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Benefit Plan Trends - Volume 61, Issue 3

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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A report covering plan design and legislative changes
 
VOLUME 61, ISSUE 3
 

Global CEOs Optimistic About Prospects for Growth In 2018


A majority of global CEOs are optimistic about the economic environment over the coming year, and plan to hire more workers in 2018, the results of an annual survey of business leaders conducted by consulting firm PwC suggest.
 
The survey findings, which were released at the World Economic Forum Annual Meeting in Davos on January 22, 2018, are based on 1,293 interviews with CEOs in 85 countries conducted between August and November 2017. The results showed that 57% of respondents believe global economic growth will improve in the next 12 months, up sharply from 29% of the executives who participated in the previous year's survey.
 
Broken down by country, the 2018 survey found that optimism about global growth has more than doubled among business leaders in the U.S. between 2017 and 2018, from 24% to 59%; and that even among some of the less optimistic countries, confidence in global growth has more than doubled since last year. For example, 38% of respondents in Japan said they are optimistic about the outlook for global growth over the coming year, up from 11% in 2017.
 
The business leaders surveyed expressed more modest levels of confidence in their own company's prospects for the coming year: 42% of all respondents said they are very confident in their own organization's growth prospects over the next 12 months, compared to 38% in 2017. But business confidence appears to be especially high in the U.S., where the share of respondents who said they are very confident in their company's 12-month outlook jumped from 39% in 2017 to 52% in 2018. Broken down by industry, the sectors with the highest shares of respondents indicating they are very confident in their organization's prospects in 2018 are technology (48%), business services (46%), and pharmaceutical and life sciences (46%).
 
When asked about their strategies for growth, the CEOs surveyed were most likely to cite organic growth (79%), followed by cost reduction (62%), strategic alliances (49%), mergers and acquisitions (42%), and partnering with entrepreneurs and start-ups (33%).
 
Researchers observed that confidence in short-term revenue growth appears to be feeding into jobs growth: 54% of the CEOs surveyed said they plan to increase their headcount in 2018, while just 18% said they expect to reduce their employee numbers. By sector, the respondents most likely to indicate they intend to recruit more workers in 2018 are in health care (71%), technology (70%), business services (67%), communications (60%), and hospitality and leisure (59%).
 
Despite their overall optimism about the global economy, the CEOs surveyed reported feeling anxious about a range of business, social, and economic threats. Significant shares of respondents said they are extremely concerned about over-regulation (42%), terrorism (41%), geopolitical uncertainty (40%), cyber threats (40%), the availability of key skills (38%), the speed of technological change (38%), an increasing tax burden (36%), populism (35%), and climate and environmental change (31%). 
 
The results further showed that two-thirds of the business leaders surveyed believe their company is responsible for helping employees retrain when their roles are replaced by digital technology or automation. CEOs in the engineering and construction (73%), technology (71%), and communications (77%) sectors were especially likely to report that they are helping employees retrain. The survey also found that respondents in the financial services sector were more likely than those in other sectors to say that they anticipate workforce reductions as a result of technology and automation. 
 
 

Boredom, Main Motivation for Looking For a New Job


As the job market picks up, many professionals report that their primary motivation for looking for a new job in 2018 is feeling bored with their current job and wanting a new challenge, according to the results of a recent survey by executive search firm Korn Ferry.
 
The survey of 4,900 professionals was conducted in December 2017. When those respondents who said they are planning to look for a new job in 2018 were asked to identify their top reason for jumping ship, 33% said they are bored with their current job and need a new challenge, 24% said the culture at their current company does not align with their values, 21% indicated they have either lost their job or expect to lose their job, and 19% said they are hoping to get a higher salary. 
 
The vast majority (89%) of the professionals surveyed said they believe networking is important during every period of their career, and not just when they are in job search mode. By contrast, a mere 7% of respondents said they see networking as important only when they have a job but are considering other options, and just 3% said they believe networking is essential only when they are out of work and looking for a job. 
 
When respondents were asked what their usual first step is when searching for a new job, the top response was networking, cited by 44%. Another 23% of respondents said updating their resume is their typical first step toward landing a new position, while 19% indicated that they start their search by taking an inventory of what kind of job would make them the happiest. Smaller shares said their usual first step when looking for a new job is reviewing the online job postings (12%) or engaging in social media activity (2%).
 
The professionals surveyed were also asked to name the top strategy they use to network. One-third (33%) of respondents said they seek to reconnect with current and former friends/colleagues, 31% reported using LinkedIn, 27% said they ask current friends or colleagues to introduce them to others in their network, and 9% indicated that they attend networking events. 
 
When asked about their job search history, 53% of respondents described their past interviewers as, on average, only somewhat to very ill-prepared. Moreover, 46% reported that they had been turned down for a job because the interviewer did not take the time to fully understand their qualifications. 
 
 

Helping Employees Meet Retirement Goals by Quantifying Readiness


To minimize disruptions in the natural progression of workforce turnover and to foster sound workforce planning, employers should help employees stay on track for retirement by quantifying their levels of retirement readiness, a study released by Sibson Consulting has recommended. 
 
The study, "Quantifying Retirement Readiness: How to Determine if Your Employees Are on a Smooth Path to Retirement," was published in the January 2018 issue of the firm's newsletter. According to the analysis, many employers have no idea how financially prepared their employees are for retirement. For example, the study's authors pointed out, companies may be unaware that they have quite a few later-career employees who are nowhere near ready for retirement, or a number of mid-career employees who have plenty of savings to retire and are looking for an early exit. 
 
The study's authors therefore recommended that employers use a comprehensive strategy to understand how retirement readiness—defined as the ability to retire with sufficient income to maintain the individual's current standard of living throughout retirement—affects their business. Specifically, they suggested that employers identify which employees appear to be on track for a timely retirement and which do not, and take steps to help employees financially prepare for retirement. 
 
According to the study, the most direct metric for retirement readiness is the replacement ratio, which defines the required income for retirement as a percent of income just before retirement. Setting a ratio of 80% as the benchmark, the authors observed that part of the replacement income will come from Social Security and other retirement vehicles, while the remainder will come from savings and other assets. However, they cited research showing that the contributions of these sources will vary by generation: for example, whereas the average retiree currently aged 69-89 receives an estimated 22% of his or her income from an employer-sponsored pension, a worker currently aged 25-49 can expect to receive only 12% of his or her retirement income from an employer-sponsored pension. 
 
The study's authors further emphasized that when employees start accumulating retirement wealth and when they begin drawing from this accumulation are key to determining an appropriate savings rate. They warned that since most replacement ratios use a retirement age of 65, employees who plan to retire before that age will need to accumulate more savings to attain the same replacement ratio for the additional years in retirement. While acknowledging that there is no single "right" answer for a wealth-accumulation target, researchers estimated that a target of 10 times the individual's pay is reasonable for a worker retiring at age 65. 
 
Finally, researchers advised employers to provide employees with a qualitative assessment of their progress so they can see if they are falling short of their desired replacement ratio and wealth-accumulation target. For example, employers can use retirement-readiness letter grades that score an employee's current standing based on his or her age plus the expectation that he or she will reach an appropriate level of retirement readiness. 
 
"Once this information is clear, the next step is to develop and implement strategies to help employees retire when they want to," the study's authors concluded, adding that these strategies may include using plan design analysis/changes, educational materials, or communications campaigns to affect behavioral changes. 
 
 

Employers Value Usability Over Cost When Choosing Benefits Platforms


When human resources professionals are choosing among benefits administration technology platforms, price is less important than ease of use and the extent to which the technology can be integrated with HR information systems, a survey by employee benefits advisory firm Pacific Resources has found. 
 
The survey of senior HR or benefits executives from 91 organizations across a range of industries was conducted during June and July 2017. The survey was designed to capture the current perspectives on benefits administration platforms of some of the largest employers in the U.S. as these platforms grow in both competition and complexity.
 
The results showed that the most valuable outcomes employers have reported in their experience with benefits administration platforms are best-in-class employee user experience (49%) and the ability to integrate benefits technology with HR functions (37%). By contrast, the total outsourcing of HR/benefits business processes and below-market costs were rated as valuable by less than 10% of respondents. 
 
The 2017 survey also found that cost is no longer the driving factor when selecting a benefits administration platform: only 23.9% of respondents cited cost as the most important consideration in 2017, down from 64.4% in 2016. In the 2017 survey, the most important factors were identified as administrative ease at 61.4%, up from 38% in 2016; and empowering employees to make informed benefits decisions at 51.5%, up from 24.4% in 2016.
 
The findings also showed that 83.2% of the employers surveyed view communication, employee education, and engagement as integral to their overall health and welfare benefits delivery strategy; and that 88.8% of respondents see cost calculators, plan comparison tools, and guided decision-support tools that help employees select benefits that meet their personal and family needs as at least somewhat effective.
 
The share of respondents who indicated that they outsource employee eligibility and enrollment processes also increased sharply, from 36% in 2016 to 58% in 2017. By contrast, just 30% of respondents said they currently manage all employee eligibility and enrollment processes in-house, and expect to continue to do so. 
 
While the findings indicated that the employers polled are confident in and rely on technology to deliver benefits, only 45.5% of respondents said they are likely to remain with their current benefits administration platform vendor, while 29.5% said they are unsure and 25% said they are likely to request bids from other platform vendors. 
 
The survey also asked the HR professionals what approach they are using to manage their health and welfare benefits in response to the Affordable Care Act (ACA). The largest share of respondents (43.7%) said their approach will be dictated by the outcome of changes to the ACA.
 
 

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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