Financial wellness: Here’s what employees want, need in 2017
Great article from our partner, United Benefit Advisors (UBA) by
Recent research into individuals’ financial resolutions for 2017 can tell you whether your financial wellness initiatives are giving employees what they want. It can also tell you whether to expect employees to increase their retirement contributions next year.
Personal finance company LendEDU recently asked 1,001 Americans about their financial goals for 2017, as well as what their biggest concerns are. The results were published in LendEDU’s “Financial Resolution Survey & Report 2017,” which can help employers determine if their financial programs are on point.
Here are some of the more interesting Q&A’s from the research:
What’s your most important financial resolution in 2017?
- Save more money — 52.85% of respondents selected this
- Pay off debt — 35.56%
- Spend less money — 11.59%
Takeaway for employers: Improving savings should be front and center in any financial wellness strategy.
What’s your top financial resolution?
- Make and stick to a budget — 21.38%
- Save for a large purchase like a down payment, household upgrade, or car, etc. — 19.28%
- Pay down credit card debt — 18.88%
- Place money aside for an emergency — 16.58%
- Save for retirement — 13.69%
- Pay down student loan debt — 7.29%
- Save for college — 2.90%
Takeaway for employers: Employees need the most help creating a budget they can stick to.
What’s your top financial concern?
- Unexpected expenses — 53.25%
- Healthcare costs — 23.98%
- Higher interest rates — 9.69%
- The labor market — 7.79%
- Stock market fluctuations — 5.29%
Takeaway for employers: Helping employees manage healthcare costs can be a key add-on to any financial education program.
Do you think you’re better off financially in 2017 than in 2016?
- Yes — 78.32%
- No — 21.68%
Takeaway for employers: Employees’ financial state of mind is on the upswing, which is good. But it could make increasing participation in wellness initiatives more challenging.
Do you make financial resolutions with your spouse or significant other?
- Yes — 84.83%
- No — 15.17%
Takeaway for employers: When it comes to finances, very few people go it alone, so invite spouses to be a part of your wellness offerings.
What would make you stick to a financial resolution?
- Having a reward for reaching the goal — 37.56%
- Segmenting a longer term goal into smaller bit sized pieces — 20.08%
- Technology that helps you save money or monitor goals in real-time — 19.38%
- The encouragement of family and friends — 13.99%
- Having a consequence for not reaching the goal — 8.99%
Takeaway for employers: Incremental rewards and incentives, can help drive participation and success in 2017 financial wellness initiatives.
Do you think you’ll increase your retirement savings contributions this year?
- Yes — 63.24%
- No — 36.76%
Takeaway for employers: This could be a good year to really push employees to bump up retirement plan contributions.
See the original article Here.
Source:
Author (Date). Title [Web blog post]. Retrieved from address https://www.hrmorning.com/financial-wellness-heres-what-employees-want-need-in-2017/
Don’t expect tech to solve benefits communications problems
Great article from Benefits Pro about using technology to communicate with your employees by Marlene Satter
Although technology has spawned multiple methods of communication with employees on benefits, that doesn’t mean they’re solving all the problems in conveying information back and forth between employer and employee.
In fact, generational and demographic differences, varying levels of comfort with a range of communication methods and the complexity of information all mean that there’s no one-size-fits-all solution in workplace benefits communication.
A study from West’s Health Advocate Solutions finds employees’ expectations cover a wide range in benefits, health and wellness program communication. As a result, human resources and benefits managers have to dig more deeply in finding ways to convey information to employees.
One finding which may surprise them is employees prefer live-person conversations, although some do prefer the option to use digital communication channels in certain benefits scenarios. And 41 percent of employees say their top complaint about employers’ benefits programs is that communication is too infrequent.
The top choice of employees for communicating about health care cost and administrative information is directly by phone (73 percent) with a live person; second choice was a website or online portal (69 percent), while an in-person conversation was the choice of 56 percent.
For information about physical wellness benefits, 71 percent opt for the website/online portal, while 62 percent want to talk to someone on the phone and 56 percent wanted an in-person conversation. Interestingly, 62 percent of men and 44 percent of women prefer in-person conversations.
For personal/emotional wellness issues, 71 percent want that chat with a person on the phone, 65 percent want an in-person conversation and just 60 percent want to interact with a website/online portal.
When it comes to managing a chronic condition, 66 percent prefer to talk to someone on the phone, 63 percent would prefer the website/online portal option and 61 percent want an in-person conversation. Sixty-seven percent of men, compared with 53 percent of women, prefer in-person conversations, while 35 percent of women, compared with 18 percent of men, prefer mobile apps.
And there are generational differences, too, with millennials wanting in-person interactions more than either Gen X or boomer colleagues. But they all want multiple options, and the ability to choose the one they prefer, rather than simply being restricted to a single method.
See the original article Here.
Source:
Satter M. (2016 December 14). Don't expect tech to solve benefits communications problems [Web blog post]. Retrieved from address https://www.benefitspro.com/2016/12/14/dont-expect-tech-to-solve-benefits-communications
How financial wellness efforts can boost retirement readiness
Great article from our partner, United Benefit Advisors (UBA) by Joe DeSilva
The economy appears to be strengthening, yet American workers are increasingly worried about retirement. On the face of it, this seems counterintuitive.
But consider this: Unemployment hovers around 5%, the lowest it’s been since 2008, and wages have grown consistently since 2014. Yet, research by Brightwork Partners shows that over the past 12 months, 38% of workers have considered delaying retirement beyond the original age they intended. And 52% of respondents say they will delay retirement because they “need to save more.”
There are a few forces influencing this trend. One reason is simple demographics. People are living longer and, therefore, working longer. The average life expectancy currently is 78.8 years according to the CDC. The percentage of workers age 55 years and older is expected to be 24.8% in 2024, up from 11.3% in 1994, per the Bureau of Labor Statistics. And, according to Gallup, the average age at which U.S. workers predict they will retire is 66, up from 60 in 1995.
In addition, residual lessons from the recession are changing the state of retirement. Even if the United States is nearing full employment and wages are rising, post-recession lessons are having an effect on the way Americans are thinking about retirement, especially millennials. The Brightwork Partners study revealed that the number of employees between 18 and 34 who are considering delaying retirement has increased 15% from 2010. Employees between the ages of 35 and 49 concerned about their retirement increased 7%. Interestingly, this trend is spread across income levels as well. Forty percent of respondents earning $50,000 to $100,000 expect to delay retirement, while 37% earning less than $50,000 expect to delay, and 37% of those earning more than $100,000 expect to do so.
Even though financial worries are a main reason to push back retirement, according to the study, certain age groups have different specific financial concerns. Those under 50 say current financial obligations have them most concerned, while those over 50 are most concerned with retirement. The recession seems to have had an effect on each group, placing an undue burden on financial milestones they face in their respective life stages.
According to AICPA, 50% of U.S. adults say they delayed contributions to retirement accounts due to the burden of student loans, a 22% jump from 2013. Many younger workers were burdened with loans during the recovery and many others came to terms with reduced retirement savings. Those concerns will likely influence how people consider their savings moving forward.
So if employees are pushing off retirement, what effect does this have on benefits administrators and HR departments?
The current trends show an increased concern over financial preparedness, both for short- and long-term objectives. Employer-sponsored benefits, like 401(k) plans and financial wellness programs, can help ease financial stress for those preparing for their retirement years. Financial wellness programs that teach about budgeting, debt management and financial goal-setting are a good complement to 401(k) plans. These programs can show how saving for retirement can be possible even with other financial obligations taking priority. Employers also can use the current shift to re-assess which retirement savings plans make the most sense for their employees and their business. Whether the classic 401(k), Profit Sharing plan or SIMPLE IRA, there are different options that employers can utilize.
It’s a new age for benefits providers. Employees are increasingly concerned about retirement and they want to be proactive in saving for their futures. A recent ADP white paper notes that when employers put in place financial wellness programs, 73% of employers see increased retirement readiness. There’s an opportunity here to not only help employees save more for retirement, but to boost financial wellness and increase overall financial literacy. That win-win scenario certainly seems worth considering.
See the original article Here.
Source:
DeSilva J.(2016 December 1). How financial wellness efforts can boost retirement readiness[Web blog post]. Retrieved from address https://www.employeebenefitadviser.com/opinion/how-financial-wellness-efforts-can-boost-retirement-readiness?tag=00000151-16d0-def7-a1db-97f03c840000
4 Things Your Company Should Consider as New Overtime Rules are Put on Hold
Great article from SHRM by Sushma Tripathi
The U.S. Department of Labor (DOL) is fighting a court ruling that put new FLSA (Fair Labor Standards Act) overtime regulations on hold. Last month, a district court in Texas issued a nationwide preliminary injunction blocking the DOL’s final rule that sought to raise the required salary level to qualify for white collar exemptions.
Although the DOL now seeks to lift the injunction, the overtime changes that were scheduled to take effect December 1 remain on hold for the time being.
Several possibilities exist as to what will happen next. The DOL could file a motion to stay, or suspend, the injunction during the appeals process. If the court were to grant such a motion, this would cause the rule to take effect. If no motion to stay is filed, or if such a motion is denied, the injunction will stand during the appeals process.
To add a further layer of complication, the DOL filed a motion for an expedited appeal on December 2, which motion was granted on December 8, and the DOL’s opening brief will be due on December 16, 2016. Further, the states’ brief in support of the district court’s injunction will be due on January 17, 2017 and the DOL’s reply brief will be due on January 31, 2017. We will not have a decision on the expedited appeal until sometime in February 2017. While all this plays out, it’s natural to ask: What should businesses be doing?
Here a few things to consider:
- Rapidly assess what actions to take and what actions are possible. Many employers spent months preparing for the FLSA changes, identifying workers affected by the final regulations, and determining whether to increase their salaries to comply or reclassify them as non-exempt employees, and communicating those changes to their employees. If an employer already notified an employee of a salary increase effective December 1 or already made the change, it may be too difficult to reverse that change and communicate that the change won’t occur. You should confer with your counsel and consider whether it’s better to go ahead with your initial plans and stay the course, especially if your payroll team already processed the change.
- Start tracking time now. The court may side with the DOL and the proposed regulations could be reinstated retroactively to the original December 1 effective date. For that reason, employers that decide not to take action to comply with the new regulations while the litigation and appeal are pending should consider directing reclassified employees to track time. This will ensure that, in the event the final rule is later upheld and overtime becomes due retroactively, employers will have an accurate record of hours worked.
- Continue to evaluate the FLSA status of employees. While the rule is delayed, employers should continue to evaluate the FLSA status of their employees by reviewing job duties and descriptions to ensure that employees are properly classified. Whether or not the rule is upheld, employers remain subject to FLSA requirements that dictate proper job classification and payment methods. Take this opportunity to make sure employees’ duties match their job descriptions. Following the recession in 2008, in many workplaces, tasks were redistributed after layoffs and many employees took on additional duties that were never added to into their job descriptions. These employees may need to be reclassified under existing FLSA regulations.
- Be transparent in communicating changes. In deciding how to proceed, employers are strongly advised to consult with internal or external legal counsel and other experts to discuss options available before making and communicating decisions related to this latest development. Employee relations and financial implications should be considered. Employers should also keep in mind that applicable state laws may require advance notice of any changes in pay. State laws may also govern the overtime exempt status of employees. Remember to convey to employees that it’s the law that’s causing potential changes and not your company. Otherwise, morale can be impacted if employees feel they are being demoted by being reclassified.
While we have no crystal ball and cannot predict what a Trump administration will do, one can guess that it might direct the DOL to abandon the appeal, because President-elect Trump previously stated that he thought that small businesses should be exempt from the proposed increases in minimum salary for the white-collar exemptions. The Trump administration might prefer to take a more gradual approach to raising the minimum salary levels, instead of the almost 100 percent increase contemplated by the DOL’s rule, or may prefer no increase at all. So, our advice to employers is to take this time to make sure you’re in compliance with existing wage and hour laws and ensure you have employees classified properly. There’s no time like the present.
See the original article Here.
Source:
Tripathi S. (2016 December 14). 4 things your company should consider as new overtime rules are put on hold[Web blog post]. Retrieved from address https://blog.shrm.org/blog/4-things-your-company-should-consider-as-new-overtime-rules-are-put-on-hold
5 employee benefits trends for 2017
Interesting article about emerging trends in employee benefits for 2017 by Marlene Satter
As the old year ticks down toward a new year filled with a drastic change in Washington that will no doubt have plenty of ripple effects throughout the country, the employee benefits sector will also be in for plenty of changes.
Based on its 14th Annual U.S. Employee Benefit Trends Study and other industry indicators, MetLife has prognosticated five trends it believes will be key in 2017.
Employers might be surprised by some, and are probably already wrestling with others—but here’s what to watch for in the year to come.
5. Customization.
If there’s one thing that’s clear in benefits, it’s that everybody is not happy with the same cookie-cutter benefit package.
And as the job market improves and employers have to work harder to attract and retain top talent, one way to do that is to provide benefits that satisfy needs that might be a little out of the ordinary. Employers that can satisfy their employees’ diverse needs, the study found, “will emerge clear winners in the talent war.”
What’s more, employees are becoming more focused on specific benefits.
The study revealed that 28 percent of all generations agree that critical illness insurance is a must-have, but it doesn’t stop there—different generations want different things. For instance, about 14 percent of millennial employees consider pet insurance a must-have benefit.
And don’t forget about benefits communications. No rubber-stamp information wanted here—employees want communications about their benefits customized to them.
4. Enrollment.
Here’s an area where employees are not happy—so change will have to come if the situation is to improve.
The study found that only about a third of employees say that their company’s benefit communications are easy to understand—and that leads many to assume they don’t need many of the benefits they’re offered. That’s definitely not a good situation.
The good news: 71 percent of employers say that by working with an enrollment firm they were able to improve communication, including explaining and clarifying nonmedical benefits.
For employers to stay ahead of the curve, they’ll have to join the movement to better educate their employees on enrollment.
3. Financial stress.
The biggest single source of stress for employees is financial stress, which weighs not only on employees but on employers’ bottom lines as well. And that situation screams to be addressed.
While financial wellness programs help employees to better manage their personal finance situations, cutting stress as a result, employers so far haven’t jumped on the bandwagon.
In fact, some of the few who offered them have quit doing so, with just 31 percent of employers having provided financial wellness programs this year. That’s down from 39 percent last year, according to the study.
If employers wise up and provide help with financial wellness, employees will sleep better at night and work better during the day. And so will their employers.
2. Data security.
Whether it’s hackers or phishers, more threats to data security arise every day—not just for consumers but for companies and their employees.
Losses from hacked, hijacked or ransomed data can drive a company out of business, but employers also have to be as protective of their employees’ data as they are of their customers’.
One way to do that, the study pointed out, is to shore up the digital support chain by moving to a single benefits carrier; that can help to limit the exposure of employee data.
With the average cost of a large-scale data breach sitting at approximately $4 million, according to a study conducted by the Ponemon Institute, it’s a smart investment.
1. Legal services.
If you’re looking for a new lure to attract top talent, this could be your ticket. MetLife has characterized legal services as the “best-kept secret of benefits.” SHRM adds that it has doubled in popularity over the past 10 years.
At some point, the study pointed out, just about everyone is going to have to deal with a legal issue. Major life events, such as buying a home, getting married, having a baby or caring for an aging parent, all have important legal implications.
According to MetLife insights, “For about $20 a month, a legal plan can help,” adding that the benefit is of particular importance to millennials. Of adults that are offered a legal plan through work, a Harris poll found that nearly 70 percent of those aged 21–34 are enrolled.
See the original article Here.
Source:
Satter M. (2016 December 7). 5 employee benefits trends for 2017[Web blog post]. Retrieved from address https://www.benefitspro.com/2016/12/07/5-employee-benefits-trends-for-2017?page_all=1
SHRM Study: Health Care Remains Key Benefit for All Employee Groups
Check out this interesting article from Workforce about the most recent SHRM benefits study by Andie Burjek
See the original article Here.
Source:
Burjek A. (2016 December 1). SHRM study: health care remains key benefit for all employee groups[Web blog post]. Retrieved from address https://www.workforce.com/2016/12/01/shrm-study-health-care-remains-key-benefit-employee-groups/
3 reasons benefits are a game-changer for attracting talent
Helpful tips from Employee Benefit Adviser about attracting new talent by Aldor Delp
Unemployment is hovering around 5%, November marked 73 continuous months of job gains and wage growth is picking up. All indications seem to suggest that employers have positions to fill, which may also mean that workers now have leverage, confidence and options. This is good news for job candidates. But for employers vying for fresh talent, it means the attributes of a company need to be that much more enticing. It also makes me think that a comprehensive benefits package may tip the scales for a candidate who’s considering multiple offers. To put it simply: Benefits can be the game changer.
It’s true that a traditional comprehensive benefit package has always been a successful recruitment element for companies. But given the wider array of benefits employers now can offer, today’s companies can use those elements to differentiate themselves from the competition.
From an employer’s perspective, competitive benefits don’t just help with recruitment but can also bolster retention. While strong benefit packages can potentially become expensive depending on the options they include, replacing an employee can be potentially even more costly and time consuming if a company experiences regular churn. With an investment in more appealing benefits packages, an employer may be able to mitigate the cost, time and effort of turnover and recruitment.
While healthy, stocked kitchens, nap areas and ping pong tables are perks that now reach far beyond the tech industry, many companies are building up three additional benefits areas that can truly change the game.
1) Financial wellness programs. Given the recent recession, retirement still is a growing concern for many American workers. A recent study showed that over the past 12 months, 38% of workers considered delaying retirement beyond the original age they intended and 52% said they will delay retirement because they “need to save more.” When these financial worries make their way into the workplace, employers should take notice. Consider a study from PricewaterhouseCoopers that showed that employees spend an average of three hours a week at work dealing with their finances. That’s fairly significant.
By offering financial wellness programs, employers can combat this anxiety and increase efficiency, while providing a sought-after benefit that many companies aren’t yet offering. Ninety-two percent of employer-respondents in another ADP study confirmed interest in providing their workforce with information about retirement planning basics, and 84% said the same of retirement income planning. Even if employers would like to provide these programs, few offer them, citing several existing challenges that stand in the way, such as a need to focus on other aspects of their business (27%) or not enough resources (15%). Providing financial wellness programs can be an added reward that may help a potential employee lean in your favor.
2) Strong internal training. Providing employees with training and development opportunities can promote retention and commitment. Regardless of the number of opportunities for career development, you can still help employees refine skills and increase knowledge that will serve them in the future. American workers want to learn to hone their skills. In fact, 84% of Americans are excited to use technology to learn in real-time, according to ADP’s Evolution of Work study. This is a benefit that not only can provide employee enrichment, it can also strengthen the talent pipeline to management positions.
However, internal training programs are not what they used to be. According to ADP’s recent report, Strategic Drift: How HR Plans for Change, corporate training budgets fell by 20% between 2000 and 2008. Seventy-six percent of executives see the market for skilled employees tightening and 75% expect high turnover among millennials. Reduced corporate training budgets have perpetuated a cycle of high employee turnover. So, if your organization has strong training programs, it’s likely to stand out from competitors. It may be worth considering internal and external training opportunities, mentoring, job shadowing, cross-training and professional development classes.
3) Workplace flexibility. Be open to the idea that it may be more feasible for some workers to telecommute and work from home for a portion of the week. Workplace flexibility is attractive for many employees and it can help reduce the number of unscheduled absences. Flexible work arrangements — such as the option to work from home, alternative start and stop times, compressed work weeks, or Summer Fridays — can help encourage workers to use their time more efficiently, and underscore a corporate culture that stresses balance, mindfulness and trust.
As job candidates and existing employees take a more holistic view of their benefits, relevant, supportive and flexible programs can be the game changer for them. The right mix of direct compensation and indirect benefits may be the difference between onboarding that “dream” candidate, retaining a top performer, or elongating the search for that precious needle in the talent haystack.
See the original article Here.
Source:
Delp A. (2016 December 12). 3 reasons benefits are a game-changer for attracting talent[Web blog post]. Retrieved from address https://www.employeebenefitadviser.com/opinion/3-reasons-benefits-are-a-game-changer-for-attracting-talent
New Law Allows Small Employers to Pay Premiums for Individual Policies
Check out this interesting article from ThinkHR, by Laura Kerekes
This week, the U.S. Senate passed the 21st Century Cures Act which includes a provision allowing small businesses to offer a new type of health reimbursement arrangement for their employees’ health care expenses, including individual insurance premiums. The act was previously passed by the House and President Obama is expected to sign it shortly. The provision for Qualified Small Employer Health Reimbursement Arrangements (QSEHRAs), a new type of tax-free benefit, takes effect January 1, 2017. Further, the act retroactively relieves small employers from the threat of excise taxes under prior rules for plan years beginning before 2017.
Background
Employers of all sizes currently are prohibited from making or offering any form of payment to employees for individual health insurance, whether through premium reimbursement or direct payment. Employers also are prohibited from providing cash or compensation to employees if the money is conditioned on the purchase of individual health insurance. (Some exceptions apply; e.g., retiree-only plans, dental/vision insurance.) Violations can result in excise taxes of $100 per day per affected employee.
The prohibition, implemented under the Affordable Care Act (ACA), was intended to discourage employers from canceling their group plans and pushing workers into the individual insurance market. The rules have been particularly disruptive for small businesses, however, since previously it had been common practice for many small employers to subsidize the cost of individual policies instead of offering group coverage. The new law, passed this week with broad bipartisan support, responds to the concerns of small businesses.
New Qualified Small Employer HRAs
The new law does not repeal the ACA’s general prohibition against employer payment of individual insurance premiums. Rather, it provides an exception for a new type of arrangement — a Qualified Small Employer HRA or QSEHRA — provided that specific conditions are met.
First, the employer must meet two conditions:
- Employs on average no more than 50 full-time and full-time-equivalent employees. In other words, the employer cannot be an applicable large employer as defined under the ACA; and
- Does not offer a group health plan to any of its employees.
Next, the QSEHRA must meet all of the following conditions:
- It is funded solely by the employer; employee contributions are not permitted;
- It is offered to all full-time employees, although the employer may choose to include seasonal or part-time employees and/or may exclude employees with less than 90 days of service;
- For tax-free QSEHRA benefits, the employee must have minimum essential coverage (e.g., medical insurance under an individual policy);
- It pays or reimburses healthcare expenses (e.g., § 213(d) expenses) and premiums for individual policies;
- It does not pay or reimburse contributions for any employer-sponsored group coverage;
- The same benefits and terms apply to all eligible employees, except the benefit amount may vary by:
- Single versus family coverage;
- Prorated amounts for partial-year coverage (e.g., new hires); and
- For premium reimbursements, variations consistent with the age- and family-size rating structure of a representative individual policy; and
- Benefits do not exceed $4,950 if single coverage (or $10,000 if family coverage) per 12-month plan year. Amounts are prorated if covered for less than 12 months. Limits will be indexed for inflation.
Coordination with Exchange Subsidies
Coverage under a QSEHRA will affect the employee’s eligibility for a subsidized individual policy from an insurance Exchange (Marketplace). Any subsidy for which the employee would otherwise qualify will be reduced dollar-for-dollar by the QSEHRA.
Benefit Laws
Group health plans are subject to numerous federal laws, including SPD and other notice requirements under ERISA, coverage continuation requirements under COBRA, and benefit mandates under the ACA. The new law specifies that QSEHRAs are not group health plans, so COBRA and other requirements will not apply.
QSEHRA Notices
Small employers offering QSEHRAs will be required to provide a notice to each eligible employee that:
- Informs the employee of the QSEHRA benefit amount;
- Instructs the employee that he or she must give the QSEHRA information to the Exchange if applying for a subsidy for individual insurance; and
- Explains the tax consequences of failing to maintain minimum essential coverage.
QSEHRA notices should be provided at least 90 days before the start of the plan year.
Employers also will be required to report the QSEHRA coverage on Form W-2, Box 12. The reporting is informational only and has no tax consequences. Although small employers usually are exempt from this type of W-2 informational reporting, apparently it will be required for QSEHRAs starting with the 2017 tax year.
More Information
To learn more about QSEHRAs starting in 2017, or for details about the relief from excise taxes for small employers before 2017, see the 21st Century Cures Act. The relevant provisions are found in Section 18001 beginning on page 306.
Employers that are considering QSEHRAs are encouraged to work with legal counsel and tax advisors that offer expertise in this area. Starting in 2017, employer-funded QSEHRAs can offer valuable tax-free benefits to employees as long as they are designed and administered to meet all legal requirements.
See the original article Here.
Source:
Kerekes L. (2016 December 9). New law allows small employers to pay premiums for individual policies[Web blog post]. Retrieved from address https://www.thinkhr.com/blog/hr/new-law-allows-small-employers-to-pay-premiums-for-individual-policies/
The big trends that will reshape retirement in 2017
Great article from Employee Benefits Advisor, by Bruce Shutan
Seven isn’t just a lucky number for rolling the dice in Vegas; it’s also a solid measure of key trends in retirement planning to watch in the coming year. Here’s what a handful of industry observers believe should be on the proverbial radar for HR and benefit professionals.
Between compliance with fee-disclosure requirements and a growing number of class-action lawsuits on 401(k) plan fees, many plan sponsors have sought more fiduciary partners to help them implement defined contribution plans. The observation comes from Josh Cohen, managing director, defined contribution at Russell Investments. In light of this litigation, he warns that choosing the lowest possible price may not necessarily be the best value or choice for helping improve retirement readiness.
Trisha Brambley, CEO of Retirement Playbook, says it’s critical to vet the team of prospective advisers and the intellectual capital they offer. Her firm offers employers a trademarked service that’s akin to a request for information that simplifies and speeds the competitive bidding process.
While the incoming Trump administration could delay, materially modify or altogether repeal the Department of Labor’s final fiduciary rule, it cannot reverse a “new awareness around the harm that’s created by conflicted advisers and brokers,” cautions David Ramirez, a co-founder of ForUsAll who heads the startup’s investment management. He expects plan sponsors who are managing at least $2 million in their 401(k) to continue asking sophisticated questions about the fiduciary roles his firm and other service providers assume and how they’re compensated. Ramirez points to a marketplace that’s demanding greater transparency, accountability and alignment of goals and incentives irrespective of what the DOL may require.
One way to improve the nation’s retirement readiness is by “fixing all of the broken 401(k) plans with between $2 million and $20 million in assets” that are paying too much in fees, doing too much administrative work or taking on too much liability, according to Ramirez. “In 2014, nearly three out of four companies failed their 401(k) audit and faced fines,” he notes, adding that last year the DOL flagged about four of 10 audits for having material deficiencies with the number being as high as two-thirds in some segments.
While litigation over high fees and the DOL’s fiduciary rule may not have a significant impact on small and mid-market plans, they’re spotlighting the need to make more careful decisions that are in the best interest of plan participants. That’s the sense of Fred Barstein, founder and executive director of the Retirement Adviser University, which is offered in collaboration with the UCLA Anderson School of Management Executive Education. He predicts there will be less revenue sharing in the institutional funds arena and better vetting of recordkeepers, money managers and plan advisers in terms of their fees and level of experience.
Default-driven plan design
Noting that it’s been 10 years since passage of the Pension Protection Act, Cohen says default-driven plan design continues to have a major impact on retirement planning. The trend is fueled by qualified default investment alternative options that encourage appropriate investment of employee assets in vehicles that will maximize long-term savings. He predicts “further customization” of off-the-shelf target date funds at the individual level based on each participant’s own unique situation and experiences. Moreover, he sees more use of a robo-adviser type framework built around managed accounts, while participants with a complex financial picture will seek a more tailored solution that fits their needs.
Financial wellness
Financial wellness cuts across virtually any demographic, Cohen notes. The point is to help balance household budgets with retirement-saving goals, “whether it involves millennials dealing with student debt or middle-aged parents dealing with college tuition, a mortgage or credit card debt,” he explains. He sees the use of more creative ideas, tools and support, such as encouraging young employees to pay off student loans by making a matching contribution to their 401(k).
For employers, a key to reaching millennials on financial wellness is through text messages over all other means of communication, suggests Ramirez, whose firm is able to get 18- to 24-year-olds saving 6.7% on average and 25 to 29-year-olds 7.3%. As part of that strategy, he says it’s important to set realistic goals, such as new entrants into the workforce deferring 6% of their salary before increasing that amount with rising earnings. The idea is to establish a culture that turns millennials into super savers.
“We’re seeing employers help their employees with just setting a basic budget,” says Rob Austin, director of retirement research for Aon Hewitt. “It can also move into things like saving for other life stages.”
Aon Hewitt recently released a report on financial wellness showing that 28% of all workers have student loans. While researchers noted that roughly half of millennials were saddled with this debt, the margin was cut in half for Gen Xers (about 25%) workers and halved again for baby boomers (about 12.5%). The employer response has been somewhat tepid, according to Austin. For example, just 3% of companies help employees pay for student loans, about 5% help consolidate those loans and 15% offer a 529 plan.
Financial wellness is being expanded and embedded into retirement programs to serve a growing need for more holistic information, observes Brambley. “A lot of people don’t even know how to manage a credit card, let alone figure out how to scrape up a few extra bucks to put in their 401(k) plan,” she says.
401(k) plan fees
Ted Benna, a thought leader in the retirement planning community commonly referred to as the “father of 401(k),” found earlier in the year “a very high level of indifference” among plan sponsors about the prices they pay for recordkeeping, investment management services and related costs. He says this was the case even at companies with “pretty outrageously high fees,” which proved to be a big shock for him.
The discovery coincided with the start of his latest advisory venture, which was designed to help shepherd sponsors through the 401(k) fee minefield with objective information to determine that the fees they were paying were reasonable and, thus, in the best interest of participants. But Benna didn’t see much demand for the service he envisioned, so he’s now in the throes of writing his fifth book, whose working title is “Escaping the Coming Retirement Crisis Revisited.”
Litigation over high fees has at least raised awareness among plan sponsors about the need for reasonable prices, along with sound investment offerings, as regulators step up their scrutiny of fiduciary duties, Austin says. While not necessarily related, he has noticed that nearly as many employers are now charging their administrative fees as a flat dollar amount vs. those that historically charge a percentage of one’s account balance. “If you have a $100,000 balance, and I have a $1,000 balance, you and I have access to the same tools and same funds,” he reasons. “So why would you pay 100 times what I’m paying just because your balance is higher?”
Greater automation
With increasing automation on the horizon, Ramirez notes that 401(k) plans are moving into cloud-based technology that will streamline core business processes and avoid careless errors.
For instance, that means no longer having to manually sync the 401(k) with payroll when employees change their deferral rate or download the payroll report to a 401(k) plan recordkeeper. “That’s 1990s technology,” he quips. “Signing up for the 401(k) can be as easy as posting a picture on Instagram or sending a tweet.”
Apart from vastly reducing the administrative burden, he says it also allows makes it easier for plan participants to enroll, increase deferrals, receive better advice based on algorithmic formulas and improve communications. The upshot is that when all these pieces of the puzzle are in place, ForUsAll has found that participants in the plans it manages save on average 8% of their pay across all industries and demographics.
Barstein believes there’s still going to be a lot of movement toward auto-enrollment and escalation, as well as the use of professionally managed investments like target-date funds, which he predicts will become more customized. “We’re starting to see where participants in one plan can choose a conservative, aggressive, or moderate version of a target date,” he says of efforts to improve an employee’s financial wellness.
Streamlined investments
Brambley sees a movement toward investment menu consolidation. She remembers how it was customary for employers to offer three to four distinctively different investment funds in the early years of 401(k) plans, which later gave way to about 20 such offerings on average. The push is now to weed out any duplication of so-called graveyard funds because she says “there’s some fiduciary risk to continue to offer them when they no longer meet the criteria on their investment policy statement.”
Cohen agrees that plan sponsors continue to see the benefit of streamlining the menu of options for a more manageable load. As part of that movement, he sees the adoption of “white labeling” of investment options that replaces opaque, retail-branded fund names with accurate generic descriptions. For example, they would reflect asset classes (i.e., the Bond Fund or the Stock Fund). The thinking is that this approach will generate more meaningful or practical value for participants whose knowledge of basic financial principles is limited.
Confining the selection of investments to a handful of funds in distinctly different asset classes will invariably make the process much easier for participants, Brambley suggests. This enables plan sponsors to wield “more negotiating power” on pricing because they have funds collecting under various asset-class headings, she explains.
Recordkeeper consolidation
Recordkeeper consolidation is going to continue, according to Barstein, who sees organizations that lack technology, scale and the support of their parent company will not survive marketplace change.
The most noteworthy activity will involve big-name mergers as opposed to scores of recordkeepers leaving or merging, he believes.
“If I was a plan sponsor, I’d be concerned because nobody really wants to go through a conversion,” Barstein says. “I’m sure JP Morgan forced a lot of their clients to either consider changing when they went through the acquisition by Empower.”
See the original article Here.
Source:
Shutan B.(2016 December 7). The big trends that will reshape retirement in 2017[Web blog post]. Retrieved from address https://www.employeebenefitadviser.com/news/the-big-trends-that-will-reshape-retirement-in-2017
9 reasons why retirement may go extinct
Worried about your future retirement? Check out this great read by Marlene Satter
Retirement as we know it may be set to disappear, as younger people look for ways to finance surviving into old age.
But extinction? Surely not.
However, according to the Merrill Edge Report 2016, that might just be in the offing, as workers change how they plan and save for retirement and how they intend to pay for it.
Millennials in particular represent a shift in attitude that includes very unretirement-like plans, although GenXers too are struggling with ways to pay their way through their golden years.
That’s tough, considering that most Americans neither know nor correctly estimate how much money they might need to keep the wolf from the door during retirement—or even to retire at all.
Here’s a look at 9 reasons why retirement as we know it today might be a terminal case—unless things change drastically, and soon.
9. Ignorance.
Most Americans have no idea how much they might need to retire, which leaves them behind the eight ball when trying to figure out when or whether they can afford to do so.
Of course, it’s hardly surprising, considering how many are members of the “sandwich generation,” who find themselves caring for elderly parents while at the same time raising kids, or even trying to put those kids through college.
With soaring medical costs on one end and soaring student debt on the other, not to mention parents supporting adult children who have come home to roost, it’s hard to figure out how much they’ll need to meet all their obligations, much less try to save some of an already-stretched income to cover retirement savings as well.
8. Poor calculations.
We already know most workers don’t know how much they’ll need in retirement—but it’s not just a matter of ignorance. They don’t know how to figure it out, either.
More than half—56 percent—figure they’ll be able to get by during retirement on a million dollars or less, while 9 percent overall think up to $100,000 will see them through.
And 19 percent just flat-out say they don’t know how much they’ll need.
Considering that health care costs alone can cost them a quarter of a mil during retirement, the optimists who think they can get by on $100,000 or less and even those who figure $100,000–$500,000 will do the job are way too optimistic—particularly since saving for medical costs isn’t one of their top priorities.
7. Despair.
It’s pretty hard to get motivated about something if you think it’s not achievable—and that discourages a lot of people from saving for retirement.
Those who have a “magic number” that they think will see them through retirement aren’t all that optimistic about being able to achieve that level of savings, with 40 percent of nonretired workers saying that reaching their magic number by retirement will either be “difficult” or “virtually unattainable.”
6. Luck.
When you don’t believe you can do it on your own, what else is left? Sheer dumb luck, to quote Professor Minerva McGonagall at Hogwarts after Harry and Ron defeated the troll.
Only instead of magic wands, 17 percent of would-be retirees are sadly (and amazingly) counting on winning the lottery to get them to their goal.
5. The gig economy.
Retirement? What retirement? Millennials in particular think they’ll need side jobs in the gig economy to keep them from the cat food brigade.
In addition, exactly half of younger millennials aged 18–24 believe they need to take on a side job to reach their retirement goals, compared with only 25 percent of all respondents. They don’t believe that just one job will cut it any more.
4. Attitude adjustment.
While 83 percent of current retirees are not currently working or never have during their golden years, the majority (83 percent) of millennials plan to work in retirement—whether for income, to keep busy or to pursue a passion.
The rise of the “gig economy" has created an environment where temporary positions and short-term projects are more prevalent and employee benefits such as retirement plans are less certain. This may be why more millennials (15 percent) are likely to rank an employer’s retirement plan as the most important factor when taking a new job compared with GenXers (5 percent) and baby boomers (5 percent).
Older generations had unions to negotiate benefits for them. Millennials might realize they have to do it all themselves, but they aren’t negotiating for salaries high enough to allow them to save.
And union benefits or not, 64 percent of boomers, 79 percent of Gen Xers and even 17 percent of currently retired workers plan to work in retirement.
3. A failure to communicate.
Lack of communications is probably not surprising, since most people won’t talk about savings anyway.
Fifty-four percent of respondents say that the only person they feel comfortable discussing their current retirement savings with is their spouse or partner. Only 36 percent would discuss the subject with family, and only 22 percent would talk with friends about it.
And as for coworkers? Just 6 percent would talk about retirement savings with colleagues—although more communication on the topic no doubt could provide quite an education on both sides of the discussion.
2. Misplaced confidence.
They won’t talk about it, but they think they do better than others at saving for retirement. How might that be, when they don’t know what others are doing about retirement?
Forty-three percent of workers say they are better at saving than their friends, while 28 percent believe they’re doing better at it than coworkers; 27 percent think they’re doing better than their spouse or partner, 27 percent say they’re doing better than their parents and 24 percent say they’re beating out their siblings.
All without talking about it.
1. DIY.
They’re struggling to figure out how much they need, many won’t talk about retirement savings even with those closest to them and they’re anticipating working into retirement—but millennials in particular are taking a more hands-on approach to their investments.
Doing it oneself could actually be a good thing, since it could mean the 70 percent of millennials, 72 percent of GenXers and 57 percent of boomers who are taking the reins into their own hands better understand what they’re investing in and how they need to structure their portfolios.
However, doing it oneself without sufficient understanding—and millennials in particular are also most likely to describe their investment personality as “DIY,” with 32 percent making their own rules when it comes to investments, compared to 19 percent of all respondents—can be a problem.
After all, as the saying goes, “A little knowledge is a dangerous thing.”
See the original article Here.
Source:
Satter M. (2016 December 7). 9 reasons why retirement may go extinct[Web blog post]. Retrieved from address https://www.benefitspro.com/2016/12/07/9-reasons-why-retirement-may-go-extinct?ref=mostpopular&page_all=1