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NEW YORK -- With governments around the world reforming social security systems, raising taxes and cutting back benefits across the board, benefit managers face new challenges and new trends, according to a benefit consultant.

"As governments cut back on benefits, there is ever more pressure on employers to bridge the gap," said Anne Craig, an international consultant at William M. Mercer Inc. in San Francisco in a presentation at Mercer's Global HR conference in New York last month. Her advice to employers: "Educate your employees on the changes and reduce the currently high expectations they have of the benefit system."

Here are some of the global employee benefit trends Ms. Craig identified:

* Defined contribution pension plans are on the rise.

"Everybody is talking about the trend toward defined contribution plans," Ms. Craig said. And "in a lot of economies we do see definite trends" in that direction. But most of the assets outside the United States still are in defined benefit plans, she cautioned. "Defined contributions plans grow at double the rate, but defined benefits still swamp them by a factor of five." Defined contribution plans are particularly useful for young companies, Ms. Craig said. "If you are a start-up, it is a cheaper way to provide retirement benefits. We see that a lot with emerging multinationals." Ms. Craig identified cost control, global competition and an aging population as the driving forces behind the trend toward defined contribution.

* Managed care is on the increase.

"HMOs and managed care currently seem to take over the world," Ms. Craig said. As examples, she cited that two-thirds of people in Latin America are covered by HMO/PPO-type plans and that in Hong Kong a number of large HMOs are about to enter the market. In addition to managed care, cost control and cost sharing are also on the rise in many parts of the world, Ms. Craig said.

* Flexible benefits are not a real global trend yet.

"It is limited to the more-developed economies," Ms. Craig said. "Many countries lack the legal and cultural basis" for flexible benefits, "but I think we are seeing it start to emerge."

* Over the long term, the Euro will lead to Pan-European retirement plans.

Besides the short-term administrative effects, the Euro ultimately will lead to Pan-European retirement plans, Ms. Craig said, echoing a view expressed by several conference speakers. "There will be increasing pressure on Brussels to legislate" on such plans, particularly from employers who want the legal framework that allows them to better manage plans, she said. At the moment, European states still have different designs, regulations and restrictions on investments outside their countries, Ms. Craig explained.

In a separate presentation, Frank McGoldrick, a Mercer international consultant in New York, talked about hot issues in global insured benefits management. One of these issues is reinsurance with a captive, he said.

"We find it's still uncommon to do it," Mr. McGoldrick said. But there is the potential for saving money, he said. The possibilities for saving depend on such factors as the risk transferred, premium timing -- if the money can be transferred at the beginning of the year, the potential savings are higher -- and the overall investment philosophy.

But "the single biggest factor is size, size of premiums," Mr. McGoldrick said. "Savings must be high enough to justify the cost." Therefore, captives are really of interest only to companies with more than $5 million in premiums, he estimated.