Data and Research November 2, 2022

Higher Education Sponsors Say DC Plan Benefits Help Address Staffing Pinch

New survey finds that a defined contribution plan is the most important benefit for attracting talent to institutions of higher education, according to plan sponsors.  

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Many higher education institutions will likely use the defined contribution plan their organization offers as an enticement for attracting workers and to help alleviate staffing pressures, survey data from Voya Financial shows.  

Higher education plan sponsors identified attracting and retaining staff as their greatest current challenge. The Voya survey shows that 80% of respondents agree that attracting and retaining high-quality administrators is much more important today than it was pre-pandemic, the Voya 2022 Higher Education Study finds.

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Among survey respondents, 90% of higher education plan sponsors agree their defined contribution plan can help to attract talented workers, 87% say an organization’s defined contribution plan helps retain good employees and 50% of institutions report starting or increasing the employer match to the retirement plan since January 1, 2021, the survey finds.

“The ability to attract and retain top talent has been a challenge facing many industries, but for those in the higher education sector, it has only been exacerbated by the pandemic,” says Brodie Wood, vice president and national practice leader for the education market at Voya, in a press release.

A specific challenge for higher education plan sponsors is that many employees want a hybrid work model, added Wood.

“When you consider today’s job market with more competition for companies to find staff in general, in most cases, higher ed[ucation] institutions are not able to compete with the benefit of flexibility that many jobs outside the sector offer today—such as the desire to work completely remotely, which many colleges and universities do not allow,” he says. 

The Voya survey identified the following as the most important benefits for attracting talent:

  • A defined contribution retirement plan.
  • A paid leave benefits program.
  • A defined benefit pension.

The Voya survey also reveals that higher education sponsors are grappling with how to best support employees with retirement planning.

A Voya spokesperson added that higher education plan sponsors’ specific recruitment and retainment challenges include a tight overall labor market with more competition for staff; the pandemic leading some people to rethink the role of work in their lives; a desire of many to work completely remotely, which many colleges and universities do not allow; salaries at educational institutions being generally lower than in the private sector; and some colleges are in a rural location, which can cause additional challenges such as drawing from a limited work pool.

Voya research finds widespread agreement among plan sponsors that many employees are facing several challenges to their ability to save for retirement including caregiver responsibilities at 87%, student loan debt at 85% and the impacts of inflation at 84%.

Some plan sponsors are addressing these challenges through wellness programs. Among respondents, 49% are addressing challenges to save through student loan repayment and 42% with financial planning resources for caregivers and employees with special needs and disabilities, the survey shows.  

Additionally, 83% agree that matching student loan payments with a retirement plan contribution is more important now that it was before the pandemic, the survey finds.

The research was conducted by Greenwald Research on behalf of Voya. The biennial study included an online survey conducted June 29 to July 19, among 301 retirement plan decision-makers from higher education organizations, along with in-depth interviews among a select group of decision-makers conducted in August.

Data and Research November 2, 2022

Inflation Is Affecting Participants’ Health Care Spend And Retirement Deferrals

Many workers are considering downgrading their health insurance during open enrollment because of high inflation, according to the Nationwide Retirement Institute.

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Many workers fear they will have higher-than-expected healthcare expenses in retirement, with current inflation heightening concerns and meaning a pullback in health-care related savings, according to a survey from the Nationwide Retirement Institute.

Among survey respondents, 63% are terrified of the effect that health care costs will have on their retirement plans. 

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Despite 72% of workers reporting that one of their top fears is health care costs going out of control, 70% can’t estimate how much they expect to pay for health care throughout their retirement, 50% are unsure or can’t estimate expected annual health care costs in retirement, while 39% have created a plan for health care costs in retirement, the 2022 Health Care Cost in Retirement Survey finds.

For adults who estimate their health care costs in retirement, 15% expect annual health care costs of less than $1,000, 5% expect between $1,000 and $2,000, 7% expect $2,000 to $3,000 and 11% estimate $10,000 or more.

“Estimating health care costs in retirement can feel particularly daunting for many participants,” explained Kristi Rodriguez, senior vice president of the Nationwide Retirement Institute, in an email.   

Rodriguez added that many adults can’t estimate their health care costs in retirement because of “uncertainties around what their health will look like when they’re older.”

According to research into health care costs, participant estimates in the Nationwide survey may be incorrect. For 2022, Fidelity Investments estimates that a 65-year-old couple retiring this year can expect to spend an average of $315,000 on health care costs throughout retirement, a 5% increase from last year. The figure has near doubled since the initial $160,000 estimate in 2002.

Workers not having an accurate estimate for their health care costs in retirement adds to the many retirement challenges—that have coalesced, amidst increased inflation—says Rodriguez, in a press release.

“As the price of health care and basic necessities continue to reach record highs, Americans have been forced to make tough decisions that sacrifice their health and wellbeing,” she says. “While these decisions are understandable and challenging, making short-term tradeoffs may have long-term impacts. Neglecting your health now can lead to far bigger costs as you age and approach retirement.”

A HeatlhView Services research report earlier this year showed that increased inflation will significantly affect retirement health care costs and workers budgets.  

Increased inflation has also affected retirement plan participants ability to save for retirement, the Nationwide survey shows. Among respondents 10%—over the last 12 months—decreased their retirement plan contributions to pay for health care expenses because of inflation, Nationwide finds.

The survey also shows—because of high inflation—17% of respondents in the last 12 months adjusted their family’s budget to pay for health care expenses, 12% canceled or changed health insurance, 10% withdrew funds from their retirement account to pay for health care expenses and 8% downgraded their health insurance plan. Other respondents said they are considering changes to their health insurance.

“To find additional savings, 14% of Americans say they are considering downgrading their health insurance plan because of high inflation, which rises to 23% and 20% for Gen Z and Millennials, respectively,” the survey states.

Nationwide’s research also shows participants are experiencing high levels of stress around retirement and retirement planning because of inflation. Among survey respondents, 47% report their top stressor is inflation, 30% Social Security running out of funds and 29% an unexpected decline in their health. The remaining top stressors Nationwide identifies are paying for health care at 25%, paying higher taxes at 24% and a stock market crash at 17%.  

The Nationwide survey was conducted online by The Harris Poll for Nationwide among 1,140 adults age 18 and older residing in the U.S, including 283 Gen Z, 285 Millennials, 286 Gen X, 286 Baby Boomers and individuals older than 58. The survey was conducted August 26 to September 8.

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