Benefits August 28, 2012

Survey Suggests No Expected Uproar About Fee Disclosures

August 28, 2012 (PLANSPONSOR.com) - One in five defined contribution (DC) participants surveyed by LIMRA said they rarely or never read retirement plan disclosures.
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The rest claimed to read disclosures at least some of the time, but the majority reported they are only skimming them and/or trying to see if they reveal something “important.”     

The most common reasons plan participants do not read disclosures are that they are too long, and that they are too technical/complicated and hard to understand. Forty percent said that they did not read disclosures because they would not change anything, anyway.    

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Reaction to fee disclosures could be muted in part because participants are not sure what to do with the information.One in three plan participants reported they did not know what they would do when asked about their reaction to discovering they pay higher than average fees.Nearly one-quarter (24%) said they would move their current assets into funds with lower fees and one in five (21%) said they would speak to their employer about the fees they pay.    

Younger plan participants (ages 18 to 35) are more likely to report reading disclosures; this group is also more likely to reach out to their employer for information about their retirement account than older participants.

Half of DC plan participants do not know how much they pay in annual fees and expenses, the survey found. Women and those with household assets under $100,000 are more likely to be unaware of how much they pay in fees and expenses each year.    

Many will be surprised with the information in the new disclosures—almost four in 10 (38%) said they did not pay any fees or expenses. Those who do not believe they pay any fees or expenses tend to have less in household assets and are less likely to have graduated college.   

Of the 12% who said they were able to estimate their fees, the most common estimate was less than 1% of the account balance (44%).Nearly three-quarters (74%) of those who estimated their plan fees believed that they were reasonable.     

Most consumers (62%) do not know how the fees charged within DC plans compare with those charged in individual retirement accounts (IRAs). Even among participants that are very or somewhat knowledgeable about investments and financial products, four in 10 do not know how DC and IRA fees compare.  

In May 2012, LIMRA surveyed U.S. adults ages 18 to 84 who are involved in household financial decisions and currently work for pay, are retired or recently unemployed (i.e., have worked for pay in the past 12 months). Of 5,296 consumers, 974 defined contribution participants were randomly selected to answer questions about DC plan fee disclosure.
Benefits August 28, 2012

Health Plan Providers Worried About Employer Exits

August 28, 2012 (PLANSPONSOR.com) - Health care and pharmaceutical executives are uncertain whether or not existing business models are sustainable over the next five years, according to a survey by KPMG.
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In response to cost shifting, health plans expect employers will demand lower cost offerings and increased use of wellness and health management initiatives. Health plans also see their biggest growth coming from consumer-directed or high deductible plans, while they expect declines in small group employers and large, fully insured groups. More than half of the plans surveyed said they are concerned about an exit by large employers.  

“Small group employers will likely migrate to exchanges with individuals,” said Cynthia Ambres, a principal, physician and U.S. member of the KPMG Global Healthcare Center of Excellence. “But health plans are also concerned about large employers exiting, as some are already assuming risk and using health care plans for administrative services only. Health plans must focus on differentiating themselves to attract the individual market.”  

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In surveying over 200 senior executives at leading U.S. health care systems, health plans and pharmaceutical organizations, KPMG found that the largest percentage of respondents—40%, 53% and 43% of systems, plans and pharmaceuticals, respectively—said that their current business model was somewhat sustainable over the next five years, while 20% to 27% of respondents in each group said current business models were either not very or not at all sustainable over the next five years.   

Despite their majority opinion that current business models are at least somewhat sustainable, many provider (65%) and health plan (41%) executives do expect major business model changes in the next five years, while a majority of pharmaceutical executives (63%) expect only moderate changes. Nearly half of providers and health plans, and one-third of pharmaceutical executives would like to see a more rapid progression to some type of value-based payment, but most anticipate that transition will in fact be accomplished more gradually, with less than one-quarter of all provider reimbursement fashioned as some type of value-based payment, according to the findings.    

“Organizations are clearly considering the effectiveness of their fee-for-service business models, but migration to more value-based models will take some time, and will include a mix of old and new delivery and payment systems,” said Ed Giniat, national sector leader, KPMG Healthcare & Pharmaceuticals.

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