Workers Might See Employer Health Coverage Disappear Under New GOP AHCA
Do you receive your healthcare through an employer? Then take a look at this article from Benefits Pro about how the passing of the AHCA will affect employees who get their healthcare through an employer by Marlene Y. Satter.
It’s not just individuals without employer health coverage who could lose big under the newly revised version of the Republicans’ American Health Care Act.
People who get health coverage from their jobs could be left swinging in the wind, too—in fact, as many as half of all such employees could be affected.
That’s according to an Alternet report that says an amendment added to the bill currently being considered by the House of Representatives would allow insurers in states that get waivers from regulations put in place by the Affordable Care Act to deny coverage for 10 types of health services—including maternity care, prescription drugs, mental health treatment and hospitalization.
An MSNBC report points out that “because the Republican-led House is scrambling to pass a bill without scrutiny or serious consideration,” the last-minute amendment’s full effects aren’t even known, since “[t]his is precisely the sort of detail that would’ve come to light much sooner if Republicans were following the American legislative process. In fact, this may not even be the intended goal of the GOP policy.”
While the ACA prohibits employer-based plans from imposing annual limits on coverage and bare lifetime caps on 10 essential benefits, the Obama administration did loosen those restrictions back in 2011, saying that employers could instead choose to follow another state’s required benefits.
What the new Republican take on the AHCA does is push that further—a lot further—by allowing large employers to pick the benefit requirements for any state. That would let them limit coverage on such costly types of care as mental health and substance abuse services.
In a Wall Street Journal report, Andy Slavitt, former acting administrator of the Centers for Medicare and Medicaid Services under President Barack Obama, is quoted saying, “It’s huge. They’re creating a backdoor way to gut employer plans, too.”
The changes to employer-based plans would hit anyone not insured by Medicare or by small-business plans, because the bill includes cuts to Medicaid and changes to the individual market as well.
A report from the Brookings Institution points out that “One of the core functions of health insurance is to protect people against financial ruin and ensure that they get the care they need if they get seriously ill.” The ACA pushed insurance plans to meet that standard, it says, by requiring them to “limit enrollees’ annual out-of-pocket spending and [bar] plans from placing annual or lifetime limits on the total amount of care they would cover.”
However, while those protections against catastrophic costs “apply to almost all private insurance plans, including the plans held by the roughly 156 million people who get their coverage through an employer,” the Brookings report says, the amendment to the Republican bill “could jeopardize those protections—not just for people with individual market plans, but also for those with employer coverage.”
How? By modifying “the ‘essential health benefit’ standards that govern what types of services must be covered by individual and small group market insurance plans. The intent of the amendment is reportedly to eliminate the federal benefit standards that currently exist and instead allow each state to define its own list of essential health benefits.”
And then, with employers allowed to pick and choose which state’s regulations they’d like to follow, a loophole the size of the Capitol building would not only allow “states will set essential health benefit standards that are considerably laxer than those that are in place under the ACA,” says the report, but “large employers may have the option to pick which state’s essential health benefits requirements they wish to abide by for the purposes of these provisions.”
The result? “[T]his would likely have the effect of virtually eliminating the catastrophic protections with respect to large employers since employers could choose to pick whichever state set the laxest standards. The same outcome would be likely to occur for all private insurance policies,” the report continues, “if insurers were permitted to sell plans across state lines, as the Administration has suggested enacting through separate legislation.”
While the actual effect of the amendment is unclear, the Brookings report concludes, “there is strong reason to believe that, in practice, the definition of essential health benefits that applied to the catastrophic protections would be far weaker under the House proposal than under current law, seriously undermining these protections. These potential adverse effects on people with employer coverage, in addition to the potentially damaging effects of such changes on the individual health insurance market, are thus an important reason that policymakers should be wary of the House proposal with respect to essential health benefits.”
See the original article Here.
Source:
Satter M. (2017 May 4). Workers might see employer health coverage disappear under new GOP AHCA [Web blog post]. Retrieved from address https://www.benefitspro.com/2017/05/04/workers-might-see-employer-health-coverage-disappe?page_all=1
3 Aspects of the GOP Healthcare Plan that Demand Employers’ Attention
The House of Representatives last week passed the American Health Care Act (AHCA) bill to begin the process of repealing the ACA. Find out what this new legislation means for employers in the great article from Employee Benefits Adviser by Daniel N. Kuperstein.
The extremely emotional journey to repeal (more appropriately, to “change”) the Affordable Care Act reached a significant milestone this week: The Republican-led House of Representatives passed an updated version of the American Health Care Act. While more than 75% of the provisions of the ACA remain intact, the AHCA gutted or delayed several of the ACA’s taxes on employers, insurers and individuals.
So what does this mean for employers?
First off, it’s important to remember that this new bill is not law just yet. The House version of the bill now heads to the Senate, where there’s no guarantee that it will pass in its current form; the margin for victory is much slimmer there. Only three “no” votes by Senate Republicans could defeat the bill, and both moderate and conservative Republican lawmakers in the Senate have expressed concerns about the bill. In other words, employers don’t have to do anything just yet, but it’s still beneficial to understand the major changes that could be coming down the pike.
As employers know from working over the last seven years to implement provisions of the ACA, there will be a million tiny details to work through if the AHCA becomes law.
But for now, we see three major aspects that demand employers’ attention.
There will be more emphasis on health savings accounts
Under the AHCA, health savings accounts will likely become far more popular — and more useful. The HSA contribution limits for employers and individuals are essentially doubled. Additionally, HSAs will be able to reimburse over-the-counter medications and allow spouses to make catch-up contributions to the same HSA. Of course, with this added flexibility comes increased responsibility — there will be a greater need for employees to understand their insurance.
There will be more flexibility in choosing a benchmark plan
For larger employers not in the small group market, the AHCA creates an opportunity to choose a benchmark plan that offers a significantly lower level of benefits to employees.
Currently, the ACA provides that employer-sponsored self-insured health plans, fully-insured large group health plans, and grandfathered health plans are not required to offer EHBs. However, these plans are prohibited from imposing annual and lifetime dollar limits on any EHBs they do offer. For purposes of determining which benefits are EHBs subject to the annual and lifetime dollar limits, the ACA currently permits employers sponsoring these types of plans to define their EHBs using any state benchmark plan. In other words, employers are not bound by the essential health benefits mandated by their state and can pick from another state’s list of required benefits.
Under the AHCA, we may see a big change to how the rules on annual and lifetime limits work. Notably, nothing in the AHCA would prohibit employers from choosing a state benchmark plan from a state that had obtained an AHCA waiver, which would allow the state to put annual and lifetime limits on its EHBs. This means that, if one state decides to waive these EHB requirements, many employers could decide to use that lower-standard plan as their benchmark plan. Of course, while choosing such a benchmark plan may benefit an organization by lowering its costs, such a move may have a negative impact on its ability to recruit and retain the best talent.
There will be a greater need to help employees make smart benefits decisions
The most important aspect of this for employers is to understand the trend in health insurance, which is undeniably moving in the direction of consumerism.
The driving philosophy behind this new Republican plan is to place more responsibility on individuals. However, this doesn’t mean employers can throw a party and simply wish their workers “good luck” — employers need to think at a macro level about what’s good for business. In a tightening labor market in which so many talented people consider themselves free agents, smart employers will focus on helping employees to make smart decisions about their health insurance.
See the original article Here.
Source:
Kuperstein D. (2017 May 5). 3 aspects of the GOP healthcare plan that demand employers attention [Web blog post]. Retrieved from address https://www.employeebenefitadviser.com/opinion/3-aspects-of-the-gop-healthcare-plan-that-demand-employers-attention
Advisers Seek Innovative Ways To Increase Retirement Savings
Are you struggling to save for your retirement? Check out this great article from Employee Benefits Adviser on what employee benefits advisers are doing to help their clients prepare for their retirement by Cort Olsen.
In a recent forum co-hosted by Retirement Clearinghouse, EBRI, Wiser and the Financial Services Roundtable, experts shared how automated retirement portability programs could be the key to increased participation in private-sector retirement plans.
Today, at least 64% of Americans say they do not have sufficient funds for retirement and less than half of private-sector workers participate in workplace retirement programs. Former U.S. Sen. Kent Conrad, a Democrat from North Dakota, says these statistics could improve through better access to workplace retirement savings plans.
“So many small businesses tell [Congress], ‘Look we’d like to offer a plan, but we just can’t afford it,’” Conrad says. “We take the liability off of their shoulders, we take the administrative difficulty off their shoulders and allow a third party to administer the plans, run the plans and have the financial responsibility for the plans, which makes a big difference for employers.”
With these improved access points to savings plans, Conrad says the opportunity arises to create new retirement security plans for smaller businesses with fewer than 500 employees, enabling multiple employers — even from different industries — to band together to offer their workers low cost, well-designed options.
“Once the [savings plan] has been put in place for a period of time, we then introduce a nationwide minimum coverage standard for businesses with more than 50 employees,” Conrad says. “Any mandate is controversial, but legally if you dramatically simplify (don’t require employer match) really all they have to do is payroll deduction, and then it becomes not unreasonable for employers with 50 or more workers to offer some kind of plan.”
How to achieve auto-portability
Once plans have been made available for employers of all sizes, Jack VanDerhei, research director for the Employee Benefit Research Institute, recommends three different scenarios for auto-portability of retirement plans between employers.
1) Full auto-portability. VanDerhei considers this to be the most efficient scenario, where every participant consolidates their savings in their new employer plan every time they change jobs. The goal would be that all participants arrive at age 65 with only one account accumulated over the span of their working life.
2) Partial auto-portability. In this scenario, every participant with less than $5,000 — indexed for inflation — consolidates their savings in their new employer plan every time they change jobs. “If you have $5,000 or less in your account balance at the time you change jobs, leakage would only come from hardship withdrawals,” VanDerhei says. This means that money would only leave the account if the participant determined it necessary to take money out to pay for a necessity.
3) Baseline: status quo. In addition to hardship withdrawals, there is a participant-specific probability of cashing out and loan default leakage at the time of job transition. These participant specific leakages can be age, income, account balance and how long the participant has been with the employer.
VanDerhei says the younger the participants are to begin using full auto-portability of retirement plans, the more likely they are to get the most out of their retirement savings once they reach the age of 65.
“If you look at people who are currently between the ages of 25 and 34, under a partial portability there is a chance for accumulation to reach $659 billion and under a full portability there is a chance to reach $847 billion in accumulation,” VanDerhei says. “As you would expect, accumulation will decrease as the age increases if they choose to enter into auto-portability later in life.”
Spencer Williams, president and CEO of Retirement Clearinghouse, LLC, says although retirement portability has been codified into ERISA there are not enough mechanisms involved to encourage participants to continue to save for retirement rather than cashing out.
“We have a little more than a third of the population cashing out when they change jobs,” Williams says. “The research shows that if you fix that problem, the difficulty moving peoples’ money, we will begin the process of reducing leakage.”
Once a retirement account reaches a certain amount, Williams adds that participants will begin to take the account more seriously and have more desire to continue investing in the plan.
“We need to create an efficient and effective means by which people can have their money moved for them, and in doing that we begin to change peoples’ behavior,” Williams says. “Finally, if we increase access and coverage, along with auto-portability, all of those benefits accrue from all those new participants in the system.”
See the original article Here.
Source:
Olsen C. (2017 April 6). Advisers seek innovative ways to increase retirement savings [Web blog post]. Retrieved from address https://www.employeebenefitadviser.com/news/advisers-seek-innovative-ways-to-increase-retirement-savings
Employers Want Lawmakers to Curb Rising Pharma Costs
Has the cost of pharmaceuticals caused an increase in your health care costs? Find out how other employers are trying to combat rising costs in the great article from Employee Benefits News by Nick Otto.
A majority of employers say they were relieved to see the GOP’s repeal and replace plan fizzle out last month, and instead have their own ideas on how to best reform healthcare and how to rein in costs.
In a poll conducted by Mercer days following the crumbling of the American Health Care Act, more than half who invest in employer-sponsored healthcare said they were happy to see the GOP plan fail.
Nearly a quarter (24%) of employers told the consulting firm they “very relieved” of the legislation’s failure, while 32% said they were “relieved.”
Meanwhile, 16% said they were disappointed the legislation didn’t pass, 5% were “very disappointed” it didn’t pass, and the remainder of employers had no opinion. A planned vote on the ACHA was scrapped in late March at President Donald Trump’s request after a number of Republicans said they opposed the bill.
With more than 61% of covered Americans getting health coverage through employer plans, Mercer says businesses should help play a key role in recognizing and addressing the underlying cost concerns plaguing the healthcare market.
“Cost-shifting does not address the underlying causes of healthcare cost growth, and increasing burdens on employers will simply make it harder for them to provide affordable coverage to their employees,” Mercer says.
So what do employers say are the top issues lawmakers should address?
Topping the employer wish list, according to the Mercer poll, is help with controlling the climbing cost of pharmaceuticals with a score of 4.4/5 (employers ranked policymaker priorities 1-5, 5 being “top priority).
The following improvements also made the list of employer desires: improving price transparency (4.1), stabilizing the individual markets (4), maintaining Medicaid funding (4) and investing more in population health and education (3.7).
While neither the ACA nor the AHCA had any significant impact to how employers offer healthcare, there are aspects of both legislations that would still influence some employer plans.
Maintaining Medicaid funding and having a stabilized individual market will lower hikes to private payers by allowing people not in employer-sponsored plans have access to affordable coverage and avoid a rise in the number of uninsured.
See the original article Here.
Source:
Otto N. (2017 April 9). Employers want lawmakers to curb rising pharma costs [Web blog post]. Retrieved from address https://www.benefitnews.com/news/employers-want-lawmakers-to-curb-rising-pharma-costs?brief=00000152-14a7-d1cc-a5fa-7cffccf00000
Understanding the Evolution of Health Insurance in a Post-ACA World
With the fall of the AHCA, are you wondering where you are left standing with healthcare? Check out this great article from Benefits Pro on what the fall of the AHCA means for employers and how to proceed with healthcare from here by Eric Helman.
While much has been written about specific aspects of the ACA and how repeal, replace and repair will affect certain populations, the impact on employer-sponsored benefits is more convoluted.
In the world of employee benefits, to properly understand the post ACA world, we must reflect on the confluence of how five separate constituents react to the new health insurance landscape.
The issues and priorities of these five groups: government, carriers, employers, employees, and brokers/consultants, and how they relate to each other will dictate the evolution of health insurance in the post-ACA world.
These insights will illuminate what to expect in a post-ACA climate as the health insurance landscape continues to evolve under President Trump.
Government compliance issues ease
While we all may be a bit weary from the focus on Washington, the fact remains the federal government continues to be the single biggest catalyst for changes in the health insurance and benefits landscape.
For benefits professionals, it is important to recognize that for all the politicization around ACA, there is very little focus on the employer-provided benefits space, especially outside of the realm of small employers. The priority for government involvement in repeal-replace-repair is the individual market and Medicaid expansion.
Having said this, if the Republicans choose to use reconciliation to repeal the ACA with a simple majority, many aspects of the employer-provided system will be affected. Unfortunately, this will perpetuate the preoccupation with compliance in the employer space, continuing the trend of non-value add expenditure of resources that has plagued the industry for the last five years.
Carrier mandates relax
Perhaps surprisingly, the second area of significant change in the post-ACA era will be in the domain of the carriers. Against the backdrop of the Department of Justice opinions on the two proposed mega-mergers, we expect the greatest impact of repeal-replace-repair will manifest itself in the proliferation of new products which were “non-compliant” under the ACA.
Whether correct or not, one of the indictments of the ACA is increased mandates do more to destroy markets in terms of access and affordability than they do to advance these objectives.
Look for the relaxation of these mandates and the commensurate acceleration of new product development which will inevitably follow. Combined with the return of premium reimbursement plans in the small market, we expect the further commoditization of major medical insurance as low risk consumers choose less coverage for less premium.
Employers reallocate benefits compensation
Second only to the carriers, the employers have been the biggest victims of the ACA era. While many have applauded the decline in the rate of health care inflation, the reality is that benefits costs continue to grow more than inflation, placing an ever-increasing burden on total compensation planning.
Add to this the increased cost of compliance in an environment where employers are trying to reduce administrative costs in the face of a slow growth economy and you can understand the “ACA fatigue” many employers report.
Repeal-replace-repair, while it will bring uncertainty in the near term, is likely to lower the burden on employers and allow more strategic thinking about how they allocate compensation to benefits.
The increasing age diversity of their employees will force them to consider altering this allocation in favor of financial wellness (retirement and student debt) perhaps at the expense of traditional health benefits. The war for new talent precipitated by near full employment in skilled professions will only exacerbate this tension.
Employees wise up on benefit choices
For employees, the impact of the politicization of health care will continue to cloud their perception of their role in choosing and consuming the benefit programs offered by their employers.
While much has been written about the promise of “consumerism” to change the hyper-inflationary nature of fee-for-service health care, it is apparent that the deadly combination of employee illiteracy and entitlement about employer-provided health insurance is a greater impediment to real reform in the way health care is consumed in this country.
With the potential deregulation on mandated benefits and the increasing availability of retail health care alternatives, it will be incumbent on all the constituents to accelerate the employees’ education and appreciation for employee benefit choices customized to their informed perception of need and risk mitigation.
Brokers/consultants rise to the challenges
And now, the elephant in the room, the impact on brokers and consultants. One of my early mentors said, “There is profit in confusion.” For the skilled practitioners, I think they would agree that the net effect of the ACA was increased opportunity. It is important to note however, that this opportunity required focus on new disciplines.
No longer were the skills of customer relationship management, procurement management and vendor management sufficient to satisfy the needs of their clients. The best players were forced to develop expertise in compliance, regulatory impact, benefits technology and internal human resources processes that their predecessors could ignore. This, the low cost of money and the aging workforce of benefit producers has contributed to the continued wave of firm consolidation which changes the nature of competition.
Additionally, the widely publicized fall of market disruptors will have a chilling effect on innovation for the near term. In the post-ACA era, benefits professionals will be challenged to balance revenue, client retention and cost-of-service pressures in an environment where the future is uncertain.
The post-ACA era promises to be as exciting as the last five years. To paraphrase Richard Epstein on a separate topic, the real dilemma is that the people working on the problem lack the technical expertise and the political agnostic orientation necessary for real change.
In the meantime, successful participants in this marketplace will be forced to be both diplomats and opportunists, acutely aware of the issues and priorities facing all of the important constituents and balancing these to the most optimum outcome. I, personally, am comforted that we have some of the most creative people I know working on this challenge.
See the original article Here.
Source:
Helman E. (2017 April 7). Understanding the evolution of health insurance in a post-ACA world [Web blog post]. Retrieved from address https://www.benefitspro.com/2017/04/07/understanding-the-evolution-of-health-insurance-in?t=core-group&page_all=1
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/
Are Healthcare Cost-Shifting Efforts at a Tipping Point?
Are you having trouble controlling your healthcare cost? Take a look at this interesting article from Employee Benefits Advisor on how rising healthcare costs are affecting employers by Bruce Shutan.
With the fate of healthcare reform in limbo, new research suggests employers are moving forward with a host of incremental changes to their health and wellness plans in hopes of curtailing costs on their own.
Kim Buckey, VP of client services at DirectPath, an employee engagement and healthcare compliance technology company, has noticed a slowdown in adoption of high-deductible health plans and cost-shifting strategies that aren’t quite living up to expectations. DirectPath’s 2017 Medical Plan Trends and Observations Report, based on an analysis of about 975 employee benefit health plans, found employers applying creative methods for cost control.
Buckey noted greater use of health savings accounts, wellness incentives, price transparency tools and alternative care options.
Slightly more than half of the employers studied by DirectPath offer a price transparency tool, while another 18% plan to do so in the next three years. Price-comparison services were found to save employees and employers alike an average of $173 and $409, respectively, per procedure.
In an effort to reduce costs and the administrative burden of tracking coverage for dependents, surcharges on spouses who can elect coverage elsewhere soared more than 40% within the past year to $152 per month.
The number of plans that offer wellness incentives rose to 58% from 50% between 2016 and 2017. Rewards included paycheck contributions, plan premium discounts, contributions to HSAs and health reimbursement arrangements and reduced co-pays for office visits. HSAs were far more popular than employee-funded HRAs (67% vs. 15% of employers examined), while employer contributions to HSAs increased nearly 10%.
Barriers to care and cost containment
A separate survey conducted by CEB, a technology company that monitors corporate performance, noted that although as many as one-third of organizations offer telemedicine, more than 55% of employees aren’t even aware of their availability and nearly 60% believe they’re difficult to access.
DirectPath and CEB both found that the average cost of specialty drugs increased by more than 30%. This reflects research conducted by the National Business Group on Health. Nearly one-third of NBGH members said the category was their highest driver of healthcare costs last year.
The pursuit of a panacea for rising group health costs has been meandering. When Buckey’s career began, she recalls how indemnity plans gave way to HMOs and managed care, then HDHPs, consumer-directed plans and private exchanges. “There is no one silver bullet that’s going to solve this problem,” she explains, “and I think employers and their advisers are starting to understand that it’s got to be a combination of things.”
More employers are now realizing that cost-shifting isn’t a viable long-term solution and that “whatever changes are put in place will require a well thought-out, year-round and robust communication plan,” she says.
There’s also a serious need to improve healthcare literacy, with Buckey noting that many employees still struggle to understand basic concepts such as co-pays, deductibles and HSAs. Consequently, she says it’s no wonder why they often “just shut down and do whatever their doctor tells them.
“So I think anything that advisers and brokers can do to support their employers in explaining these plans, or whatever changes they choose to implement,” she continues, will help raise understanding and eventually have a positive influence on behavior change. This, in turn, will help lower employee healthcare costs.”
See the original article Here.
Source:
Shutan B. (2017 April 5). Are healthcare cost-shifting efforts at a tipping point? [Web blog post]. Retrieved from address https://www.employeebenefitadviser.com/news/are-healthcare-cost-shifting-efforts-at-a-tipping-point
The 10 Biggest 401(k) Plan Misconceptions
Do you know everything you need to know about your 401(k)? Check out this great article from Employee Benefit News about the top 10 misconceptions people have about their 401(k)s by Robert C. Lawton.
Unfortunately for plan sponsors, 401(k) plan participants have some big misconceptions about their retirement plan.
Having worked as a 401(k) plan consultant for more than 30 years with some of the most prestigious companies in the world — including Apple, AT&T, IBM, John Deere, Northern Trust, Northwestern Mutual — I’m always surprised by the simple but significant 401(k) plan misconceptions many plan participants have. Following are the most common and noteworthy —all of which employers need to help employees address.
1. I only need to contribute up to the maximum company match
Many participants believe that their company is sending them a message on how much they should contribute. As a result, they only contribute up to the maximum matched contribution percentage. In most plans, that works out to be only 6% in employee contributions. Many studies have indicated that participants need to average at least 15% in contributions each year. To dispel this misperception, and motivate participants to contribute something closer to what they should, plan sponsors should consider stretching their matching contribution.
2. It’s OK to take a participant loan
I have had many participants tell me, “If this were a bad thing why would the company let me do it?” Account leakage via defaulted loans is one of the reasons why some participants never save enough for retirement. In addition, taking a participant loan is a horribleinvestment strategy. Plan participants should first explore taking a home equity loan, where the interest is tax deductible. Plan sponsors should consider curtailing or eliminating their loan provisions.
3. Rolling a 401(k) account into an IRA is a good idea
There are many investment advisers working hard to convince participants this is a good thing to do. However, higher fees, lack of free investment advice, use of higher-cost investment options, lack of availability of stable value and guaranteed fund investment options and many other factors make this a bad idea for most participants.
4. My 401(k) account is a good way to save for college, a first home, etc.
When 401(k) plans were first rolled out to employees decades ago, human resources staff helped persuade skeptical employees to contribute by saying the plans could be used for saving for many different things. They shouldn’t be. It is a bad idea to use a 401(k) plan to save for an initial down payment on a home or to finance a home. Similarly, a 401(k) plan is not the best place to save for a child’s education — 529 plans work much better. Try to eliminate the language in your communication materials that promotes your 401(k) plan as a place to do anything other than save for retirement.
5. I should stop making 401(k) contributions when the stock market crashes
This is a more prevalent feeling among plan participants than you might think. I have had many participants say to me, “Bob, why should I invest my money in the stock market when it is going down. I'm just going to lose money!” These are the same individuals who will be rushing into the stock market at market tops. This logic is important to unravel with participants and something plan sponsors should emphasize in their employee education sessions.
6. Actively trading my 401(k) account will help me maximize my account balance
Trying to time the market, or following newsletters or a trader's advice, is rarely a winning strategy. Consistently adhering to an asset allocation strategy that is appropriate to a participant's age and ability to bear risk is the best approach for most plan participants.
7. Indexing is always superior to active management
Although index investing ensures a low-cost portfolio, it doesn't guarantee superior performance or proper diversification. Access to commodity, real estate and international funds is often sacrificed by many pure indexing strategies. A blend of active and passive investments often proves to be the best investment strategy for plan participants.
8. Target date funds are not good investments
Most experts who say that target date funds are not good investments are not comparing them to a participant's allocations prior to investing in target date funds. Target date funds offer proper age-based diversification. Many participants, before investing in target date funds, may have invested in only one fund or a few funds that were inappropriate risk-wise for their age.
9. Money market funds are good investments
These funds have been guaranteed money losers for a number of years because they have not kept pace with inflation. Unless a participant is five years or less away from retirement or has difficulty taking on even a small amount of risk, these funds are below-average investments. As a result of the new money market fund rules, plan sponsors should offer guaranteed or stable value investment options instead.
10. I can contribute less because I will make my investments will work harder
Many participants have said to me, “Bob, I don’t have to contribute as much as others because I am going to make my investments do more of the work.” Most participants feel that the majority of their final account balance will come from earnings in their 401(k) account. However, studies have shown that the major determinant of how much participants end up with at retirement is the amount of contributions they make, not the amount of earnings. This is another misconception that plan sponsors should work hard to unwind in their employee education sessions.
Make sure you address all of these misconceptions in your next employee education sessions.
See the original article Here.
Source:
Lawton R. (2017 April 4). The 10 biggest 401(k) plan misconceptions[Web blog post]. Retrieved from address https://www.benefitnews.com/opinion/the-10-biggest-401-k-plan-misperceptions?brief=00000152-14a5-d1cc-a5fa-7cff48fe0001
Half of Mature Workers Delaying or Giving Up on Retirement
Did you know that now more than ever Americans are giving up on their dreams of retirement? Find out about the somber facts facing the older generation of workers in the great article from Benefits Pro by Marlene Y. Satter.
It’s a grim picture for older workers: half either plan to postpone retirement till at least age 70, or else to forego retirement altogether.
That’s the depressing conclusion of a recent CareerBuilder survey, which finds that 30 percent of U.S. workers aged 60 or older don’t plan to retire until at least age 70—and possibly not then, either.
Another 20 percent don’t believe they will ever be able to retire.
Why? Well, money—or, rather, the lack of it—is the main reason for all these delays and postponements.
But that doesn’t mean that workers actually have a set financial goal in mind; they just have this sinking feeling that there’s not enough set aside to support them.
Thirty-four percent of survey respondents aged 60 and older say they aren’t sure how much they’ll need to save in order to retire.
And a stunning 24 percent think they’ll be able to get through retirement (and the potential for high medical expenses) on less than $500,000.
Others are estimating higher—some a lot higher—but that probably makes the goal of retirement seem even farther out of reach, with 25 percent believing that the magic number lies somewhere between $500,000–$1,000,000, 13 percent shooting for a figure between $1–2 million, 3 percent looking at $2 million to less than $3 million and (the) 1 percent aiming at $3 million or more.
And if that’s not bad enough, 26 percent of workers 55 and older say they don’t even participate in a 401(k), IRA or other retirement plan.
With 74 percent of respondents 55 and older saying they aren’t making their desired salary, that could play a pretty big part in lack of participation—but that doesn’t mean they’re standing still. Eight percent took on a second job in 2016, and 12 percent plan to change jobs this year.
Predictably, the situation is worse for women. While 54.8 percent of male respondents aged 60+ say they’re postponing retirement, 58.7 percent of women say so.
Asked at which age they think they can retire, the largest groups of both men and women say 65–69, but while 44.9 percent of men say so, just 39.6 percent of women say so.
In addition, 24.4 percent of women peg the 70–74 age range, compared with 21.1 percent of men, and 23.2 percent of women agree with the gloomy statement, “I don’t think I’ll be able to retire”—compared with 18 percent of men.
And no wonder, since while 21.7 percent of men say they’re “not sure” how much they’ll need to retire, 49.3 percent of women are in that category.
Women also don’t participate in retirement plans at the rate that men do, either; 28.3 percent of male respondents say they don’t participate in a 401(k), IRA or other retirement plan, but 35.4 percent of female respondents say they aren’t participating.
For workers in the Midwest, a shocking percentage say they’re delaying retirement: 61.6 percent overall, both men and women, of 60+ workers saying they’re doing so.
Those in the fields of transportation, retail, sales, leisure and hospitality make up the largest percentages of those putting off retirement, at 70.4 percent, 62.5 percent, 62.8 percent and 61.3 percent, respectively. And 46.7 percent overall agree with the statement, “I don’t think I’ll be able to retire.”
Incidentally, 53.2 percent of those in financial services—the largest professional industry group to say so—are not postponing retirement.
They’re followed closely by those in health care, at 50.9 percent—the only other field in which more than half of its workers are planning on retiring on schedule.
And when it comes to participating in retirement plans, some industries see some really outsized participation rates that other industries could only dream of. Among those who work in financial services, for instance, 96.5 percent of respondents say they participate in a 401(k), IRA or comparable retirement plan.
That’s followed by information technology (88.2 percent), energy (87.5 percent), large health care institutions (85.8 percent—smaller health care institutions participate at a rate of 51 percent, while overall in the industry the rate comes to 75.5 percent), government employees (83.6 percent) and manufacturing (80.2 percent).
After that it drops off pretty sharply, and the industry with the lowest participation rate is the leisure and hospitality industry, at just 43.4 percent.
See the original article Here.
Source:
Satter M. (2017 March 31). Half of mature workers delaying or giving up on retirement [Web blog post]. Retrieved from address https://www.benefitspro.com/2017/03/31/half-of-mature-workers-delaying-or-giving-up-on-re?ref=mostpopular&page_all=1
5 Simple Steps Clients Can Take to Boost Workers' Financial Wellness
Are you trying to help your employees increase their financial well-being? Check out these 5 great tips from Employee Benefits Adviser on how to help increase your employees' investment into their financial wellness by Joe Desilva.
Now more than ever, employers offer a wide array of benefits to build engagement and culture within their walls. Healthy snack options adorning the kitchen? Check. Fitness stipends? Check. Competitive work-from-home policies? Check. These are all nice-to-have extras, but employees are increasingly concerned about a more fundamental concern: retirement planning. And it’s here where employers are not providing enough enticing options as they are with the other, flashier perks.
One of the biggest issues employees face as they plan for retirement is economic uncertainty. Only 21% of workers are very confident that they will have enough money for a comfortable retirement, according to the 2016 Employee Benefit Research Institute Retirement Confidence Survey. This should matter to employers because financial uncertainty can have a negative effect on work performance, according to a study by Lockton Retirement Services. The study found that one in five workers reported feeling extremely stressed, mostly because of their job or finances, and those reporting high stress were twice as likely to report poor health overall, leading to more sick days and decreased productivity.
Boosting financial wellness programs not only can help employees’ finances in the long term, it can possibly help employees manage stress and increase productivity in the short term. Employers seem to understand this. In fact, 92% of employer-respondents in a study commissioned by ADP titled Winning with Wellness confirmed interest in providing their workforce with information about retirement planning basics, and 84% said the same of retirement income planning.
Yet, even though many employers appreciate the value of these programs, 32% are not considering implementation. The appetite exists for retirement planning, but the prospects of starting a program appear to be daunting. The truth is, it can be easier than you think.
Here are five simple steps an employer can take to start helping employees find tools and information to help them better manage their finances and grow more confident in their financial futures.
- Teach employees critical planning skills. Experts suggest retirees will need 75%-90% of their working income to live comfortably in retirement. To help employees determine the optimal amount to meet their needs, consider providing them with tools that look at factors such as current annual pre-tax income, estimated Social Security benefit amount, current age and the age they would like to retire, and any retirement savings and project possible retirement savings outcomes. Helping them estimate savings needs and retirement investing now can pay off in the future.
- Offer access to automatic enrollment and auto-escalation features. No matter how well employees do with other investments, the 401(k)’s advantages of tax-deferred growth and a company match is likely unbeatable. By automatically enrolling employees in retirement plans with savings increases, you may be able to position your employees for a more confident financial future.
- Provide resources so employees can seek investment advice from a professional. Employees may want to seek advice on their investments so they will not bear the stress of retirement on their own. There are a lot of options available to employees, but they may not be familiar enough with those options to determine whether or not they’d benefit. Providing access to professional investment advice with respect to retirement accounts may help employees feel confident in their retirement decisions.
- Deliver tools and personalized materials that integrate with real data. Working with a service provider that integrates payroll and recordkeeping data can give a retirement plan the ability to deliver targeted personalized information that employees can use for planning purposes. By delivering relevant information, employees can get engaged and have a better sense of the progress of their retirement planning.
- Make self-learning tools available for honing financial skills anytime, anywhere. A financial wellness program can help employees face their financial decisions with confidence. Most programs offer a library of tools and resources that gives employees access to information about planning, saving, and providing for their home, family and retirement. With financial education, employees may make better financial choices and set realistic goals.
At a time when employee retention is crucial, it’s important to create a support system for employees as they plan their financial futures. With so many workers concerned about retirement security, employers have a clear opportunity to step in and help. Whether it’s enabling employees to save more for retirement or learn about budgeting, financial planning can potentially serve as another popular perk among that list of nice-to-haves.
See the original article Here.
Source:
Desilva J. (2017 March 16). 5 simple steps clients can take to boost workers' financial wellness[Web blog post]. Retrieved from address https://www.employeebenefitadviser.com/opinion/5-simple-steps-clients-can-take-to-boost-workers-financial-wellness