Data and Research July 6, 2017

Employees Want a Full Suite of Benefits

This is prompting employers to ask their benefits brokers for new and innovative solutions.
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Sixty-five percent of employers are asking their broker or consultant to recommend new and innovative benefits solutions, MetLife found in its 15th annual employee benefit trends study, “Work Redefined: A New Age of Benefits.” Because employees are changing jobs more often, employers are hoping that enhanced benefits will keep staff in their employ longer.

The survey found that forty-nine percent of employees are anxious about their financial well-being, and 40% would like their employer to provide financial security. Twenty-three percent say they are less productive at work because of financial worries. Fifty-eight percent of employees want customized benefit options, and 43% expect to delay their retirement due to their financial situation.

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Sixty percent of employees worry about money. Only 27% are happy with their progress in paying down student debt, and only 32% think they are doing a good enough job of saving for their children’s education.

Forty-nine percent of employees want programs that reward healthy behavior, but only 8% of employers offer such a program. Sixty-two percent of employees want portable benefits. Sixty percent of employees want parental leave to include both partners.

Fifty-nine percent of employees say that if health and wellbeing benefits were offered to them, they would be more loyal to their employer, and another 53% say that of financial planning programs. Seventy-four percent say that of flexible work hours, 72% of customized benefits and 66% of the ability to work from home.

NEXT: The Employer’s Perspective

Employers tend to agree with employees’ belief that they have a responsibility to help them with their financial lives; 73% believe they have a responsibility for their employees’ health and well-being of their employees. Sixty-four percent of employers believe that their benefits can help employees make better financial decisions, and 80% think benefits can increase employee satisfaction.

Eighty-eight percent think financial wellness benefits can boost employee productivity, and 75% think they will result in employees working longer hours. Seventy-eight percent think that benefits overall can increase employee loyalty, and 73% think they can attract employees.

The top five benefits employers think they must offer are health insurance (88%), prescription drug coverage and a 401(k) or other retirement plan (both tied at 72%), auto insurance (68%), dental insurance (68%) and home insurance (62%).

“It is important for employers to ensure that they offer the benefits that employees need, even if the company doesn’t pay for them,” MetLife says. “Offering a benefits experience that provides a range of support shows employees that their goals—in and out of work—are understood. Getting to know the needs of employees can help employers decide on the right mix of benefits options.”

MetLife also says employers should make enrolling in benefits easier for their employees.

Metlife’s report was conducted by ORC International last October and November among 2,504 company benefits executives and 2,652 employees. The full report can be downloaded here.

Investing July 6, 2017

Public Pensions Should Weigh Pros and Cons of Alternative Investments

Hedge funds have been producing low returns, but slightly less volatility, while other alternative investments are associated with more volatility, a study found.
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In order to hedge against investment risk and seek higher returns, public pension plans have looked toward alternative investments, notes a study by the Center for Retirement Research at Boston College.

The allocation to alternative investments more than doubled from 9% to 24% during 2005 to 2015, according to data by the Public Plans Database (PPD), which accounts for more than 95% of pension assets. These alternatives contain a variety of assets including private equity, hedge funds, real estate, and commodities. The research also noted significant returns from alternatives as opposed to traditional equity. Between 2010 and 2016, traditional equity returned about 14% compared to private equity at 25% minus fees.

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State and local pension plans were somewhat late to adopt alternative investing due to their complexity, but once plans were comfortable with these strategies, adoption steadily increased. In 2005, for example, the maximum share held in alternatives by any plan was less than 30% and half of plans held less than 10%. As of 2015, however, the maximum allocation among plans was more than 50%, and only 9% of plans held less than 10% in alternatives.

As adoption grew, pension plans portfolios compositions changed as well. Between 2005 and 2015, the allocation to real estate dropped sharply, while investments in hedge funds rose significantly. However, hedge funds have not performed well relative to other asset classes since the financial crisis, the research notes.

In terms of returns, a 10% increase in the average allocation to alternatives was associated with a reduction of 30 to 45 basis points, primarily due to hedge funds.

The researchers conclude, “The empirical results revealed a consistently negative and statistically significant relationship between alternative investments and returns on the total investment portfolio. Regression with various asset types showed this relationship stemmed primarily from low hedge fund returns. But, the analysis also found that hedge funds were related to slightly less volatility of the portfolio, while other alternatives, such as real estate and commodities, were associated with more volatility.”

The full research study may be downloaded from here.

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