Benefits September 8, 2011

Two-Thirds of Healthcare Org Employees Participate in DC Plans

September 8, 2011 (PLANSPONSOR.com) - According to a nationwide survey of nearly 200 health care plan sponsors, two-thirds of their employees participate in retirement plans, with participation in 401(k) plans (72%) slightly higher than that of 403(b) plans (65%).
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Further, highly compensated employees contribute more (7%) than other employees (5%). The survey, Retirement Plan Trends in Today’s Healthcare Market—2011, was conducted by Diversified and the American Hospital Association (AHA) to provide healthcare plan sponsors and their advisers with benchmarking information and to help the strategic evaluation of their retirement programs.   

The survey found automatic enrollment works to increase participation rates. Sponsors report a participation rate of 79% in plans with automatic enrollment versus 62% without.    

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Sixty-one percent of healthcare organizations use high employee participation as the primary measure of plan success, while just 26% feel that a plan is successful if participants are on track to meet their goals.  

However, “[O]ne-third (34%) of healthcare organizations state they are going to improve employee education—a step in the right direction, as education could lead to assistance in retirement income goal planning,” explained Wendy Daniels, senior vice president of Diversified, in a press release.   

“There is growing evidence that contribution levels of less than 10% to 12% are not sufficient for individuals to achieve a fully funded retirement,” said Brodie Wood, Vice President and not-for-profit practice leader at Diversified. “In an effort to increase employee savings and participation rates, most healthcare plan sponsors (87%) make employer contributions to their defined contribution plans.”  

The survey found that fixed employer contributions are more common (65%) than discretionary ones (22%). In addition, sponsors are more likely to impose a service requirement for employer contributions (83%) than they are for plan entry (72%). Thirty-eight percent of health care organizations require more than one year of service before offering employer contributions, and 41% require a waiting period of three months to one year.    

“Plan participation generally increases as service requirements are shortened,” noted Wood. “Those health care plan sponsors with a service requirement of less than three months report a 79% participation rate as compared to a 66% participation rate with a service requirement of three months to a year and a 50% participation rate with a service requirement greater than a year.

Plan Designs  

The survey, Retirement Plan Trends in Today’s Healthcare Market—2011, conducted by Diversified and the American Hospital Association (AHA), found most health care organizations (74%) offer matching employer contributions, and a match of $.50 on every dollar on the first 4% or 6% of pay is the most common formula. Vesting schedules for defined contribution plans are fairly evenly split across three options: immediate vesting (34%), cliff vesting (35%) and graded vesting (31%).    

In the health care market, 401(k) plans tend to offer more investment options: 67% offer more than 15 compared to 57% of 403(b) plans. Seventy-one percent of sponsors offer investment advice to plan participants, 53% offer managed accounts, and 34% have adopted lifetime income/annuity options. 

Automatic features, which are more prevalent in 401(k) plans than in 403(b) plans, are more widespread than in the past. Overall, automatic escalation increased to 23% in 2011 from 14% in 2010 and automatic enrollment increased to 36% from 29% over the same period.  

Hardship withdrawals remain prevalent—47% of health care organizations report an increase in them over the past two years.   

Nearly eight in 10 sponsors report using the services of a retirement plan professional such as a consultant (30%) or independent adviser (21%). Key adviser responsibilities involve ongoing monitoring of investments (79%) and investment selection (77%).   

Outsourcing of most aspects of plan management has increased, with the most commonly outsourced plan functions being loans (59%), hardship withdrawals (56%), enrollment (49%), and Qualified Domestic Relations Orders (47%).  

Internet communications increased from 69% in 2010 to 78% in 2011.   

The prevalence of defined benefit plans continues to decline among healthcare organizations that also offer a defined contribution plan. Only 37% offer both plans today as compared to 45% one year ago.  Defined benefit plans are more common among larger organizations, with 66% of companies with 5,000 or more employees offering one. This is compared to only 28% among organizations with less than 5,000 employees.  

Retirement Plan Trends in Today’s Healthcare Market – 2011 is the ninth annual survey conducted by Diversified and the AHA. A total of 194 health care plan sponsors nationwide responded to the survey conducted during the second quarter in 2011.   

To request a copy of the survey report, send an e-mail to RetirementResearchCouncil@divinvest.com.
Products September 8, 2011

ING Offers Tools and Guidance to Public Employers

September 8, 2011 (PLANSPONSOR.com) - As attention over public sector budgets and employee benefits programs continues to grow, ING’s U.S. Retirement division announced the publication of Public Pensions in Focus, a new suite of research and support tools for state and local government employers.
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The materials, developed by the ING Retirement Research Institute, include a whitepaper and a checklist that public sector employers can leverage when making important decisions about their retirement systems, including their defined benefit pension programs. The goal is to provide sponsors with an objective and well-informed approach to analyzing their existing systems, the needs of their employees, and the options that are available if a change is in order.  

“Many government employers are looking very closely at their retirement systems to make sure they can meet their short-term and long-term goals for funding retiree benefits,” said Brian Comer, President of Public Markets for ING Retirement, in the announcement. “We believe that each public employer must make an informed decision based on their unique situation. Some will find they need to significantly restructure their plans, while others will be fine and not require a change. We are seeing examples of both cases play out in the market. No matter what the outcome, it is crucial to approach each situation with a systematic and documentable process.”  

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In addition to providing an overview of the issues and opportunities facing the U.S. public retirement system, the whitepaper offers government plan sponsors actionable direction by walking them through the following steps: 

  • Pre-planning: Pre-planning helps plan sponsors lay the groundwork for a retirement program analysis and involves identifying relevant information about various stakeholders in the retirement program. 
  • Situation Analysis: With pre-planning documentation serving as a guide and framework, the situation analysis calls for an objective analysis of the current retirement program and its future viability. 
  • Choosing a Strategy: Decisions about the appropriate solutions require an assessment of all available features and options, such as costs; benefits and risks; ability to meet stated organizational goals; impact on stakeholders; and potential obstacles and benefits. 
  • Implementation: If change is required, it is imperative to create detailed communications and implementation plans that clearly identify such things as team members and responsibilities; key dates and events; contractual, legislative and legal factors; and performance metrics and feedback mechanisms. 

As part of the process, ING’s Public Pensions in Focus checklist helps walk a sponsor through all the key steps before undertaking any large scale changes. Completing the checklist provides a structure for approaching any discussion about redesigning a program.  

To access Public Pensions in Focus, or other ING research, visit the ING Retirement Research Institute at http://www.ingretirementresearch.com, and select the “publications” page.

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