The Most Desirable Employee Benefits
When it comes to hiring new employees, benefits can make or break the process. Hire with confidence when considering these tips on attractive and affordable employment perks.
In today’s hiring market, a generous benefits package is essential for attracting and retaining top talent. According to Glassdoor’s 2015 Employment Confidence Survey, about 60% of people report that benefits and perks are a major factor in considering whether to accept a job offer. The survey also found that 80% of employees would choose additional benefits over a pay raise.
Google is famous for its over-the-top perks, which include lunches made by a professional chef, biweekly chair massages, yoga classes, and haircuts. Twitter employees enjoy three catered meals per day, on-site acupuncture, and improv classes. SAS has a college scholarship program for the children of employees. And plenty of smaller companies have received attention for their unusual benefits, such as vacation expense reimbursement and free books.
But what should a business do if it can’t afford Google-sized benefits? You don’t need to break the bank to offer attractive extras. A new survey conducted by my team at Fractl found that, after health insurance, employees place the highest value on benefits that are relatively low-cost to employers, such as flexible hours, more paid vacation time, and work-from-home options. Furthermore, we found that certain benefits can win over some job seekers faced with higher-paying offers that come with fewer additional advantages.
As part of our study, we gave 2,000 U.S. workers, ranging in age from 18 to 81, a list of 17 benefits and asked them how heavily they would weigh the options when deciding between a high-paying job and a lower-paying job with more perks.
Better health, dental, and vision insurance topped the list, with 88% of respondents saying that they would give this benefit “some consideration” (34%) or “heavy consideration” (54%) when choosing a job. Health insurance is the most expensive benefit to provide, with an average cost of $6,435 per employee for individual coverage, or $18,142 for family coverage.
The next most-valued benefits were ones that offer flexibility and improve work-life balance. A majority of respondents reported that flexible hours, more vacation time, more work-from-home options, and unlimited vacation time could help give a lower-paying job an edge over a high-paying job with fewer benefits. Furthermore, flexibility and work-life balance are of utmost importance to a large segment of the workforce: parents. They value flexible hours and work-life balance above salary and health insurance in a potential job, according to a recent survey by FlexJobs.
Eighty-eight percent of respondents said they’d give some or heavy consideration to a job offering flexible hours, while 80% would give consideration to a job that lets them work from home. Both flexible hours and work-from-home arrangements are affordable perks for companies that want to offer appealing benefits but can’t afford an expensive benefits package. Both of these benefits typically cost the employer nothing — and often save money by lowering overhead costs.
More vacation time was an appealing perk for 80% of respondents. Paid vacation time is a complicated expense, since it’s not simply the cost of an employee’s salary for the days they are out; liability also plays into the cost. American workers are notoriously bad at using up their vacation time. Every year Americans leave $224 billion dollars in unused vacation time on the table, which creates a huge liability for employers because they often have to pay out this unused vacation time when employees leave the company. Offering an unlimited time-off policy can be a win-win for employer and employee. (Over two-thirds of our respondents said they would consider a lower-paying job with unlimited vacation.) For example, HR consulting firm Mammoth considers its unlimited time-off policy a successnot just for what it does but also for the message it sends about company culture: Employees are treated as individuals who can be trusted to responsibly manage their workload regardless of how many days they take off.
Switching to an unlimited time-off policy can solve the liability issue; wiping away the average vacation liability saves companies $1,898 per employee, according to research from Project: Time Off. And with only 1%–2% of companies currently using an unlimited time-off policy, according to the Society for Human Resource Management (SHRM), it’s clearly a benefit that can make companies more attractive.
Contrary to what employers might expect, unlimited time off doesn’t necessarily equal less productive employees and more time out of the office. A survey from The Creative Group found that only 9% of executives think productivity would decrease significantly if employees used more vacation time. In some cases, under an unlimited time-off policy, employees take the same amount of vacation time. We adopted an unlimited time-off policy at Fractl about a year ago and haven’t seen a negative impact on productivity. Our director of operations, Ryan McGonagill, says there hasn’t been a large spike in the amount of time employees spend out of the office, but the quality of work continues to improve.
Student loan and tuition assistance also ranked highly on the list of coveted benefits, with just under half of respondents reporting that these bonuses could nudge them toward a lower-paying job. A benefits survey from SHRM found that only 3% of companiescurrently offer student loan assistance, and 52% of companies provide graduate educational assistance. Although education assistance sounds costly, companies can take advantage of a tax break; employers can provide up to $5,250 per employee per year for tuition tax free.
Job benefits that don’t directly impact an individual’s lifestyle and finances were the least coveted by survey respondents, such as in-office freebies like food and coffee. Company-sponsored gatherings like team-bonding activities and retreats were low on the list as well. This isn’t to say these benefits aren’t valued by employees, but rather that these perks probably aren’t important enough on their own to convince a job candidate to choose a company.
We noticed gender differences regarding certain benefits. Most notable, women were more likely to prefer family benefits like paid parental leave and free day care services. Parental leave is of high value to female employees: 25% of women said they’d give parental leave heavy consideration when choosing a job (only 14% of men said the same). Men were more likely than women to value team-bonding events, retreats, and free food. Both genders value fitness-related perks, albeit different types. Women are more likely to prefer free fitness and yoga classes, while men are more likely to prefer an on-site gym and free gym memberships.
Our survey findings suggest that providing the right mix of benefits that are both inexpensive and highly sought after among job seekers can give a competitive edge to businesses that can’t afford high salaries and pricier job perks.
SOURCE:
Jones K (30 May 2018). [Web Blog Post]. Retrieved from address https://hbr.org/2017/02/the-most-desirable-employee-benefits
Benefit change could raise costs for patients getting drug copay assistance
Health plans may change with time. Know what to expect and how to respond with these tips on how to avoid unexpected changes.
Since Kristen Catton started taking the drug Gilenya two years ago, she’s had only one minor relapse of her multiple sclerosis, following a bout of the flu.
She can walk comfortably, see clearly and work part time as a nurse case manager at a hospital near her home in Columbus, Ohio. This is a big step forward; two drugs she previously tried failed to control her physical symptoms or prevent repeated flare-ups.
This year, Catton, 48, got a shock. Her health insurance plan changed the way it handles the payments that the drugmaker Novartis makes to help cover her prescription’s cost. Her copayment is roughly $3,800 a month, but Novartis helps reduce that out-of-pocket expense with payments to the health plan. The prescription costs about $90,000 a year.
Those Novartis payments no longer counted toward her family plan’s $8,800 annual pharmacy deductible. That meant once she hit the drugmaker’s payment cap for the copay assistance in April, she would have to pay the entire copayment herself until her pharmacy deductible was met.
Catton is one of a growing number of consumers taking expensive drugs who are discovering they are no longer insulated by copay assistance programs that help cover their costs. Through such programs, consumers typically owe nothing or have modest monthly copayments for pricey drugs because many drug manufacturers pay a patient’s portion of the cost to the health plan, which chips away at the consumer’s deductible and out-of-pocket maximum limits until the health plan starts paying the whole tab.
Under new “copay accumulator” programs, that no longer happens.
In these programs, the monthly copayments drug companies make don’t count toward patients’ plan deductibles or out-of-pocket maximums. Once patients hit the annual limit on a drugmaker’s copay assistance program, they’re on the hook for their entire monthly copayment until they reach their plan deductible and spending limits.
Catton put the $3,800 May copayment on a credit card. She knows her insurer will start paying the entire tab once she hits the pharmacy deductible. But, she said, she can’t afford to pay nearly $9,000 a year out-of-pocket for the foreseeable future.
“I’m talking to my doctor to see if I can I take it every other day,” she said. “I guess I’m winging it until I can figure out what to do.”
Drug copay assistance programs have long been controversial.
Proponents say that in an age of increasingly high deductibles and coinsurance charges, such help is the only way some patients can afford crucial medications.
But opponents say the programs increase drug spending on expensive brand-name drugs by discouraging people from using more cost-effective alternatives.
Switching to a cheaper drug may not be an option, said Bari Talente, executive vice president for advocacy at the National Multiple Sclerosis Society.
“Generally the multiple sclerosis drugs are not substitutable,” she said. “Most have different mechanisms of action, different administration and different side effect profiles.” Generics, when they’re available, are pricey too, typically costing $60,000 or more annually, she said.
Most MS drug annual copay assistance limits, if they have them, are between $9,000 and $12,000, Talente said.
Employers argue that the drug copayment programs are an attempt to circumvent their efforts to manage health care costs. For example, employers may try to discourage the use of a specialty drug when there’s a lower-cost drug available by requiring higher patient cost sharing.
There’s also the issue of fairness.
“From an employer perspective, everyone under the plan has to be treated the same,” said Brian Marcotte, president and CEO of the National Business Group on Health (NBGH), which represents large employers.
If someone needs medical care such as surgery, for example, that person doesn’t get help covering his deductible, while the person with the expensive drug might, he said.
According to an NBGH survey of about 140 multistate employers with at least 5,000 workers, 17 percent reported they have a copay accumulator program in place this year, Marcotte said. Fifty-six percent reported they’re considering them for 2019 or 2020.
If there is no comparable drug available, drug copayment programs may have a role to play if they can be structured so that participating patients are paying some amount toward their deductible, Marcotte said. But, he said, assistance programs for drugs that are available from more than source, such as a brand drug that is also available as a generic, shouldn’t be allowed.
In 2016, 20 percent of prescriptions for brand-name drugs used a drug copay assistance coupon, according to an analysis by researchers at the USC Schaeffer Center for Health Policy and Economics. Among the top 200 drugs based on spending in 2014, the study found that 132 were brand-name drugs, and 90 of them offered copay coupons. Fifty-one percent of the drugs with copay coupons had no substitute at all or only another brand drug as a close therapeutic substitute, the analysis found.
Advocates for people with HIV and AIDS say copay accumulators are cropping up in their patients’ plans and beginning to cause patients trouble. Drugs to treat HIV typically don’t have generic alternatives.
The biggest impact for the community their organizations serve may be for PrEP, a daily pill that helps prevent HIV infection, said Carl Schmid, deputy executive director at the AIDS Institute, an advocacy group. A 30-day supply of PrEP (brand-name Truvada) can cost nearly $2,000. Drug manufacturer Gilead offers a copay assistance program that covers up to $3,600 annually in copay assistance, with no limit on how much is paid per month.
“They’re at risk for HIV, they know it and want to protect themselves,” Schmid said. “It’s a public health issue.”
Earlier this month, the AIDS Institute was among 60 HIV organizations that sent letters to state attorneys general and insurance commissioners across the country asking them to investigate this practice, which has emerged in employer and marketplace plans this year.
Compounding advocates’ concerns is the fact that these coverage changes are frequently not communicated clearly to patients, Schmid said. They are typically buried deep in the plan documents and don’t appear in the user-friendly summary of benefits and coverage that consumers receive from their health plan.
“How is a patient to know?” Schmid asks. They learn of the change only when they get a big bill midway through the year. “And then they’re stuck.”
SOURCE:
Andrews M (25 MAY 2018). [Web Blog Post]. Retrieved from address https://khn.org/news/benefit-change-could-raise-costs-for-patients-getting-drug-copay-assistance/
Are your employees scared to take time off?
Your employees might be feeling pressured and overworked. Avoid low productivity in your workplace with these tips on vacation impact.
They might be getting paid time off, but close to half of American workers aren’t taking it—or aren’t taking as much of it as they’re entitled to. And that’s making for a workforce that’s not only overworked and under stress, but actually being pressured to forego time that they’re entitled to.
So says “The PTO Pressure Report” from Kimble Applications, which finds that not only have 47 percent of employees not taken as much PTO as they’re entitled to, 21 percent admit to having left more than five vacation days unused. According to survey respondents, workload-related stress is the top reason so many are failing to use all the PTO they’re entitled to: 27 percent say they just have too many projects or deadlines to take time off, and 13 percent dread the heaps they’ll find on their desks when they get back.
Their bosses aren’t helping, either, with 19 percent of respondents saying that they’ve felt pressured by employers or managers to abstain from vacation. Not only that, more than a quarter are actually nervous or even anxious at the thought of submitting a time-off request; 19 percent worry about being away from work, while 7 percent fear that their requests will be denied.
But businesses could actually be shooting themselves in the foot by keeping such a tight rein on employees. Says the report, “These managers likely don’t realize that this is having a direct, negative impact on the business, as past research indicates that employees who take most or all of their vacation time each year perform better and are more productive than those who do not.”
Even if they get to go on vacation, it’s not doing a lot of them much good. They’re too wired into the job, with 48 percent saying they proactively check in on vacation. A surprising 19 percent do so every day, with another 29 percent doing so periodically. And the boss isn’t making it easy to be on vacation once they get to go; 29 percent of workers say they’re expected to be available for emergencies, and another nine percent say they’re expected to check in frequently. Can’t exactly unwind too well with that hanging over their heads, which means they get back to work stressed out from making sure they satisfy vacation’s employment obligations.
They think they’ll get ahead that way, though—at least 14 percent believe that if they leave that vacation time on the table, they’re more likely to succeed and move up in the ranks. And 19 percent say that’s more important to them than the vacation time they’re abandoning—they’d give up their vacation time for a whole year if it meant they’d nail a promotion.
Younger employees are more willing to work instead of take time off than their elders ; 25 percent of those aged 25–34 feel this way compared to only 17 percent of those aged 55–64.
What businesses may not realize is how important PTO is for the company’s bottom line. Mark Robinson, co-founder of Kimble Applications disagrees. “I am an advocate of giving people a reasonable vacation entitlement and then encouraging them to take it,” he says in the report. ”My experience is that businesses work best if there is clarity about this and people feel confident about planning their vacation well in advance. That is better for the individuals and it allows the business to forecast and budget better too.”
Robinson adds, “American businesses sometimes offer unlimited time off—but they know that in most cases that ends up with people taking less time off. Also, in businesses where people don’t feel confident enough about taking vacations to plan them well in advance, there can be an issue at the end of the year when they suddenly all disappear at once. Successful, sustainable organizations learn to plan their business around PTO time.”
SOURCE:
Satter M. (22 May 2018). “Are your employees scared to take time off?” [Web Blog Post]. Retrieved from address https://www.benefitspro.com/2018/05/22/are-your-employees-scared-to-take-time-off/
Healthcare analytics market grows as providers take aim at cost-cutting
A combination of artificial and human intelligence data analytics, offering the opportunity to bring greater customization to medical approaches, is expected to increase in demand over the next few years.
Data-enriched tools have cut the communication gap between caregivers and patients even as they provide a large amount of data that can be used to create personalized treatments. (Image: Shutterstock)
The need by hospitals and other health care providers to cut the cost of providing care is helping to drive up the global health care/analytics market, to reach an anticipated worth of $53.65 billion by 2025.
That’s according to a new report by Grand View Research, Inc., which says that hospitals are already using health care analytics to manage the number of workers working in a particular shift.
Citing the example of a hospital in Paris that uses health care analytics to predict the number of patients that may be hospitalized, the report points out that such data can be used to decide the number of staff members that will be needed for a particular shift, thus assisting in driving down the cost of labor in hospitals.
Data-enriched tools such as mHealth, eHealth, Electronic Health Records and mobile applications have cut the communication gap between caregivers and patients even as they provide a large amount of data that can be used to create personalized treatments. However, patients might hesitate to use such tools; that could weigh on the implementation of analytics.
But a combination of artificial and human intelligence data analytics, offering the opportunity to bring greater customization to medical approaches, is expected to expand demand for such tools over the next few years.
Among other findings in the report is the significant market share held by descriptive analytics in 2015 because of its applications in process optimization in organizations. In addition, the services category dominated the component segment in 2015, with outsourcing of big data services contributing to their growth in aiding the high volume of services rendered.
The hardware systems category came out the winner in the component segment, with the high cost of hardware contributing to its growth, while on-premise delivered analytic services dominated the delivery mode category in 2015, capturing a market share of approximately 54.0 percent.
North America has captured a significant share in the global market, the report finds, with advanced health care infrastructure in the region and growing per capita health care spending supporting greater consumption of these services.
Source:
By Marlene Satter | April 02, 2018 at 12:13 PM | Originally published on BenefitsPro
4 trends in financial education
Having financial wellness within your business is incredibly valuable for its overall growth and success. In this article, we are going to take a look at four trends contributing towards financial wellness in the employee benefits realm. Read more below.
Employees’ financial well-being is a hot topic these days. Right now, it’s top-of-mind with most employees. And it’s becoming more so with employers, not only because they are realizing the effect employee financial stress has on their bottom line, but also because industry surveys are revealing that employees want their employers to help by providing financial education and benefits.
Benefit advisers have a definite role in helping employers take steps toward building a more financially-secure workforce through financial wellness benefits. What should advisers expect to see this year in financial wellness benefits?
Industry research confirms the impact employee financial stress has on a company’s bottom line, including lower productivity, higher absenteeism and more healthcare claims. Only about half of employers offered some kind of counseling or instruction about money last year, according to SHRM and IFEBP surveys. Certainly, more employers will want to add financial education benefits this year. Benefit advisers can help by bringing this to the attention of their clients.
Another trend to consider is that financial education benefits are becoming more holistic. Financial education benefits should be more than planning for retirement and having access to supplemental medical benefits. Financial education benefits today should include financial education tools and resources as well as voluntary benefits that are designed to address both physical and emotional struggles while working to help employees with short-term financial needs.
Look for more student loan repayment benefits to become available in the industry this year. In 2017, more Americans were burdened by student loan debt than ever before. It’s a major concern among today’s millennials, the largest generation in today’s workforce. This year we likely will see more student loan repayment benefits appear, including programs in which employers are making contributions to loan balances or providing methods for employees to refinance their debt.
Increased attention to helping employees with short-term financial issues also will be a focus this year. In spite of the improved economy, employees are still struggling financially. Statistics show the alarming number of employees that continue to live paycheck-to-paycheck and do not have even $1,000 in savings for emergency needs.
While financial education benefits can help employees with budgeting and debt reduction needs, employers should offer additional voluntary benefits that provide employees some financial assistance in the short-term. Benefit advisers should bring short-term financial assistance voluntary benefits to the attention of their clients. Among these are employee purchase programs and low interest installment loans and credit that help employees avoid payday loans and cash advances from credit cards when they have emergency needs such as a broken refrigerator or unexpected out-of-pocket medical expenses.
Employers are realizing the important role that financial education plays in an employee’s overall well-being and will look to increase their financial wellness benefits on several levels. Benefit advisers not only can bring the need to the attention of their clients, but can also offer benefit recommendations to round out their clients’ employee benefits programs.
Read the original article.
Source: Halkos E. (February 9th, 2018). "4 trends in financial education" [Web Blog Post]. Retrieved from address https://www.employeebenefitadviser.com/opinion/4-trends-in-financial-education
Tax Cut Spurs Employers to Boost 401(k) Contributions
Following one after the other, large employers including Wal-Mart, Aflac and SunTrust have announced significant compensation and benefits changes and attributed them to the Tax Cuts and Jobs Act, which President Donald Trump signed into law in December.
Experts expect hundreds of other employers to join suit.
A new study from global consulting and advisory firm Willis Towers Watson found that about half of 333 large and mid-sized companies polled plan on making changes to their employee benefits, compensation, total rewards and executive pay programs within the next year.
All told, 66% of employers surveyed have either made changes to their benefits packages or are considering making changes. The most common changes are expanding personal finance planning (34%), increasing 401(k) contributions (26%) and increasing or accelerated pension plan contributions (19%), according to WTW.
About 22% of employers say they plan on addressing pay gap issues — a hot topic in the wake of the #MeToo movement and the public firings of top CEOs, editors and TV anchors, politicians and chefs — as part of a broad-based approach to compensation, according to the report.
“The tax reform law is creating economic opportunity to invest in their people programs,” says John Bremen, managing director of human capital and benefits at Willis Towers Watson. “While a significant number have already announced changes to some of their programs, the majority of employers are proceeding to determine which changes will have the highest impact and generate the greatest value.”
Although the Tax Cuts and Jobs Act slashed the corporate tax rate to 21% from 35%, one expert says the decision of where to place those extra savings is going to vary by employer.
“Clearly you have that situation where there has been a tremendous amount of activity,” says Jack Towarnicky, executive director for Plan Sponsor Council of America. “I haven’t seen a comparable situation in the past where somebody announced a particular change and so many others have moved in the same direction. I think it would be as varied as the enterprises themselves where they deploy any corporate reduction.”
Some companies, such as Boeing, Disney and MidWestOne Bank, announced one-time bonuses and student loan repayment contributions, respectively, but said those decisions were not made with consideration to the tax reform.
The heavy lift of raising retirement benefits
Any changes to a company’s employee benefits plan require analysis and strategy to determine the predicted costs, which is more time-consuming than giving every employee a one-time bonus, Towarnicky says.
“There have been a handful of employers that have announced changes in 401(k) savings plans, but it’s clearly dwarfed by the number of employers that announced one-time bonus payments,” he says. “There is a difference between a one-time action and a change to your 401(k) match. It is reasonably predictable if you’ve got a match and you’re going to increase it.”
Employers may also apply those extra savings to voluntary or employer-sponsored benefits, a growing trend for 2018, and wellness initiatives that transcend the benefits package.
Companies with larger, campus-like office buildings are beginning to invest in bike trails around the area and ergonomic work stations, says Catherine O’Neill, senior healthcare consultant at Willis Towers Watson.
Employers are “trying to blend their work environment with their benefits strategy or wellness strategy to make it more successful,” O’Neill says.
While the changes will remain to be seen, Towarnicky warns employers faced with reinvesting their tax savings that those rates may not remain in effect indefinitely.
“Too many times, particularly when it comes to retirement, people develop expectations,” he says. “Any reductions [to benefits or compensation] have a negative impact on employee relations.”
Read more.
Source: Eisenburg A. (28 January 2018). "Tax cut spurs employers to boost 401(k) contributions" [Web Blog Post]. Retrieved from address https://www.benefitnews.com/news/tax-cut-spurs-employers-to-boost-401k-contributions?brief=00000152-14a7-d1cc-a5fa-7cffccf00000
Losing Sleep Over Benefits Technology? Get Over It!
Are you having a hard time figuring out all the different technologies associated with your benefits program? Read this great article by Linda Keller from SHRM on how to navigate through the different technologies accociated with you employee benefits program .
It’s easy to get caught up wanting to deliver a sophisticated platform to engage your workforce. Many benefits technology solutions promise to make employees smarter consumers of health care through slick recommendation engines, bots, and avatars delivered on smart phones.
I advise you to keep these three things in mind when you evaluate benefits technology:
See the original article Here.
Source:
Keller L. (2017 May 23). Losing sleep over benefits technology? get over it! [Web blog post]. Retrieved from address https://blog.shrm.org/blog/losing-sleep-over-benefits-technology-get-over-it
HSAs on the Rise, but Employees Need to Know More About Them
Are your employees aware of the many benefits and features associated with HSAs? Check out this great article by Marlene Y. Satter from Benefits Pro on why it is important employees are knowledgeable about HSAs, so they can prepare for their health care expenses while planning for retirement.
According to Fidelity Investments, health savings accounts — and the assets within them — are rising quickly, as both employers and employees try to find ways to pay for health care. Still, a number of the features of HSAs are still underutilized.
While Fidelity says that assets in its HSAs rose 50 percent in the past year, now topping $2 billion, and the number of individual account holders rose 46 percent during the same period to 657,000, it points out more work still needs to be done on showing employees the advantages of such accounts.
Since it’s estimated that couples retiring today could need $260,000 — perhaps even more — to cover their health care costs during retirement, the need for a way to save just for health care expenses, aside from other retirement expenses, is becoming more urgent.
HSAs offer a tax-advantaged way to set aside more money than a retirement account alone provides — and people who have both tend to save more overall, with 2016 statistics indicating that people who had both defined contribution and HSA accounts saved on average 10.7 percent of their annual income in the retirement account. Those with just a DC account saved on average 8.2 percent in it.
People are mostly satisfied with HSAs — 80 percent say they are, while 76 percent are satisfied with the ease of using it HSA for medical expenses, 77 percent with the quality of their health care coverage and 77 percent with how the plan helps them manage their health care costs.
But that doesn’t mean they’ve got all the ins and outs figured out yet; 39 percent mistakenly believe that they’ll lose unspent HSA contributions at the end of the year. Yet unlike contributions to health flexible spending accounts (FSA), unspent contributions to HSAs roll over from year to year.
Still, employees are learning that HSAs can provide them a means of saving that’s not restricted to cash. While it’s still not common, more people are putting HSA money into investments that can then grow toward covering longer-term health expenses, but employers, says Fidelity, can do more to educate workers on such an option. Nationally, only 15 percent of all HSA assets are invested outside of cash.
See the original article Here.
Source:
Satter M. (2017 May 26). HSAs on the rise, but employees need to know more about them [Web blog post]. Retrieved from address https://www.benefitspro.com/2017/05/26/hsas-on-the-rise-but-employees-need-to-know-more-a?ref=hp-news
Traditional IRA, Roth IRA, 401(k), 403(b): What’s the Difference?
The earlier you begin planning for retirement, the better off you will be. However, the problem is that most people don’t know how to get started or which product is the best vehicle to get you there.
A good retirement plan usually involves more than one type of savings account for your retirement funds. This may include both an IRA and a 401(k) allowing you to maximize your planning efforts.
If you haven’t begun saving for retirement yet, don’t be discouraged. Whether you begin through an employer sponsored plan like a 401(k) or 403(b) or you begin a Traditional or Roth IRA that will allow you to grow earnings from investments through tax deferral, it is never too late or too early to begin planning.
This article discusses the four main retirement savings accounts, the differences between them and how Saxon can help you grow your nest egg.
“A major trend we see is that if people don't have an advisor to meet with, they tend to invest too conservatively because they are afraid of making a mistake,” said Kevin. “Then the problem is that they don't revisit it and if you’re not taking on enough risk you’re not giving yourself enough opportunity for growth. Then you run the risk that your nest egg might not grow to what it should be.”
“Saxon is here to help people make the best decision on how to invest based upon their risk tolerance. We have questionnaires to determine an individual’s risk factors, whether it be conservative, moderate or aggressive and we make sure to revisit these things on an ongoing basis.”
Traditional IRA vs. Roth IRA
Who offers the plans?
Both Traditional and Roth IRAs are offered through credit unions, banks, brokerage and mutual fund companies. These plans offer endless options to invest, including individual stocks, mutual funds, etc.
Eligibility
Anyone with earned, W-2 income from an employer can contribute to Traditional or Roth IRAs as long as you do not exceed the maximum contribution limits.
With Traditional and Roth IRAs, you can contribute while you have earned, W-2 income from an employer. However, any retirement or pension income doesn't count.
“Saxon is here to help people make the best decision on how to invest based upon their risk tolerance. We have questionnaires to determine an individual’s risk factors, whether it be conservative, moderate or aggressive and we make sure to revisit these things on an ongoing basis.”
Tax Treatment
With a Traditional IRA, typically contributions are fully tax-deductible and grow tax deferred so when you take the money out at retirement it is taxable. With a Roth IRA, the money is not tax deductible but grows tax deferred so when the money is taken out at retirement it will be tax free.
"The trouble is that nobody knows where tax brackets are going to be down the road in retirement. Nobody can predict with any kind of certainty because they change,” explained Kevin. “That’s why I'm a big fan of a Roth.”
“A Roth IRA can be a win-win situation from a tax standpoint. Whether the tax brackets are high or low when you retire, who cares? Because your money is going to be tax free when you withdraw it. Another advantage is that at 70 ½ you are not required to start taking money out. So, we've seen Roth IRA's used as an estate planning tool, as you can pass it down to your children as a part of your estate plan and they'll be able to take that money out tax free. It's an immense gift,” Kevin finished.
Maximum Contribution Limits
Contribution limits between the Traditional and Roth IRAs are the same; the maximum contribution is $5,500, or $6,500 for participants 50 and older.
However, if your earned income is less than $5,500 in a year, say $4,000, that is all you would be eligible to contribute.
"People always tell me 'Wow, $5,000, I wish I could do that. I can only do $2,000.' Great, do $2,000,” explained Kevin. “I always tell people to do what they can and then keep revisiting it and contributing more when you can. If you increase a little each year, you will be contributing $5,000 eventually and not even notice."
Withdrawal Rules
With a Traditional IRA, withdrawals can begin at age 59 ½ without a 10% early withdrawal penalty but still with Federal and State taxes. The Federal and State government will mandate that you begin withdrawing at age 70 ½.
Even though most withdrawals are scheduled for after the age of 59 ½, a Roth IRA has no required minimum distribution age and will allow you to withdraw earned contributions at any time. So, if you have contributed $15,000 to a Roth IRA but the actual value of it is $20,000 due to interest growth, then the contributed $15,000 could be withdrawn with no penalty.
Employer Related Plans - 401(k) & 403(b)
A 401(k) and a 403(b) are theoretically the same thing; they share a lot of similar characteristics with a Traditional IRA as well.
Typically, with these plans, employers match employee contributions .50 on the dollar up to 6%. The key to this is to make sure you are contributing anything you can to receive a full employer match.
Who offers the plans?
The key difference with these two plans lies in if the employer is a for-profit or non-profit entity. These plans will have set options of where to invest, often a collection of investment options selected by the employer.
Eligibility
401(k)'s and 403(b)'s are open to all employees of the company for as long as they are employed there. If an employee leaves the company they are no longer eligible for these plans since 401(k) or 403(b) contributions can only be made through pay roll deductions. However, you can roll it over into an IRA and then continue to contribute on your own.
Only if you take possession of these funds would you pay taxes on them. If you have a check sent to you and deposit it into your checking account – you don't want to do that. Then they take out federal and state taxes and tack on a 10% early withdrawal penalty if you are not age 59 ½. It may be beneficial to roll a 401(k) or 403(b) left behind at a previous employer over to an IRA so it is in your control.
Tax Treatment
Similar to a Traditional IRA, contributions are made into your account on a pretax basis through payroll deduction.
Maximum Contribution Limits
The maximum contribution is $18,000, or $24,000 for participants 50 and older.
Depending on the employer, some 401(k) and 403(b) plans provide loan privileges, providing the employee the ability to borrow money from the employer without being penalized.
Withdrawal Rules
In most instances, comparable to a Traditional IRA, withdrawals can begin at age 59 ½ without a 10% early withdrawal penalty. Federal and State government will mandate that you begin withdrawing at age 70 ½. Contributions and earnings from these accounts will be taxable as ordinary income. There are certain circumstances when one can have penalty free withdrawals at age 55, check with your financial or tax advisor.
In Conclusion…
"It is important to make sure you are contributing to any employer sponsored plan available to you so that you are receiving the full employer match. If you have extra money in your budget and are looking to save additional money towards retirement, that’s where I would look at beginning a Roth IRA. Then you can say that you are deriving the benefits of both plans - contributing some money on a pretax basis, lowering federal and state taxes right now, getting the full employer contribution match and then saving some money additionally in a Roth that can provide tax free funds/distributions down the road," finished Kevin.
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5 Benefits Communication Mistakes That Kill Employee Satisfaction
Are you using the proper communication channels to inform your employees about their benefits? Take a look at this great article from HR Morning about how to manage to communicate with your employees to keep them satisfied at work by Jared Bilski.
Good benefits communication is more important than the actual benefits you offer – at least when it comes to employee satisfaction.
Proof: When a company with a rich benefits program (i.e., better than industry standard) communicated poorly, just 22% of workers were satisfied with their benefits.
On the other hand, when an employer with a less rich benefits program communicated effectively, 76% of employees were satisfied with the benefits.
These findings come from a Towers Watson WorkUSA study.
At the at the 2017 Mid-Sized Retirement & Healthcare Plan Management Conference in Phoenix, AZ., Julie Adamik, the former head of Employee Benefits Training and Solutions at PETCO, highlighted the five most common benefits communication mistakes that put firms in the former category.
Satisfaction killers
1. The information is boring. Many employees assume that if the info is about benefits, it’s probably boring. As a result, they tend to tune out and miss critical material.
2. The learning styles and preferences of different generations aren’t taken into account. With multiple generations working side-by-side, a one-size-fits-all approach is doomed to fail.
3. The budget is too low. If your company has a $15 million benefits package, you shouldn’t accept upper management’s argument that a $2,500 communication budget should cover it. HR and benefits pros need to take a stand in this area.
4. The language is “too professional.” Assuming that official-sounding language is better than “plain speak” is a common but costly communication mistake.
5. There’s too much information being covered. Cramming everything into a single open enrollment meeting is guaranteed to overwhelm employees.
Cost, wellness, personal issues and care
Employers also need to be wary of relying too heavily on tech when it comes to benefits communication. Even though there are plenty of technological innovations in the world of benefits services and communications, but HR pros should never forget the importance of old-fashioned human interaction.
That’s one of the main takeaways from a recent Health Advocate study that was part of the whitepaper titled “Striking a Healthy Balance: What Employees Really Want Out of Workplace Benefits Communication.”
The study broke down employees’ preferred methods of benefits communications in a number of areas. (Note: Employees could select more than one answer.)
When asked how they preferred to receive health cost & administrative info, the report found:
- 73% of employees said directly with a person by phone
- 69% said via a website/online portal, and
- 56% preferred an in-person conversation.
Regarding their wellness benefits:
- 71% of employees preferred to receive the info through a website/online portal
- 62% said directly with a person by phone, and
- 56% preferred an in-person conversation.
In terms of personal/emotional wellness issues:
- 71% of employees preferred to receive the info directly with a person by phone
- 65% preferred an in-person conversation, and
- 60% would most like to receive the info via a website/online portal.
Finally, when it came to managing chronic conditions:
- 66% of employees preferred to receive the info directly with a person by phone
- 63% would most like to receive the info via a website/online portal, and
- 61% preferred an in-person conversation.
See the original article Here.
Source:
Bilski J. (2017 April 4). 5 benefits communication mistakes that kill employee satisfaction [Web blog post]. Retrieved from address https://www.hrmorning.com/5-benefits-communication-mistakes-that-kill-employee-satisfaction/