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Benefit Plan Trends – Volume 61, Issue 4

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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Demand for Skilled Workers Remains Strong

As the economy picks up, hiring confidence is strong going into the second quarter of 2018, with nearly one in five U.S. employers reporting plans to increase their workforce between April and June, according to the findings of a seasonally adjusted net employment outlook survey conducted by Manpower Group.
The results of the survey of more than 11,500 U.S. employers in 13 industry sectors, released on March 13, indicated that, allowing for seasonal variation, 18% of respondents plan to hire additional staff in Q2. This figure represents a decline of one percentage point compared to Q1 of 2018, and an increase of one percentage point compared to Q2 of 2017.
The findings showed that nationwide, employers in all 13 industry sectors anticipate an increase in staffing levels in Q2 2018. The strongest hiring outlooks were reported in leisure & hospitality (+28%), professional & business services (+23%), wholesale & retail trade (+23%), durable goods manufacturing (+19%), and transportation & utilities (+19%). The sectors with weaker hiring outlooks include construction (+17%), education & health services (+16%), financial activities (+15%), mining (+15%), government (+14%), information (+14%), nondurable goods manufacturing (+12%), and other services (+11%).
Employers surveyed in all four regions in the U.S. reported positive hiring outlooks for Q2 2018. The results showed that the outlook is strongest in the Midwest (+20%), but is nearly as high in the West (+19%), the South (+18%), and the Northeast (+17%). Compared to the outlook in Q2 2017, the hiring prospects in Q2 2018 are slightly stronger in the Midwest (+4% year over year) and the Northeast (+2% year over year), and are relatively stable in the South and the West.
Broken down by state, the strongest employment outlooks for Q2 2018 were reported in Wisconsin (+30%), New Hampshire (+30%), Alaska (+29%), Maine (+29%), and Colorado (+27%). Of the 100 largest metropolitan statistical areas, the strongest job prospects were reported in Provo, UT (+32%); San Antonio, TX (+32%); Madison, WI (+30%); Columbia, SC (29%); Seattle, WA (+29%); and Syracuse, NY (+29%). The metropolitan areas with relatively weak hiring intentions for Q2 include San Francisco, CA (+12%); Allentown, PA (+11%); Youngstown, OH (+9%), and Hartford, CT (+8%).

Debt Levels of Older Households Increasing

Noting that financial liabilities are a vital but often ignored component of retirement income security, researchers at the Employee Benefit Research Institute (EBRI) recently published the results of an analysis showing that while debt levels among families headed by an individual aged 55 or older appear to have eased since the financial crisis, the debt burdens of older households have been increasing overall since the early 1990s.
The results of the study, "Debt of the Elderly and Near Elderly, 1992-2016," by senior research associate Craig Copeland, are based on an examination of data from the Federal Reserve's Survey of Consumer Finances (SCF). The aim of the study, published on March 5, was to identify trends in debt among older American families with a head aged 55 or older. The analysis also looked separately at debt levels among near-elderly families, defined as those with a head aged 55-64; and among elderly families, defined as those with a head aged 65 or older.
The study found that debt levels among elderly and the near-elderly families reached their highest levels in 2010, and declined thereafter. The results indicated that the average amount of debt of families with a head aged 55 or older was $76,679 in 2016, down from $82,968 in 2010 (in 2016 dollars). Moreover, among these older families, debt as a percentage of income decreased from 11.4% in 2010 to 8.2% in 2016, and debt as a percentage of assets declined from 8.4% in 2010 to 6.5% in 2016. 
However, the analysis also uncovered a longer-term increasing trend line in the share of families with a head aged 55 or older with debt, from 53.8% in 1992 to 68.0% in 2016. The results further indicated that between 2007 and 2016, the share of families with a head aged 75 or older who were carrying debt increased sharply, from 31.2% to 49.8%.
In addition, the research found that while the overall percentage of families with a head aged 55 or older with debt payments in excess of 40% of income (a threshold commonly used to determine whether a family has an issue with debt) declined from a peak of 9.9% in 2007 to 6.9% in 2016, the percentage of families with a head aged 75 or older with debt payments in excess of 40% of income increased from 4.3% in 2007 to 5.3% in 2016. 
An examination of the types of debt held by older households showed that housing debt drove the changes in debt payment levels from 2001 to 2016, while the consumer debt payment share of income was relatively stable over that period. The findings indicated that between 1992 and 2016, housing debt payments of older families were one to three times larger than their non-housing debt payments. However, the analysis revealed that for these older households, housing debt payments as a percentage of income were lower in 2016 (5.7%) than in 2010 (8.3%) and 2013 (7.0%). 
Not surprisingly, the study also found that between 1992 and 2016, younger families with a head aged 54 or younger were more likely to have been carrying debt than older families, and had higher debt payments as a percentage of income. However, the findings also indicated that families with a head aged 55-64 were more likely to have had debt payments in excess of 40% of income than any other age group over the study period. 
"While improving in many respects in the most recent years, the longer-term trends in debt are troubling as far as retirement preparedness is concerned," Copeland observed. "We see in the data that American families just reaching retirement or those newly retired are more likely to have debt than past generations, specifically those in the 1990s." 

Managing Costs Top Priority For Benefits Professionals

While human resources professionals who focus on employee benefits are concerned with improving employee engagement and productivity, their leading concern is managing the cost of providing benefits, according to the results of a survey examining current practices around benefit decision-making conducted by insurance broker Hub International.
The annual survey of 337 employee benefits professionals from organizations with 50 to 1,000 employees was conducted in December 2017. The findings, released on March 15, showed that managing costs is employers' top benefit priority, with 66% of respondents ranking it as a leading concern. Among the other benefit priorities cited by respondents are helping employees make more informed benefits decisions (44%), improving employee wellness and productivity (32%), and improving employee engagement and productivity (28%). 
Researchers noted that whereas in recent survey years complying with changing regulations at the Federal, state, and local levels were considered top priorities, compliance has been ranked as less important in recent years: for example, 26% of respondents in the 2017 survey and just 16% of respondents in the 2018 survey cited complying with the Affordable Care Act (ACA) as a top priority. 
When the professionals were asked to identify the cost-cutting strategy they have found most effective, the top responses were high-deductible health plans, multiple plan options, and telemedicine benefits. However, while two-thirds of respondents said one of their goals for 2018 is to better manage health benefits costs, 49% reported that they do not plan to implement any new cost management programs in the next 12 to 18 months, and 54% said they believe they have done all they reasonably can to control rising medical costs.
In addition, the survey found that benefits professionals have yet to embrace multi-year benefits planning, with 66% of respondents saying they spend less than a year developing their annual benefit plan changes. Researchers observed that these results suggest that most benefits professionals take a reactive, short-term approach to planning benefits, which can make it difficult for them to formulate cost-cutting strategies that have a long-term impact.
The results also showed that relatively few of the HR professionals surveyed prioritize addressing the diverse benefit needs of a multi-generational workforce, with just 20% of respondents identifying this objective as a top priority in 2018, down from 28% in 2017. The findings further indicated that while nearly half (46%) of respondents believe technology upgrades would reduce their workload, 34% have encountered challenges in convincing CEOs and CFOs to make such investments.
Moreover, the results suggested that although a majority of the benefits professionals surveyed believe wellness programs can provide a morale boost, they are less convinced that such initiatives have direct effects on employee health and productivity. When asked to identify the benefits of implementing a wellness program, 51% of respondents cited improved employee morale, while 32% cited employee stress reduction and employee productivity, 29% mentioned employee retention, and 28% cited a reduction in medical and prescription claims.

A Strong Value Proposition Can Boost Employee Engagement 

Whether a company brings out the best in its workers depends on the health of the organization's engagement ecosystem, including the value proposition companies offer current and prospective employees, according to a report released by The Engagement Institute, a joint venture of The Conference Board, Deloitte Consulting LLP, Mercer I Sirota, ROI Institute, and The Culture Works.
The report, "The DNA of Engagement: Moments That Matter Throughout the Employee Life Cycle," was released on March 1. The authors used data from surveys, focus groups, and interviews to examine the interconnected factors that attract employees to organizations, keep them engaged, and encourage them to stay. Researchers also looked at the critical moments that affect the employee experience at work, and recommended strategies that organizations can implement to attract, retain, and engage employees.
According to the report, the most critical components that shape an organization's engagement ecosystem is the employee value proposition, or the tangible and intangible deal that organizations provide in exchange for employee effort, commitment, and performance. The authors pointed out that the employee value proposition is a product not only of the explicit statements made by employees and actions by the organization, but of the implicit assumptions and observations employees make over time. 
Researchers emphasized that individual employees have their own "personal ecosystem" that changes over the course of their career, and that is shaped by numerous moments they experience. The authors observed that when faced with critical moments in an employee's life cycle that may affect his or her level of engagement, key stakeholders, including the employee's managers, and coworkers, may struggle to respond adequately, and to ensure that the employee's experience remains positive. 
The report recommended that organizations take three key actions to strengthen overall employee engagement. First, researchers encouraged employers to promote an employee value proposition using empathy in the workplace. Specifically, they advised organizations to design and implement programs that support employees in how and where work gets done, prepare leaders to respond to employee concerns with an authentic tone of support and solidarity, and support supervisors who support employees in difficult circumstances by showing sensitivity to their workload.
Second, the study's authors advised organizations to provide programs to assist employees at every stage of the career life cycle. They encouraged organizations to engage individuals from the start of their career to retirement by providing robust onboarding programs for new employees, training and development for junior-level employees, and processes to enable later-stage employees to connect with leaders and voice their concerns. They added that employers can make all employees feel valued by offering them training in newer technologies and other skills.
Third, researchers recommended that employers prepare for and seize upon "the unscripted moments." The study's authors observed, organizations can shape a favorable experience by ensuring that leaders are approachable, show heightened awareness during daily interactions, and demonstrate behaviors that build trust.

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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