The current economic downturn and ongoing efforts to reduce costs are adding to the squeeze affecting benefits staffs, prompting benefit managers to turn often to consultants for core activities.

Consultants may assist benefits managers with communications about employee plans, actuarial work related to premium pricing, compliance with pension plan regulations and negotiations with vendors.

"In many organizations today, it's easier to ask for money to hire consultants than to ask for money to add to your staff," said Rick Beal, managing consultant for Northern California in Watson Wyatt Worldwide's San Francisco office. Mr. Beal said consultants are spending more time onsite, often working at a business for three to six months to implement a program.

For example, Public Service Enterprise Group Inc. has been outsourcing administration and record-keeping for its benefits plan to Hewitt Associates Inc.

"They know our culture and our benefit plans," said Charlie Miracola, manager of corporate benefits in Newark, N.J., for the energy company. It is "a lot easier" to delegate core activities, including communications around annual enrollment, he said.

Mr. Miracola said PSEG also continues to use consultants to reassess and meet the company's business goals.

Since merger talks with another utility fell through in 2006, the company has turned to consultants for help with benchmarking and developing processes "that would line up with those best practices."

A small nonprofit organization such the American Library Assn. in Chicago continues to rely on its consultant for health care premium pricing and plan design. Cynthia Vivian, director of human resources for the ALA, said she uses a broker to maintain a certain level of services "with dollar amounts in my face." Without a broker, "you run the risk of not knowing if you're getting the correct rate," she said.

She said she needs "the right broker who just doesn't take something off the shelf but recognizes you have to be aware of our culture. It has become invaluable for me during this time."

"Overall, demand for our services remains pretty consistent," said Chris Michalak, executive vp-business development and growth at Aon Consulting in Chicago. "Anything driven by regulation would be constant."

Regulatory change is "one of the biggest areas we use (consultants) for," PSEG's Mr. Miracola said.

Most employers with defined benefit or defined contribution plans don't have an actuary on staff who can do nondiscrimination testing and certify plan valuations, said Chantel Sheaks, principal of government affairs at Buck Consultants L.L.C. in Washington.

"There is no change in how companies are turning to us for core work," said Bob Leone, principal and solutions and strategy leader for Hewitt Associates' retirement and financial management practice in Minneapolis.

But companies are deferring discretionary activities, which could include redesigning a performance management system. Benefit managers expect consultants to look for "things that have a much more immediate payback," said Mike Thompson, a principal in PricewaterhouseCoopers L.L.C.'s human resources practice in New York.

While many benefit managers rely on consultants, some also are turning to other sources.

"We will continue to use consultants but ever more judiciously during the economic downturn, and we are being ever more creative in leveraging the resources of our partners," said Chris McSwain, director of global benefits for Whirlpool Corp. in Benton Harbor, Mich. (see related story)

"Looking at plan design is very hot right now," including increasing copays, deductibles and coinsurance, and implementing incentive programs to change behaviors, Mr. Thompson said.

"The biggest change (in plan design) in the last few years has been the move to consumer-directed health plans," said Watson Wyatt's Mr. Beal.

Buck Consultants has "a very big initiative" on consumer-directed plans and is "working with employers to get employees more engaged in their benefits," Ms. Sheaks said. Companies also are turning to consultants to help tailor health plans to employees' needs, she said.

Benefit managers are asking consultants to develop absence management programs. Companies also want more help with dependent eligibility verification, to "understand who's on the rolls and who should be off the rolls," Aon Consulting's Mr. Michalak said.

A Buck Consultants group is doing dependent audits, Ms. Sheaks said. Buck also has begun to help with COBRA audits, she said.

Hewitt is seeing more demand for technical services relating to health care plans, such as providing research and survey data about employee needs and preferences, pricing of alternative benefit plans, and analyzing various plans' financial impact on the organization and the employee, said Mr. Leone.

Some companies are doing more strategy work internally, he said. For example, "it's not unusual" to for a company whose benefits director has experience in plan redesign to rely on actuarial support from a consultant.

As Baby Boomers' retirement is expected to cause a labor shortage, consultants expect to be asked "to help in demographic planning, what the workforce of the future looks like and how it will impact (employers') ability to hire the people they need," Mr. Michalak said.

That may involve rethinking retiree access to health coverage, Mr. Thompson said.

Hewitt is expecting more demand for its expertise around managing risk for companies with defined benefit plans, said Mr. Leone.

Mr. Beal said that global consulting will become more important as U.S. companies increase their activities around the world.