Why blockchain is about compliancy first and technology second

Don't get blindsided by technology when it comes to blockchain and benefits, says David Creelman. It's a compliancy issue mainly

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Apr 26, 2023

Thanks to blockchain – distributed ledgers that comprise records (or blocks) containing information about the previous block – we are all going to see some big changes to benefits technology.

That’s just a plain and simple fact.

But, don’t expect this to be an easy journey.

For while the motivation for change is to better meet employees’ needs, there is a barrier to this change that continues to get in the way.

And this barrier to change isn’t technology, it’s regulation.

Let’s break that down.

Here are two things that employees would like from benefits:

First, they would love for benefits to be more transferable as they move from one company to another.

One of the most poignant examples of that is when you get matched up with a great family doctor who takes care of you for years, but when you move to a new company you must use a new doctor because the new company has a different insurer.

Secondly, as your needs change you may find that the benefits dollars the company is spending on you are not being used to the best effect.

For example, you may have a better use for PTO dollars than time off.

Compliancy is the problem

TLNT contributor Rob Whalen is a leader who has worked through the challenges of better benefits technology.

He’s CEO of PTO Exchange and his idea was “simply” to use technology to enable employees to use dollars allocated to PTO for something else.

The big lesson from his experience was that the critical thing we need to get right is to do things in a way that remains compliant in all 50 states and at a federal level.

When we are dealing with benefits technology, now or in the future, doing the hard work to remain compliant is going to drive what you can or cannot do.

Whalen says that the key benefit of blockchain technology is that the transactions are auditable by the IRS.

But since different benefits are taxed differently, if you are going to move dollars around then you need to be able to control and track how they are moved.

Regulators need to track transactions

Some people position blockchain apps in terms of cryptocurrency, but it’s not the “currency” side of it that matters, it’s the ability for regulators to track the transactions.

Once the technology is in place, employees can do all kinds of things to fit their personal circumstances.

One employee took money designated as PTO and redeployed it (in a compliant way) to help pay for her doctorate in health sciences.

So here’s the takeaway:

Blockchain technology is leading us to a future where employees have more portable and more flexible benefits.

It means that the huge pool of money going into benefits will create more value.

However, you need to think about compliance first and technology second.

Blockchain technology makes compliance possible and will open up lots of opportunities for innovative benefits professionals.