Benefits April 25, 2014

Employer Challenges Persist for Health Benefit Offerings

April 25, 2014 (PLANSPONSOR.com) – Employers want to offer employees a good health care plan, but many have concerns about their ability to control key factors impacting the cost and delivery of health benefits, says a new survey.
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A survey from financial research and benefits consulting firm LIMRA, “Employee Benefits at a Crossroads,” finds that the competing variables of increasing health care costs, the implementation of the ACA, and the desire to offer a competitive benefits package leave many employers unsure of how to proceed with benefit offerings.

While uncertainty is widespread, employers appear to recognize the importance of offering health care benefits. The survey results show the following trends:

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  • Nearly 80% of surveyed employers say it is the employer’s responsibility to pay some or all of the premium for their workers’ benefits;
  • In terms of plan choice, 57% believe employees want plans with multiple benefit choices and plan features. Thirty-five percent say they believe their employees want limited choices for ease of decisionmaking; and
  • To attract new employees, nine out of 10 employers say they must offer medical insurance.

However, the survey results also show that employers have concerns about health care plans in general and with the implementation of the ACA in particular:

  • Just over half of surveyed employers expect the ACA to have a negative impact on their ability to offer medical benefits in the near future;
  • Eighty-five percent of employers say controlling the costs of health care is an important or critical challenge; and
  • Employees need to take more responsibility for their benefits, say 67% of employers surveyed.

Developing sufficient feedback from employees about health care benefits may also be an issue, as nearly half of employers say they conduct employee benefit surveys only “once in a while,” with 15% conducting surveys on a regular basis and 38% saying they never do them. In addition, the survey finds that 8% of employers are not sure how much choice their employees wanted in their benefit packages.

As for communicating with employees about their health care benefits, 44% of those surveyed believe that companies need to use targeted communication strategies for specific employee populations. However, 80% of employers surveyed say they use the same communications strategy for all employees. According to LIMRA, this shortcoming highlights an opportunity for benefit advisers and health care coverage carriers to better serve employers’ needs by helping them to customize their approaches to employee benefits education.

More information about the survey can requested here.

Benefits April 25, 2014

Many Draw Down Accounts Without a Plan

April 25, 2014 (PLANSPONSOR.com) – More than half of retirees say they have withdrawn funds from retirement accounts, usually to cover short-term expenses, without a strategy in place to mitigate longevity risk.
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Fifty-two percent of retirees have withdrawn funds from their retirement savings without any strategy in place, according to the most recent release of the Perspectives of Retirement survey from PNC Financial Services Group. PNC conducts the survey semi-annually among a national sample of 1,200 adults, ages 35 to 75, to track the way workers and retirees are spending accumulated resources.

PNC says the latest survey results show nearly the same percentage of retirees (53%) are concerned about running out of money. Of those who have withdrawn funds, almost 60% did so to cover living expenses.

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Survey results show retirees grow more likely to withdraw money as they age, but nearly 40% of young retirees (age 64 or younger) are already drawing down non-annuitized savings. Almost two-thirds (63%) are concerned that Social Security or pensions will not be enough to cover expenses and needs further into retirement, PNC says.

“Most retirees don’t have a plan for drawing down savings and that is a concern,” explains Joseph Jennings, senior vice president of wealth management with PNC. “Using savings to cover expenses indicates that retirees may not have a retirement income strategy in place and are putting themselves at greater risk of outliving their funds.“

PNC finds one-third (35%) of retirees say the amount of money they use in retirement is about what they anticipated, but nearly as many (31%) had no specific expectations when entering retirement. The remainder split evenly between those who are spending more and those who are spending less.

One positive sign in the survey data shows many of the retirees reporting concerns about running out of money have already taken action to control their expenses and budget more tightly. They are also taking various actions to reduce overall living costs or raise new sources income, PNC says, among other positive actions.

The 53% who fear running out of money report the following about their financial outlook:

  • Two-thirds have recently changed the way they manage their money. Fifty-nine percent have reduced expenses and 41% now budget more carefully;
  • Those who are concerned are more likely to say they get a higher percentage of their total retirement income from personal savings and investments, at an average of 35% versus 24% for those who get most of their retirement income from other sources, such as Social Security;
  • The equity in their home is more likely to be important to their retirement plans, but at the same time, they are more reluctant to rely on the equity for income; and
  • These retirees have significantly fewer assets, on average, with total investable assets at $225,000, compared with average assets of $411,000 among those who are not concerned.

The survey suggests retirees continue to rely heavily on Social Security. Almost eight in 10 (77%) receive Social Security, while 66% have a pension and 50% use money from savings and investments.

"The need for early retirement planning is crucial, and those nearing retirement can no longer take risk out of their portfolios,” Jennings adds. “We're living longer and need more funds to afford our longevity. Younger generations do not have pensions to rely on, so early planning is more important than ever.”

More information on the survey can be accessed here.

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