Employee benefits are a key component of local government compensation systems. Global economic, social, demographic, and technological changes are transforming the nature of work, necessitating innovation in employee benefits practices (Fredericksen & Soden, 1998). There has been a dramatic proliferation in employee benefits, increasing both the cost and importance of the overall benefits package (Bergmann, Bergmann, & Grahn, 1994; Durst, 1998). The major objectives of this research effort are to identify and categorize the benefits cost control strategies used by a national sample of municipal governments and to gauge their impacts on the provision of an effective benefits package. Employee benefits constitute an increasing share of total compensation costs. The percentage of compensation expenditures devoted to benefits grew from 3% in 1929 to approximately 30% by the midl990s (Bergmann et al., 1994; Fredericksen & Soden, 1998; McDonnell et al., 1997). Concurrent with the elevation in total benefits costs is the enhanced significance that employees attach to the benefits package when choosing jobs (Bond, Galinsky, & Swanberg, 1998). Research indicates that employee benefits satisfaction is linked with more effective staffing, lower absenteeism, reduced turnover, and higher levels of organizational commitment, among other positive outcomes (Durst, 1998; Williams, 1995). To remain competitive, public sector organizations must not only maintain an attractive, traditional benefits package consisting of health insurance and pension coverage but also offer selected family-friendly benefits to accommodate changing employee needs as a result of changing employee demographics, family structures, and lifestyles (Bond et al., 1998). Municipal governments customarily provide very competitive and generous traditional benefits, providing pensions and health insurance coverage for no or small employee contributions (Moulder & Hall, 1995; Strieb, 1996). The liberal vacation,