Benefits November 19, 2003

Health-Care Costs Cutting Into Retirement Savings

November 19, 2003 (PLANSPONSOR.com) - More than seven out of 10 (73%) workers show some level of concern about the potential impact of rising health-care costs on their retirement and financial goals.
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More than two-thirds of workers have seen an increase in their share of health-care costs, which, in turn, has had a ripple effect on worker spending and saving habits. Fifty-five percent say they are reducing discretionary spending, 24% are cutting back on workplace benefits they receive at additional costs – a move that includes reducing contributions to retirement plans – 12% are switching to a less-expensive health plan and 6% are dropping their healthcare coverage completely, according to an American Express Financial Advisors Inc study.

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In fact, 37% of the 958 respondents are planning to decrease the amount allocated toward savings and investing overall. “We’re most concerned about employees making abrupt decisions to try and quickly fix their current financial situation, without taking into consideration the long-term impact to their retirement savings,” said Rusty Field, vice president, American Express Financial Education and Planning Services.

“We have found that a significant number of people are now considering reducing their retirement plan savings. We realize that having sufficient health care is vital for workers and their families, but their future retirement security is equally important. However, employees need to be well educated on the options they have to help them handle the increase in health care expenses without compromising their ability to save for the long-term.”

But unless the health-care cost situation improves, retirement contributions may continue to plummet. Nearly three out of 10 (29%) workers said a “significant increase” in the cost of health benefits would make them consider reducing their regular retirement plan contributions.

  • 42% would make a 1% to 2% reduction as a percent of their salary currently being deducted.
  • 21% would cut back 3% to 4%
  • 22% would decrease their contribution percent more than 4%.

American Express says the survey results shows health care expense increases can have a measurable effect on respondents’ level of financial stress, with half of those surveyed indicating at least some or considerable increase in financial stress. To combat financial stress issues, the survey found that 70% of workers would be interested in attending a free financial seminar to help them understand and address rising health-care costs.

Compliance November 18, 2003

EBSA Rakes in $1.4 Billion in FY 2003

November 18, 2003 (PLANSPONSOR.com) - The Employee Benefits Security Administration (EBSA) has cracked its enforcement whip to the tune of $1.4 billion in fiscal year 2003.
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>EBSA’s 2003 haul represented a 60% increase over the previous year’s results and came from a variety of different enforcement actions.   This included civil investigations, criminal investigations and voluntary fiduciary correction program (VFCP) applications, according to a news release.

>While the number of civil investigations closed may have dropped 13.64% during the past year, the percentage of civil investigations closed with results was up 18.28%.   EBSA attributes this trend to “improved targeting and more resource-intensive investigations.”    Not seeing a drop was the number of criminal investigations closed, up 13.64% from FY 2002, and the number of those investigations closed with guilty pleas or convictions, up 16.33%.

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>Additionally, EBSA’s VFCP, which encourages self-correction of benefit violations, saw a 336% increase in applications in FY 2003 and more than $8.7 million in restored assets to employee plans, an increase of 348%.

>The record windfall for the Department of Labor (DoL) division comes through its enforcement of the Employee Retirement Income Security Act (ERISA).   EBSA’s oversight authority extends to approximately 730,000 pension plans and another 6 million health and welfare plans that cover approximately 150 million workers and their dependents and include assets of nearly $4 trillion.

>Further, the increased enforcement activities reaped rewards for other DoL divisions.   Total back wages including overtime that were collected by the Department’s Wage and Hour division for workers in FY 2003 increased by 21% over the previous year, representing an 11-year high.   The number of workers receiving back wages jumped from 263,593 workers to 342,358 – nearly a 30% increase in one year.

Also recording an increase were the enforcements of the Occupational Safety and Health Administration (OSHA).   OSHA cited employers for 83,760 violations in FY 2003, a nearly 8% increase with nearly 60,000 of those violations were considered serious, an 11% increase over FY 2002.   In all, the enforcement appears to have paid off as the most recent data available show the rates of workplace injuries and fatalities fell to the lowest point ever in 2002.

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