Benefits December 20, 2012

Workers Value Tax Advantages of Health Benefits

December 20, 2012 (PLANSPONSOR.com) – If Congress taxes health benefits, most workers would change or even drop their current coverage, the Employee Benefit Research Institute (EBRI) found.
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If current tax preferences were to change and employment-based coverage became taxable, 26% of workers surveyed would want to find a less costly plan, 21% would want to shop for coverage directly from insurers, and 9% would want to drop coverage altogether. Nearly four in 10 (39%), however, reported they would continue with their current level of coverage, up 10 percentage points from EBRI’s Health Confidence Survey (HCS) findings last year.

As to their preferred means of receiving health insurance, four in 10 (38%) prefer to continue getting coverage as they do today; 34% would prefer to choose their insurance plan, have their employers give them the money that was being spent on their behalf and pay the difference themselves; and 23% would like their employers give them the money and let them decide whether to purchase coverage and how much to spend.

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Workers also claimed that having a choice of health plan is important to them, and they would prefer to have more choices. The majority of those surveyed, however, claimed they were confident that their employers or unions picked the best plan for them, and many admitted they were less confident in their ability to choose the best available plan if coverage was no longer offered.

“Most Americans are satisfied with the health benefits they have now and prefer not to change the mix of benefits and wages,” said Paul Fronstin, director of EBRI’s health Research and Education Program and author of the report. “About three-quarters say they are satisfied with the health benefits they currently receive, while 15% say they would trade wages to get more health benefits, and 9% say they would surrender health benefits for higher wages.”

The full results of the survey are published in the December 2012 EBRI Notes, “Views on Employment-Based Health Benefits: Findings from the 2012 Health Confidence Survey,” online at www.ebri.org. 

—Sara Kelly 

Benefits December 20, 2012

401(k) Participant Accounts More Diversified

December 20, 2012 (PLANSPONSOR.com) – An analysis of 401(k) accounts for 2011 shows more balanced investments.
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A joint study released by the Employee Benefit Research Institute (EBRI) and the Investment Company Institute (ICI) shows on average, at year-end 2011, 61% of 401(k) participants’ assets was invested in equity securities through equity funds, the equity portion of balanced funds and company stock. Thirty-four percent was in fixed-income securities such as stable-value investments and bond and money funds.   

Target-date funds (TDFs) are playing an increasingly important role in the diversification of investments, with 72% of 401(k) plans offering target-date funds in their investment lineup at year-end 2011, compared with 70% at year-end 2010 and 57% at year-end 2006. At year-end 2011, 13% of the assets in the EBRI/ICI 401(k) database were invested in target-date funds, up from 11% in 2010 and 5% in 2006. In addition, 39% of 401(k) participants held target-date funds at year-end 2011, compared with 36% in 2010 and 19% in 2006. 

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The study also finds more new or recent hires invested their 401(k) assets in balanced funds, including target-date funds. Fifty-one percent of the account balances of recently hired participants in their 20s were invested in balanced funds at year-end 2011, up from 44% in 2010 and 24% in 2006. At year-end 2011, 40% of the account balances of recently hired participants in their 20s was invested in target-date funds, compared with 35% in 2010 and 16% in 2006.  

Other findings: 

  • At year-end 2011, 21% of all 401(k) participants who were eligible for loans had loans outstanding against their 401(k) accounts, unchanged from year-end 2009 and year-end 2010. Loans outstanding amounted to 14% of the remaining account balance, on average, at year-end 2011, unchanged from year-end 2010. Loan amounts outstanding increased slightly from those at year-end 2010. 
  • At year-end 2011, the average 401(k) participant account balance was $58,991 and the median (mid-point) account balance was $16,649, with wide variation reflecting the many variables in retirement saving, including participant age, tenure, salary, contribution behavior, rollovers from other plans, asset allocation, withdrawals, loan activity and employer contribution rates. 

The full analysis, “401(k) Plan Asset Allocation, Account Balances and Loan Activity in 2011,” is being published in the December 2012 EBRI Issue Brief and ICI Research Perspective, online at www.ebri.org and www.ici.org/research/perspective. 

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