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Benefit Plan Trends- Volume 61, Issue 2

Lundstrom Insurance Agency, Inc.

2205 Point Blvd., Suite 200
Elgin, Illinois 60123
Phone: (847) 741-1000
Fax: 847-428-8857

This publication intends to provide accurate information pertaining to the subject matter covered, however, it should not be considered as legal or tax advice. It is published and distributed with the understanding that neither the publisher nor Lundstrom Insurance Agency is rendering legal or tax advice. Before taking any action, you should always obtain specific advice and assistance from a competent attorney or tax advisor.

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Employees Want Managers Who Are Approachable and Transparent

The quality of the manager-employee relationship has a large impact on job satisfaction and retention, with employees saying they place considerable value on working with managers who are approachable, transparent, and honest, according to the findings of a survey conducted by human capital management solutions provider Ultimate Software. 
The results of the survey of more than 2,000 U.S. employees and managers, which were released on December 4, 2017, revealed that there are complex differences in perception and experience between managers and the people they manage. Of the employees surveyed, 93% said that trust in their direct boss is essential to staying satisfied at work, and more than half indicated that if they aren't satisfied at work, they can't put forth their best effort. 
The findings further suggested that a good manager-employee relationship can play a significant role in retention, with more than half of the employees saying they would turn down a 10% pay increase to stay with a great boss. However, while the survey found that 75% of the employees consider approachability to be the most important quality in an effective manager today, only half of these respondents said they have an approachable manager. 
The survey also looked at how well managers and employees communicate. The results showed that whereas 80% of the managers think they are transparent with their direct reports, only 55% of the employees agree that their managers are transparent. While the bulk of the employees polled said they feel comfortable communicating, 57% of the managers surveyed indicated they wish their reports would be more open about what is on their minds. 
In addition, the results showed that of the managers surveyed, less than half reported having a mentor who gives them guidance on how to be a better leader, and 45% said they have never received formal management training. But despite this lack of training, the managers expressed confidence in their skills: only 16% acknowledged that they frequently make mistakes, and less than one-third admitted that they do not know what to do in personnel situations. Whereas 71% of the managers surveyed said they believe they know how to motivate their team, only 44% of the employees agreed that their manager knows how to motivate them. 
Finally, researchers warned of a possible end of "the manager" as we know it: 80% of the employees surveyed indicated that they think they could do their job without managers, and deem them unnecessary. 

Employers Are Increasingly Turning Permanent Positions into Contingent Roles

To cope with the talent gap and to ensure that their company remains agile and flexible in the changing economy, more than half of global human capital leaders expect to transfer nearly one-third of their organization's permanent positions to contingent roles in the near future, a report on talent trends published by talent solutions provider Randstad Sourceright has indicated.
The report, released on December 6, 2017, examined trends for the fourth quarter of 2017 based on a survey of more than 700 global human capital and C-suite leaders. The survey results showed that 61% of respondents plan to replace up to 30% of their permanent positions with freelancers, gig workers, and independent contractors; and that 74% of respondents believe that the right person for a given job may be an employee, contractor, or contingent worker from anywhere in the world.
The survey also found that 40% of respondents believe that by implementing an integrated hiring strategy, they will be able to reduce the impact of talent scarcity. According to the report, an integrated talent model, which includes both permanent and all forms of contingent talent, can reduce recruitment costs by between 10% and 12%. Of the survey respondents who said they have implemented an integrated talent model, 94% confirmed that they are very or extremely satisfied with this strategy. 
When the leaders who reported having adopted an integrated talent model were asked about its benefits, the top responses were that this approach brings strategic planning to the HR function (45%), enhances the employer's brand (41%), helps the company gain a competitive advantage through attracting and engaging higher-quality talent (41%), and creates efficiencies in hiring (41%). Among the survey respondents who said they have not yet adopted an integrated talent model, but plan to do so, the top reasons they cited were to gain a competitive advantage through attracting and engaging higher-quality talent (39%), followed by a desire to build for the future (36%).
The results further indicated that the great majority of respondents agree that all available resources should be considered to combat recruitment challenges, with nearly 69% of the leaders surveyed saying they believe the skills gap is widening and will create significant challenges in the near future. Moreover, 25% of respondents identified talent scarcity as their greatest concern. 
The report also noted, however, that companies are investing more in training programs to meet the growing demand for talent: 50% of respondents said they are increasing their budget to invest in programs that help their workforce advance their careers through upskilling, and 52% reported they are investing in training and development technologies at moderate or significant levels.

Employers Can Do More to Encourage Employees to Contribute to HSAs

Nearly half of all employees enrolled in health savings accounts (HSAs) in 2017 did not contribute any of their own money to these tax-advantaged accounts, and are thus missing out on an opportunity to reduce their out-of-pocket health care costs and potentially save for retirement, the findings of a survey conducted by human resources solutions company Willis Towers Watson suggest. 
The survey of 698 U.S. employers was carried out between June and July 2017, and reflects respondents' 2017 health program decisions and strategies. The results showed that nearly three-quarters of employers (73%) are currently offering their employees a high-deductible health plan tied to an HSA, and that the share of employers offering HSAs is expected to rise to 83% by 2019.
The findings also indicated that of the employers that currently offer HSAs, a majority (62%) are encouraging greater employee participation by contributing seed money to these accounts. The survey found that in 2017, median seed amounts ranged from $300 to $750 for employee-only coverage and $700 to $1,400 for family coverage, depending on whether employers offered automatic seed money or automatic plus "earned" seed money. However, the results also showed that 43% of the employees who were enrolled in an HSA in 2017 made no contributions to their account. 
Researchers offered employers three tips on how to encourage more employees to contribute their own money to HSAs. First, they recommended, employers should communicate with employees early and often—and through multiple vehicles—to make sure employees understand the tax advantages and versatility of HSAs. Second, researchers advised employers to seed HSAs with automatic or earned money to incentivize them to enroll in high-deductible health plans and contribute their own money to their HSAs. Third, they recommended that employers provide employees with decision support tools, including financial well-being tools that help employees estimate the tax effects of HSA contributions, their current and future health care costs, and their longevity needs.

Retirement Readiness Shows Signs of Waning 

While the retirement systems in the United States, the United Kingdom, and Australia differ in important ways, all are falling short to varying degrees in ensuring that workers in those countries are adequately preparing for retirement, according to an article published by human resources consultancy Findley Davies in its November/December 2017 newsletter. 
The article, "Retirement Readiness—How Do We Compare?" was written by Ken Hohman, an actuary and management consultant. Hohman presented a comparison of the retirement systems in these three countries based on his involvement on behalf of the American Academy of Actuaries with a project in collaboration with the Actuaries Institute in Australia and the Institute and Faculty of Actuaries in the UK.
Hohman observed that Australia, the UK, and the U.S. have similar but significantly different retirement systems. Specifically, he explained, each country has a national social security system that is weighted in favor of lower-income individuals, but the degree of weighting varies greatly among the systems. He also pointed out that each country has employer-based retirement plans, but that these range from mandatory plans with significant mandatory contributions (Australia), to mandatory auto-enrollment plans with the ability for an individual to opt out (UK), to voluntary plans with voluntary auto-enrollment (U.S.). Moreover, he noted, each country offers voluntary tax-favored options for personal savings.
In the article, Hohman reported on the results of a survey the project conducted of nearly 3,000 working-aged individuals (ages 18-64) divided among the three countries that looked at three main topics: the retirement transformation, preparing for retirement, and the ability to address retirement risks. He noted that the survey findings suggest that the perceptions of what retirement is have clearly changed in the years since the financial crisis of 2008, with workers today saying they expect to retire later and with lower expectations. The survey found, for example, that 30% of respondents said they have no thought of ever retiring; and that of the 70% who do plan to retire, 73% indicated that they plan to retire gradually. 
According to Hohman, the most meaningful finding of the survey is that an average of only 42% of respondents expect to have a comfortable retirement, with respondents in the UK (36%) lagging well behind those in Australia (46%) and the U.S. (47%) in anticipated retirement lifestyle. "This raises the question of whether those living in the UK are less prepared for retirement or simply more honest in their long-term outlook," he said. 
The survey used four criteria to determine whether respondents are preparing appropriately for retirement: whether they are seeking out ways to educate themselves regarding retirement savings and risks; whether they have already started saving for retirement; whether they know how much income they will require in retirement, and how much they will have accumulated at retirement; and whether they have planned for an unanticipated early cessation of work due to events such as job loss or ill health. The average of these four criteria indicated that 48% of U.S. respondents and 43% of Australians are reasonably prepared, compared to 35% of respondents in the UK, who were shown to lag behind in all four criteria. 
The survey findings also showed that retirement preparation increases with age and income, and that men are more likely to be prepared than women. The average retirement preparation score was 47% for men and 34% for women; and the gender gap was greatest in Australia, at 54% for males and 32% for females.
In addition, the survey respondents were asked about the degree to which they have anticipated five specific post-retirement risks: how long their savings will have to last; whether they have a plan for how they will spend down their retirement assets; whether they have planned for living longer than expected; what they will do if they experience a significant loss in their retirement assets; and whether they have planned for the risk of chronic ill health. 
The results showed that little more than half (56%) of the respondents indicate they have taken steps to address these five retirement risks. Hohman observed that the average score by country shows the familiar pattern of stronger preparation in the U.S. (63%) and Australia (61%) relative to the UK (48%), and that this average is driven by the finding that 77% believe they have appropriately planned for a drop in their retirement assets. He cautioned, however, that the vast majority of these respondents indicated that their "plan" for this contingency is to go back to work.
Commenting on these findings, Hohman said that "it is obvious that all three countries have done a good job educating workers about retirement saving and getting them to actually start saving, but all three have failed to help people understand the amount of savings needed or to recognize the risk that events could intercede to shorten the savings horizon." 
The information contained in this newsletter is for general use, and while we believe all information to be reliable and accurate, it is important to remember individual situations may be entirely different. The information provided is not written or intended as tax or legal advice and may not be relied on for purposes of avoiding any Federal tax penalties. Individuals are encouraged to seek advice from their own tax or legal counsel. This newsletter is written and published by Liberty Publishing, Inc., Beverly, MA. Copyright © 2018 Liberty Publishing, Inc. All rights reserved.


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