Benefits October 31, 2013

Employees Need Education About Contribution Limits

October 31, 2013 (PLANSPONSOR.com) – Retirement plan participants need more education about contribution deferral limits, according to a recent survey.
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Preliminary results of the 2013 Mercer Workplace Survey show the average participant believes his tax deferral limit for 2013 is around $8,500 rather than the actual limit of $17,500. The survey also found for those in the 50-and-older age range and nearing retirement, the gap between supposed and accurate knowledge about limits is even more substantial.

In terms of what participants perceived as being their limit and what they annually contributed to their plans because of that perception:

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  • For ages 18 to 34, the perceived limit was $7,631 and the average contribution was $7,535;
  • For ages 35 to 49, the figures were $9,476 and $7,667, respectively;
  • For ages 50 to 64, the figures were $8,304 and $6,673, respectively; and
  • For ages 65 and older, the figures were $9,039 and $7,704, respectively.

According to Mercer, the data not only points to a troubling disconnect between perception and reality, but also creates a false sense of security among participants when it comes to saving for retirement. Although 61% of respondents said they are saving for retirement outside of their 401(k) plans, 34% said they would increase their employee contributions to the tax-deferred maximum limit if they could live the past year over again.

For the survey, online interviews were carried out with 1,506 retirement plan participants between May 28 and June 5. This represented a cross-section of participants currently contributing to a 401(k) plan regardless of balance or those having a balance of $1,000 or more with their current employer, regardless of whether they are currently contributing. A full release of survey findings will be issued in one to two weeks.

Benefits October 30, 2013

Health Exchanges Could Greatly Benefit Young Adults

October 30, 2013 (PLANSPONSOR.com) – The health insurance exchanges created as a result of the Patient Protection and Affordable Care Act (or ACA) could be especially beneficial to young adults.
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An October 28 research brief from the Department of Health and Human Services (HHS) found that nearly five in 10 (or 46%) of uninsured young adults (those between the ages of 18 and 34) may be able to purchase “bronze level” health coverage, via the exchanges, for $50 or less per month. This figure would be after the use of tax credits.

The HHS brief cited that under the ACA, “advanced payment of the premium tax credits will be available to help eligible individuals and families afford insurance coverage through the Health Insurance Marketplace [i.e., the exchanges].”

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Young adults in households of any type account for 41% of the 41.3 million eligible uninsured nationwide, said Laura Skopec and Emily R. Gee, the authors of the brief. “Young adults are the age group most likely to be without health insurance coverage and are therefore a key target for outreach and enrollment activities,” said the authors.

Skopec and Gee also pointed out that about 1.8 million of eligible young adults may be able to pay $100 or less per month for silver- or bronze-level health coverage and that about 92,000 may be able to pay $100 or less for catastrophic coverage. In addition, another 1.3 million eligible young adults may be able to purchase bronze-level coverage for $50 or less a month after tax credits.

To arrive at their conclusions, the authors used data about household composition and income from the 2011 American Community Survey Public Use Microdata Sample.

A copy of the research brief, which includes the methodology for its analysis, can be downloaded here.

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