Data and Research August 2, 2023

Nearly 90% of Jobseekers Consider 401(k) a ‘Must-Have’ Benefit

Workers have continued to prioritize 401(k) saving despite inflation and market volatility, data shows.

Reported by

For jobseekers, a 401(k) plan is becoming a non-negotiable benefit, new data shows.   

Nearly nine out of 10 participants (88%) considered a 401(k) a must-have benefit when looking for a new job—second only to health insurance, at 90%—and more than three in four 401(k) participants would refuse a new job if it did not offer one, the Charles Schwab 2023 401(k) Participant Study found.

Never miss a story — sign up for PLANSPONSOR newsletters to keep up on the latest retirement plan benefits news.

“Placing such a high priority on their 401(k) is not surprising since it is their primary retirement resource, with workers counting on it to deliver 40% of their retirement income,” Marci Stewart, director of communication consulting and participant education for Schwab Workplace Financial Services, stated in a press release accompanying the research. “That’s double what workers expect from the next closest source, which is Social Security, at 20% of retirement income.”

Life insurance ranked third in the employee must-have benefit rankings at 36%, the data showed. 

Despite increased challenges from inflation and market volatility affecting participants, “retirement saving continues to be a priority for workers, who have maintained their 401(k) savings rates and largely stayed on top of their 401(k) investments over the past year,” Brian Bender, head of Schwab Workplace Financial Services, said in the release.

Comparatively, more workers are also saving for retirement than last year outside of their workplace retirement plan: 68% vs 61% in a savings account, 47% vs 33% in an IRA and 38% vs 29% investing through a brokerage account. These savers are looking to bolster their primary retirement fund with other methods of saving and investing, according to Schwab.

More than seven out of 10 (71%) employed Americans were more likely to stay with an employer that offered an employer-sponsored 401(k), 403(b) or 457 retirement savings plan, an increase from 60% in a 2022 survey, according to the “Voya Consumer Omnibus Research: Retirement Report Q2 2023” from Voya Financial, published earlier this year.

The Schwab survey found that inflation and market volatility continue to weigh on plan participants’ retirement planning, citing statistics including:

  • Inflation, at 62% of respondents, and market volatility, at 42%, are obstacles to saving for a comfortable retirement. Nearly eight in ten respondents, or 78%, say these conditions are impacting their spending and saving habits, and 36% plan to delay retirement.
  • Workers say they will need to save an average of $1.8 million for retirement, with 37% of workers thinking it’s very likely they’ll achieve this target, down by 10% from last year. But workers are still hopeful: nearly half still feel somewhat likely to reach their goals and only 14% feel they are not at all likely to reach their goals; and
  • When respondents were asked whether they agreed or disagreed they would like personal advice most workers (73%) say they would like personalized advice on their 401(k) plan, and separately, 39% say they are already receiving such advice through their plan at work when respondents were asked in what areas they would like help with retirement planning They would like help with basic retirement planning and understanding how the new SECURE 2.0 law affects their retirement plan.

The online survey of 1,000 U.S. 401(k) plan participants was conducted by Logica Research between April 19 and May 2, 2023. Survey respondents were actively employed by companies with at least 25 employees, were 401(k) plan participants and were 21-70 years old.

Compliance August 2, 2023

UnitedHealth Group Insurance TPA, UMR Sued by DOL

The Department of Labor’s complaint may indicate health care regulations are going the way of rules for retirement plans. 

Reported by

Insurance company UMR Inc. was sued Monday by the Department of Labor for allegedly breaching plan documents under the Employee Retirement Income Security Act by denying certain emergency room claims based solely on diagnosis codes and not the standard established by the Patient Protection and Affordable Care Act.

The DOL, in the name of Acting Secretary Julie Su, sued the third-party benefits administrator on two counts of ERISA fiduciary breach. The claims are in connection with UMR denying emergency services claims and urinary drug screening claims for thousands of health plan participants, according to the complaint.

Get more!  Sign up for PLANSPONSOR newsletters.

“Specifically, UMR violated ERISA, including ERISA’s prudence provisions and requirement to follow plan documents under ERISA § 404, 29 U.S.C. § 1104, by denying ER claims based solely on diagnosis codes and not applying a prudent layperson standard,” the DOL alleges. “UMR’s explanation of benefits for denied emergency services claims [also] failed to comply with the requirements of the ACA [Affordable Care Act] and the U.S. Department of Labor’s claims procedures regulation.”

The lawsuit is Julie A. Su v. UMR, Inc. The complaint was filed in U.S. District Court for the Western District of Wisconsin.

UMR is a third-party administrator providing services to self-funded employee welfare benefit plans, that provide medical, surgical, or hospital care or benefits to participating employees, the complaint explains. UMR is headquartered in Wausau, Wisconsin.

UMR provided services to at least 2,136 ERISA-covered health plans, the complaint says. United Health Group Inc. is the parent company for UMR, notes the complaint. According to UnitedHealth, UMR is the nation’s largest TPA, the complaint states.


The Lawsuit

The DOL claimed UMR’s procedures failed to comply with standards set under The Patient Protection and Affordable Care Act, which is incorporated in ERISA and the terms of the ERISA plans UMR administers, DOL says.

A UMR representative, responding to a request for comment on the lawsuit by email, explains that the complaint deals with administrative processes that are no longer in place.

“We have been in ongoing conversations with the DOL regarding this matter and will continue to defend our position vigorously,” says the UMR spokesperson.


Early ERISA Indications

The DOL’s complaint may indicate that the regulator is elevating its’ enforcement actions against providers in the private health care industry, using ERISA lawsuits to bolster heightened fiduciary standards and increased transparency.

“We can expect increased enforcement actions by the Department of Labor with regard to welfare plans—health plans in particular,” says Douglas Neville, St-Louis-based ERISA attorney, officer and practice group leader at Greensfelder, Hemker & Gale, P.C Neville. “Although ACA was passed more than a decade ago, it added a staggering volume of new rules for health plans. The DOL is one of the agencies tasked with enforcement of those rules, so it is not surprising that we are seeing more DOL actions regarding health plans.”

In the course of DOL’s general investigatory initiatives, the regulator has sued self-funded medical and other health and welfare benefits providers that are unrelated to retirement.

“There was some lag between ACA’s passage and the uptick in DOL enforcement activity—in part because it took years for regulatory guidance under ACA to be issued,” adds Neville. “But there has been an increase in DOL scrutiny of health plans and fiduciary practices in connection with those plans in recent years. I expect that trend will continue for some time.”

In 2020, Congress passed the Consolidated Appropriations Act, furthering the DOL’s ability to regulate health care providers.

The transparency rules stemming from what is commonly called CAA ‘21 imposed several new obligations on plan fiduciaries, similar to the rules that have governed retirement plan fiduciaries, explains Drew Oringer, partner in and general counsel at the Wagner Law Group, which is not involved in the litigation.   

“Congress also has indicated interest in purported abuses, in passing new disclosure rules in the CAA to track certain indirect compensation under covered group health plans,” Oringer adds. “It will be interesting see whether the DOL’s efforts in this regard reflect a basic change in investigative priority, or whether these examples represent individual alleged abuses to which the DOL was made aware.” 

DOL’s enforcement efforts for health plans go back to the 2016 fiduciary rule, adds Oringer.

“The DOL, when amending the fiduciary rule [in 2016], was clear as to its concern about retail investment practices, and even though the amended fiduciary rule was vacated, that concern does not appear to have waned,” he says. “If the DOL is or were to become similarly concerned about health-plan practices, it is not impossible that we could see the kind of concerted activity that we’re used to seeing in the [defined contribution] arena.”


Is it a Trend?

The DOL reached a settlement with Prudential Insurance Company of America, earlier this year, Oringer notes.

Whether the Prudential settlement and UMR lawsuit indicate the DOL is pursuing health care plans, “It may be too early to say that ‘two’ is a trend,” Oringer notes.

“It is difficult to tell from the [UMR] case whether these claims have resulted from a general DOL initiative regarding investigations of insurers’ practices, or whether this particular allegedly abusive situation specifically came to the DOL’s attention,” explains Oringer.  

The DOL posted FAQs on implementing certain provisions of the Affordable Care Act and CAA ‘21 earlier this year.

Hugh O’Toole, CEO of Innovu LLC, a benefits consultancy that offers services related to CAA ’21 to plan sponsors, says the lawsuit is part of a trend. 

“It is 2006 all over again but instead of retirement now [lawsuits are against] health insurance,” he explains.  

In this litigation, the DOL is asking the court to require UMR to reform its procedures for ER claims and UDS claims to comply with ERISA; readjudicate all such claims that were denied or partially denied from January 1, 2015, to present,  and require UMR from future violations of ERISA; and granting such other relief as may be appropriate. 

Requests for comment to the DOL were not returned.

«