Benefits February 26, 2014

Middle-Class Employees Value Workplace Benefits

February 26, 2014 (PLANSPONSOR.com) – Workplace benefits are critical to the financial security of middle-class employees, says a new study.
Reported by

The authors of the “Guardian Workplace Benefits Study” find that the increased value these employees place on benefits is an encouraging sign in the current economy, and these benefits “play a vital role in providing economic support and protection against uncertainties for this vulnerable segment.”

The study indicates that many middle-class employees struggle with achieving their financial goals, citing “making ends meet” as highly important, with eight in 10 saying the reduction of debt is their most important goal.

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

The study also finds, for middle-class employees:

  • The loss of income due to significant illness or disability poses a real risk for such households, with only 52% saying they will have financial security in such a case;
  • Only 63% feel they will have financial security in the case of the death of a spouse; and
  • Many focus on “here and now” goals, with only six in 10 saying they are doing well with regard to saving for retirement and ensuring those savings will last a lifetime.

These circumstances translate into greater stress among middle-class employees, according to the study, and this stress can also have significant consequences for employers. Employees under less stress were found to value their benefits to a greater degree and are happier with their jobs, thus more productive.

According to the study, workplace benefits are important in recruiting new employees and retaining current ones. Of those middle-class employees queried for the study, 82% say benefits are crucial in deciding whether to take a new job, while eight in 10 say benefits are crucial in deciding whether to stay with a current employer.

However, middle-class employees are generally satisfied with their workplace benefits. The study finds three-quarters of such employees “express satisfaction with their employer’s benefits package and an even greater share are confident they are making the right benefits selections.” In addition, about two-thirds of such employees agree that their benefits meet their needs, are affordable to them and contribute positively to their personal health and wellness.

The authors of the study caution that middle-class employees need to pay better attention to benefit-related communications, as fewer than half of these respondents say they spend time reviewing such material or researching insurance and benefit-related products and services. Only four in 10 perform print or online searches to learn more about insurance products, just 32% seek out the opinions of financial experts, and only 13% look to social media or financial planning websites for answers.

The study authors conclude, “Given the critical role of workplace insurance and retirement products in their overall financial security, middle-class Americans would greatly benefit from more effective guidance and targeted recommendations to best support their financial needs and goals.”

The study presents findings from two separate Internet surveys conducted last September among 1,704 employees and 1,007 employers. Employee respondents were aged 22 or older and work full time at a company with at least five employees. Employer respondents include business executives and human resource (HR) and financial management professionals.

More information about the study can be found here.

Benefits February 25, 2014

Regulator Questioning Moves to Annual 401(k) Match

February 25, 2014 (PLANSPONSOR.com) – The Massachusetts Securities Division is looking into how many 401(k) plan sponsors have moved to paying deferral matching contributions annually.
Reported by

According to a statement from Secretary of the Commonwealth William F. Galvin, a letter has been sent to the 25 largest 401(k) plan providers seeking the number of plans they administer that have shifted to year-end lump-sum matches, the number of affected employees, and the date of the change. It also seeks the disclosure of information provided to plan participants about the potential risks associated with the change.

The statement notes that AOL shifted from a per-pay period distribution of the employer contribution to a year-end distribution, but in response to a negative reaction from its employees the Internet company reversed its position (see “AOL Changes Mind About 401(k) Match Change”). “At a time when most Americans have much of their retirement savings in these 401(k) plans, it is crucial that they are made aware of the risks involved when a company shifts to a year-end distribution,” Secretary Galvin says.

Get more!  Sign up for PLANSPONSOR newsletters.

The letter to the 401(k) providers indicates “other companies such as Deutsche Bank, IBM, and Charles Schwab have shifted their employees’ benefits by paying matches in an annual lump sum.” The statement points out that while companies save money by making a lump-sum match contribution payment into 401(k) accounts at the end of the year, employees miss out on gains that could have accrued on their accounts during the year. Employees who leave during the year get no matching funds for that year, and the year-end employer contribution could go into investments during a declining market.

Fidelity Investments, one of the firms sent the letter from the Massachusetts Securities Division, offered this statement to PLANSPONSOR: “Fidelity provides 401(k) recordkeeping and other employee benefits services to more than 20,000 companies. A very small number of these companies—primarily large employers—have moved in the direction of annual lump sum matching contributions. In general, we are not seeing a big shift away from the more traditional method of matching employee contributions per pay period.”

Following IBM’s decision last year to move to an annual employer contribution, Jeanne Thompson, Fidelity’s vice president of thought leadership, told PLANSPONSOR this was not a widespread trend. An analysis of 14,000 plans showed that, in the small plan market, more than 20% use an annual contribution, but in the jumbo market, 3.3% did so in 2010, and in 2013 only 5.4% did (see “Employer Match Changes Not Widespread Reaction”). 

The letter asks providers to send the information to Galvin’s office by March 10.

«