Benefits November 14, 2012

Employers Balance Costs with Effective Benefits

November 14, 2012 (PLANSPONSOR.com) – Fifty-eight percent of executives say employee benefits costs are the leading factor impacting total reward decisions.
Reported by

According to the 2012/2013 Verisight and McGladrey Compensation, Retirement and Benefits Trends Survrey, employers are consequently balancing the need to control costs with the desire to attract (47%) and retain (48%) key employees.  

When it comes to evaluating retirement plans, costs of investments (59%), costs of services (57%) and quality of service (53%) continue to be the major factors influencing decisionmaking. The overwhelming majority of employers (98%) received disclosures from their plan providers regarding fees. After reviewing these disclosures, 16% report they have a better understanding of fees while 69% feel they fully understood costs prior to receiving the disclosures.  

Get more!  Sign up for PLANSPONSOR newsletters.

Fiduciary status is also becoming an increasingly important issue for employers today. Overall, 84% of organizations surveyed use external or third-party advisers for consultation about their defined contribution (DC) plans. Of these, 73% say they understand their adviser’s fiduciary status, up seven percentage points from 2011 (66%).

Defined contribution plans remain the dominant retirement savings vehicle across the U.S., regardless of company size: 99% of employers surveyed sponsor a DC plan. Fourteen percent have defined benefit (DB) plans, while 6% offer an employee stock ownership plan (ESOP).  

As employers strive to attain appropriate investment diversification without overwhelming their participants, providing choices to employees remains paramount. Half (51%) of the employers surveyed offer 11 to 20 plan investment options. Mutual funds are still the most common investment type and are offered by 92% of retirement plans.  

Eighty percent of employers in the survey experienced an increase in health care costs in 2012. One-third say their health plan costs rose by at least 8% from 2011 to 2012. To address this increase, employers are passing more of the cost to employees by raising their share of the premiums, deductibles and co-payments.   

For companies overall, the average monthly premium for family coverage edged up to $1,252 for 2012, with employees contributing a historically high 36% of the cost. The average monthly premium for employee-only coverage was $539 with employees contributing 22% of the cost.

Twenty-six percent of employers surveyed are undecided about whether they will continue group health coverage in the next 24 months. Nearly half of respondents (45%) already offer wellness programs, and three out of four plan to improve their programs in the upcoming year.    

Preferred provider organization (PPO) plans remain the most popular healthcare option: 75% of employers offer a PPO. Thirty-nine percent sponsor a high deductible health plan (HDHP) compared to 36% that use a health maintenance organization (HMO). 

Conducted online from August through October 2012, the survey polled more than 958 organizations drawn from a national sample. The majority of respondents are midsized companies; however, small and large firms are also represented. Respondents reflect a wide range of industry types including finance/banking, health care, manufacturing, distribution, construction, not-for-profit and services.  

More information is here.
Administration November 14, 2012

TDFs Not Well-Understood

November 14, 2012 (PLANSPONSOR.com) – Only 16% of consumers surveyed by LIMRA said they are familiar with target-date funds (TDFs).
Reported by

While more than half of consumers understood that TDFs become more conservative over time and provide a diversified mix of stocks and bonds, one in 10 believed that TDFs included guarantees, become risk-free at retirement or require income to be drawn at the target year—none of which are typical features of TDFs. 

The survey found fewer women were likely to say they are familiar with TDFs as men (10% versus 22%). Consumers younger than 50 and those with household incomes of $100,000 or more were the most likely to be familiar with TDFs (20% and 30%, respectively).  

Get more!  Sign up for PLANSPONSOR newsletters.

Even though IRA owners in general were more likely to claim to be familiar with TDFs than defined contribution (DC) plan participants (42% versus 37%), their actual knowledge is similar to that of DC participants.  

LIMRA found that consumers who are invested in TDFs are far more confident than those who do not own TDFs that they will be able to live the retirement life style they want (62% versus 37%). However, this confidence may reflect consumers’ self-identified knowledge level. Three quarters of TDF owners report being somewhat or very knowledgeable about investments or financial products, compared to just 42% of non-owners.  

The findings are based on responses from 3,531 consumers who were ages 18 to 84 in May 2012; involved in household financial decisionmaking; and currently working for pay, retired or recently unemployed.  

LIMRA offers a survey to test knowledge of TDFs at http://www.limra.com/NewsCenter/TDFQuiz/.

«