking should consider adopting it as a tool for both cost containment and organizational competitiveness. Working with a qualified benchmarking partner, monitoring competitor and mar-ketplace trends, and using these insights to influence both tactical and strategic planning is an effective way to ensure that key decisionmakers are always armed with the data they need to make the right call. Benchmarking provides employers with relative to those of similar companies.insights that enable them to assess their benefits programSection 3: Workforce Optimization

19Strategic Compensation Planning It’s no secret that compensation is one of the largest expense categories for most employers. This has been especially true over the past couple of years, with infla-tionary pressures and an acute labor shortage causing wages to rise across many sectors of the economy. Generally speaking, compensation is one of the last things that employers want to touch when they are trying to contain costs. However, strategic changes to compensation policies can sometimes be the lesser of two evils for companies that find themselves caught in difficult circumstances. While full-throated pay cuts are outside the scope of this paper due to their negative impact on the employee experience, the list below contains other compensation levers that employers can pull. These policies will likely be unpopular, but they represent real opportuni-ties for savings that can help businesses to navigate unfavorable conditions in the short-to-medium term.1. Reduction/Suspension of Merit IncreasesWhile merit increases to employee pay are generally advisable for reasonsof retention, productivity, and morale, it is sometimes prudent to limit theamount of money allocated to such increases or even cancel them altogetherduring periods of distress. This option is arguably the least severe of any ofthe items on this list, as merit increases are not guaranteed by definition andsuspending them is merely continuing the status quo rather than “takingsomething away”. However, it is no secret that inflation has reduced thepurchasing power of employee salaries, and a portion of your workforce mayview the implementation of this policy as a de facto pay cut.2. Reduction/Suspension of Incentive PaymentsA similar strategy may be applied to incentive-based payments that arecontingent on employees meeting concrete goals, although this can be a bitdicey. For example, incentive payments that are unequivocally guaranteed inoffer letters or other employment agreements will likely need to be honored.In addition to this some types of positions may have low base salaries and highperformance-based payouts, meaning that limiting incentive pay could havea crippling effect on employee wellbeing (sales jobs are the most prominentexample of this). For these reasons, employers should exercise discretion andweigh the pros and cons of such policies prior to implementation.Limiting incentive pay could have a on employee wellbeing.cripplingeffectIt is sometimes prudent to limit the amount of or even cancel them altogether during periods of distress.money allocated to such increases Section 3: Workforce Optimization

203. Limitation of Overtime PayLax overtime policies can quickly add up to a significant drain on a company’sbottom line. If employees are not already required to obtain approval frommanagement before incurring overtime, it may be prudent to implementstricter controls along these lines. Employers may also consider allocating aset budget for overtime expenditures per week or per month and working withfrontline employees to ensure that this is adhered to. Please be advised that,generally speaking, employers are legally required to pay overtime once it isincurred, even if it was incurred in violation of an internal policy.4. Suspension/Reduction of Certain ReimbursementsLaws regarding the reimbursement of work-related employee expenses varybetween different jurisdictions. In jurisdictions with lower levels of regulation,employers may be able to save money by instituting stricter reimbursementstandards or even suspending reimbursements entirely. Temporarily reducingor suspending reimbursements for things such as car mileage, cell phoneusage, meals, or internet for remote workers may be a good way to cut backon “nice-to-have” policies during fiscally challenging periods in a way thatdoes not affect a company’s core employer value proposition. In order toensure that no laws or regulations are being violated, make sure to confer withyour finance team before implementing policies such as these.Before electing any of these compensation cost saving strategies, it is important that employers mitigate any associated risks. We suggest taking the following steps:� Ensuring that no discrimination of a protected employee category is occurring� Consulting with legal and financial counsel (where appropriate) to ensure theaction is in accordance with local, state, and federal laws� Clearly communicating the changes with employees, including what change isoccurring, why it is occurring, who it impacts, and for how longEmployers may also consider allocating a per week or per month and working with frontline employees toset budget for overtime expendituresensure that this is adhered to.Section 3: Workforce Optimization

21Professional Employer Organizations (PEOs) WHAT ARE THEY?PEOs are third party organizations that enter into co-employment agreements with businesses and exe-cute various administrative and compliance duties for their clients.WHAT DO THEY DO?Once contracted, PEOs act as the employer of record and handle routine administrative duties on behalf of their clients. These duties typically include items such as payroll, hiring, onboarding, benefits administration, and worker’s compensation. Employers who work with PEOs retain responsibility for day-to-day operations, the direct management of employees, and strategic planning and decision-making.HOW DOES IT HELP CONTROL COSTS? PEOs can save employers money by leveraging economies of scale, consolidating various tasks and ven-dor relationships into a single efficient stream, and enabling HR and administrative employees to focus on higher-value activities. Because PEOs can pool the plan risks and administrative burdens of many different clients, they can put forward attractive pricing structures and plan designs that cost significantly less than what individual employers would be able to achieve on their own.KEY CONSIDERATIONS FOR ADOPTERS:� While PEOs can certainly help employers to save money, their main selling point is the ability to streamline human capital management challenges with dedicated staff and technology platforms. This means that the best candidates for cost containment via PEOs are those who currently have inefficient or low-tech administrative processes.� Like any professional service provider, a PEO should be thoroughly vetted before entering into apartnership. Employers should look for designations such as CPEO (Certified Professional EmployerOrganization) status from the IRS and ESAC (Employer Services Assurance Corporation) accreditation.While these credentials don’t guarantee protection in the event of a closure, they do signal that thePEO meets strict financial, ethical, and operational standards - giving employers added confidence intheir stability and reliability.Savings Potential: $$$$ Change Management Difficulty: Disruption to Employees: Good fit for: Smaller businesses with room for administrative streamlining.Section 3: Workforce Optimization

22Section 3: Workforce OptimizationRetention as a Cost Containment StrategyEmployers have been grappling with years of record-high job openings, record-low unemployment, and a workforce participation rate that remains below its pre-pandemic level. Demographic changes are making this labor shortage even worse: Americans are having fewer children, over 10,000 baby boomers are hitting retirement age every day, and the population of working-age Americans has been in decline for almost two decades.2 3Savvy business leaders know the talent shortage won’t be resolved anytime soon and that it carries real financial costs. Many employers focus only on the expense of hiring a replacement, typically estimated at 30–50% of the employee’s salary, and overlook the broader impact of turnover. However, this figure grossly underestimates the true cost of replacing a seasoned performer with someone new. In professional roles, new hires can take months or years to reach the productivity and contribution levels of those they replace. Taking this into account, organizations like Union Leader say that unhappy workers cost U.S. firms 1.9 trillion dollars.4 Things get even more expensive when a new employee winds up being a poor fit for their role. Research by Topgrading Inc. suggests that the cost of a mis-hire can reach staggering levels - potentially millions of dollars for executive roles - when factoring in lost productivity, poor decisions, team disruption, and the cost of replacement.5Because of all this, cultivating a high-retention atmosphere is one of the most surefire ways for employers to contain costs. However, there is a lot of misinformation and myth-making on this topic that has led well-meaning managers astray. For example, the simplest and most common step many leaders take to boost retention is also one of the least understood: they raise pay. While below-market compensation has been shown to drive employees away, decades of research show that high pay alone does not prompt the type of extreme satisfaction that causes employees to stay with an organization long-term. What’s worse, pay raises have little or no lasting impact on productivity or effectiveness.Unhappy workers cost U.S. firmsdollars.450%-200%Engaged teams experience up to 43% lower turnover.11 “Employee Retention.” Wikipedia.2 “Aging Readiness & Competitiveness (ARC), United States.” American Association of Retired People. 3 “Working age population.” OECD iLibrary.4 “Study: Unhappy workers cost US firms $1.9 trillion.” Union Leader, March 11, 20255 “From the Desk of Brad Smart: Estimate the Cost of Your Mis-hires.” Topgrading, Inc.

23So what practices can employers cost-effectively implement that act as strong satisfiers? Consider these three:1. Elevate Clarity: Articulate what the role is, what responsibilities it has, andhow performance is measured. Ambiguity about these things causes stressand frustration.2. Connect to Purpose: It is critical for employees to understand how theirefforts contribute to a larger mission or goal and to make sure that this iscompatible with their own “why”.3. Focus on Growth: This one is the most important. Provide the people youmanage with a path forward in their professional lives and actively work tohelp them advance.Retention is a natural byproduct of organizations getting these things right. This isn’t a reluctant, I-guess-I’ll-stay-another-year retention, but a true and enduring satisfaction and enthusiasm that boosts productivity and turns employees into brand ambassadors. Focusing on these three satisfiers, and especially on growth, is an effective strategy that secures real savings by way of preventing turnover.So instead of advising managers to retain their people, insist that they grow their people. Instead of “if we pay, they’ll stay”, think “if they’re not growing, they’ll be going.” When it comes to clarity, focus on what, how, how much, and why. Spell out exactly what great performance looks like, naming the skills and behaviors you are looking for. Create measurable goals and indicators, especially for non-sales roles that rarely experience such clarity. Take the time to understand what makes each employee feel a sense of purpose. Encourage them to share their “why”, not the company’s why, and map their role and responsibilities to this. Pursue moments of intentionality and have clarifying conversations about what interests them and how they would like to see their role evolve and change. Finally, don’t assume that people know where and how they should grow. Collaborate with them on a growth plan, tie measurable development goals to it, and put these in writing. Once this is done, revisit the plan in your recurring check-ins and progress updates. Be relentless in your guidance and encouragement and prove to them that your organization cares about its people.does not prompt the type of that causes employees toextreme satisfaction stay with an organization long-term.High pay alonewhat makes each employee and map their role and responsibilities to this.. feel a sense of purpose Take the time to understandSection 3: Workforce Optimization

24Growth Practices Retention PracticesRole and goal clarity Free Salary increases 5-10% of salaryMentorship or accountability buddies Free Higher variable comp or bonus 5-25% of salaryBook clubs or lunch-and-learns Free or low $Equity incentives $$$$3-6 months of professional coaching $$$ Promotions $$$$Eliminate unfair or annoying policies FreeLegal Action Against Departed Employees$$$$These practices not only work to contain recruiting and hiring costs, but also increase productivity and morale. Helping people grow is low-cost, high-impact, and rewarding in its own right. Development is about progress over perfection – if you can make everyone in the organization feel like they are growing, retention issues will begin to melt away.Section 3: Workforce Optimization

25Built for SMBs: Smarter Plan Design, Cost Control & Workforce ImpactRetirement Plan Pricing Models: Per Participant vs. Asset-BasedWHAT ARE THEY?Small and mid-sized employers offering retirement plans typically choose between two pricing models:1. A fixed annual fee per participant2. An asset-based plan structure (Variable Asset Charge or VAC) charging a percentage of the plan’s totalassetsHOW DO THEY WORK?� In a per-participant pricing model, if a company has 75 employees and the fee is $70 per participant,the total annual plan fee is $5,250. If headcount grows, so do costs.� With an asset-based model, a plan with $7 million in assets and a 0.20% fee results in $14,000annually—regardless of how many employees participate. As assets grow, fees increase.HOW DO THEY HELP CONTROL COSTS?Each model has benefits depending on plan size, growth, and participant behavior:� Per-participant pricing may benefit businesses with stable headcounts or highly compensatedemployees� Asset-based pricing may suit growing teams with modest account balancesKEY CONSIDERATIONS FOR ADOPTERS:Employers should evaluate headcount trends, average balances, plan usage data, and growth projections. CRS offers benchmarking and strategic guidance to help SMBs reduce costs while supporting employee financial wellness.Retirement Plan Management Styles: Active, Passive, & HybridWHAT ARE THEY?There are three primary approaches to managing retirement plan investments:1. Active Management – Human-led investment oversight aimed at outperforming the market2. Passive Management – “Autopilot” investing that mirrors broader markets or indexes3. Hybrid Management – A blend of both strategies to balance cost and performanceRETIREMENT PLAN OPTIONSSection 3: Workforce Optimization

26HOW DO THEY WORK?� Active management involves frequent trades and custom strategies by investment managers� Passive management uses fixed allocations and minimal adjustments, typically via index funds� Hybrid plans combine both to create balanced, cost-conscious portfoliosHOW DO THEY HELP CONTROL COSTS?� Active plans are generally higher-cost due to increased oversight and trading� Passive plans are more cost-effective, requiring less intervention� Hybrid plans offer strategic flexibility depending on asset mixKEY CONSIDERATIONS FOR ADOPTERS:Employers should weigh cost vs. performance expectations and review investment goals. CRS can assist in assessing current plan models and identifying optimization opportunities that meet both fiduciary and financial priorities.Retirement Policy Updates: SECURE 2.0 Key ProvisionsWHAT IS SECURE 2.0?The SECURE 2.0 Act, signed into law in 2022, introduces over 90 provisions designed to modernize retire-ment plans and improve outcomes - particularly for small and mid-sized employers. Most provisions take effect between 2024 and 2027.SMALL BALANCE THRESHOLD INCREASING TO $7,000� Effective 2024� Allows employers to remove small-balance accounts from terminated employees� Helps improve average account balance metrics, reducing administrative and “per account” fees� CRS helps plan sponsors implement this change to streamline operations & reduce unnecessary costsPART-TIME EMPLOYEE PLAN PARTICIPATION� Effective 2025� Requires employers to offer retirement plans to part-time employees working 500+ hours for 3consecutive years� Employers are not required to provide matching contributions� A low-cost way to expand retirement benefits and enhance retention among part-time/seasonal staffSTUDENT LOAN-LINKED 401(K) CONTRIBUTIONS� Effective 2024� Employers can “match” student loan repayments with 401(k) contributions, even if the employee isn’tcontributing� A modern, cost-effective benefit that supports recruitment & retention of debt-burdened employeesSection 3: Workforce Optimization

27KEY CONSIDERATIONS FOR ADOPTERS:Understanding which provisions apply, and how to operationalize them, can help employers lower plan friction and uncover cost-saving opportunities.Non-Qualified ContributionsWHAT ARE THEY?Non-qualified retirement plans offer employers a flexible way to reward and retain key employees without the limitations of traditional 401(k) plans.HOW DO THEY WORK?Employers can:� Set custom vesting schedules� Offer contributions tied to company performance or milestones� Use these plans in place of equity grants, bonuses, or raisesKEY CONSIDERATIONS FOR ADOPTERS:Non-qualified plans can help smaller employers compete for talent - without equity dilution or large cash bonuses. They’re also useful in succession planning and long-term incentive design.WHAT MATTERS MOSTIn today’s environment of rising benefits costs and tighter labor markets, retirement plan optimization isn’t just a fiduciary responsibility, it’s a business advantage.SMBs should regularly:• Reassess pricing models and fund strategies• Leverage legislation like SECURE 2.0 to their advantage• Explore flexible, targeted approaches for rewarding top talentWhen done right, these changes can enhance financial wellness, support recruitment, and reduce operational costs - all without sacrificing plan quality.Section 3: Workforce Optimization

SECTION 4ConclusionSmall businesses are the backbone of our economy and the heart of every community. But in today’s environment, running one isn’t easy. Costs are rising. Talent is harder to find. And every dollar matters more than ever. That’s why this playbook exists: to give you real, actionable strategies to take control of your healthcare and workforce costs without sacrificing what makes your business great. You don’t need a massive HR team or a Fortune 500 budget to make smart, strategic decisions. You just need the right tools, the right partners, and the confidence to act. The future will reward the businesses that adapt. That stay resilient. That put their people first while protecting their bottom line.For additional cost containment guidance and customized solutions for your organization, connect with our team of workforce strategists here.ONEDIGITALOneDigital’s team of fierce advocates helps businesses and individuals achieve their aspirations of health, success, and financial security. Our insurance, financial services, and HR platform provides personalized, tech-enabled solutions for a contemporary work-life experience. Nationally recognized for our culture of caring, OneDigital’s teams enable employers and individuals to do their best work and live their best lives. More than 75,000 employers and millions of individuals rely on our teams for counsel and access to fully integrated worksite products and services and the retirement and wealth management advice provided through OneDigital Investment Advisors. Founded in 2000 and headquartered in Atlanta, OneDigital maintains offices in most major markets across the nation. For more information, visit OneDigital.com.28

29ContributorsAdam Rivett, Retirement Plan ConsultantAmber Jamison, Clinical Account Executive, OneDigital Pharmacy ConsultingCassandra Schlarb, Regional Director of Risk and Analytics Dan Yuftczak, Client Relationship Manager, Retirement ServicesDavid Hernandez, Analyst, Stop Loss Center of ExcellenceGeorge Papagelis, National Practice Leader, Captive SolutionsHeather Gould, Executive Vice President of Strategy, Growth & TransformationJulie Cape, Executive Vice President of Client ServicesKelly Pamm, Clinical Account Executive, OneDigital Pharmacy ConsultingKammy Boyd, Managing Principal, Small Business EssentialsKristen Duke, Managing Principal, Small Business EssentialsMadison Eddleman, National Member Engagement and Wellbeing SpecialistMonique Burke, Director, Stop Loss Center of ExcellenceNauman Shaikh, Vice President of Risk & Analytics Nicholas Paribello, Senior Actuarial Consultant, Health and BenefitsRichard Lo, Clinical Services Manger, OneDigital Pharmacy ConsultingScott Wham, Director of ComplianceSena Meilleur, Principal, Employee Benefits ConsultantShira Wilensky, National Practice Leader, Health and WellbeingStacey Parker, Director, Compensation ConsultingTim Connors, Regional Director of Quoting and AnalyticsTravis Dommert, Senior Vice President of TalentTroy Miethke, Senior Financial Benefits and Underwriting Consultant DISCLAIMERThe information contained herein and the statements expressed are a general nature and are not intended to address the circumstances of any particular or individual entity. This whitepaper is made available by OneDigital for educational purposes only. Please consult with a professional on appropriate advice for your specific situation.Investment advice offered through OneDigital Investment Advisors, an SEC-registered investment adviser and wholly owned subsidiary of OneDigital.

30Small Business EssentialsCost Containment Playbook:How Small Businesses Can Save Big on BenefitsWWW.ONEDIGITAL.COM