Home|Careers|FAQ| CLIENT LOGIN »

ShareShare Print RSS

Benefit Plan Trends - Volume 61, Issue 9

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.

Serving you, your business and your community since 1956
BPT Header
A report covering plan design and legislative changes

Salary Budgets Show Signs of Increasing in 2018

As the labor market tightens, U.S. salary budgets grew by more than 3% for the first time in four years in 2018, according to the results of a global survey on salary budget trends released by human resources consultancy WorldatWork.

The survey, which was conducted in April 2018, collected data on nearly 15 million workers employed in a wide range of organizations and industries across 19 countries. The results showed that the salary budgets in the U.S. have risen by an average of 3.1% (median: 3.0%) in 2018, and are projected to grow by an average of 3.2% in 2019.

Researchers noted that while this growth level is in line with last year's projection and breaks a four-year trend during which the average salary budget growth rate held steady at 3%, a one-tenth of a percentage increase is not the level of growth that might be expected given the extremely tight labor market and the tax code changes that went into effect this year.

The results also indicated, however, that more employees are progressing in their careers, with an average of 8.6% of U.S. employees receiving promotions in 2017, up from 7.9% in 2016. The survey also found that the mean value of the raises associated with those promotions was 8.7% in 2017, up from 8.4% in 2016.

Researchers observed that several factors could be contributing to this growth in promotion rates in the U.S., including the departure of baby boomers from the labor market and demands by millennial workers for professional growth and development opportunities. They also speculated that employers could be using promotions as a strategy for retaining top employees who otherwise might be lured away as the economy improves and the job market tightens; and that some employers may be relying on promotions to address internal equity issues that arise from hiring outside talent at a premium.

Broken down by industry, the findings indicated that the range of average salary budget increases in the U.S. in 2018 was between 2.5% and 3.6%. The survey showed, for example, that the average salary budget increase for employers in the mining, quarrying, and oil and gas industry rose 0.7 percentage points to 3.6%, although it is expected to fall to 3.3% in 2019. The results further indicated that while the average salary budget increase for employers in educational services was just 2.5% in 2018, it is projected to grow 0.2 percentage points to reach 2.7% in 2019.

The findings also revealed that there was considerable variability in salary budget trends from country to country. Among the countries surveyed in 2018, India was found to have the largest average budget increase at 10%, followed by Russia (7.4%), China (6.6%), Brazil (5.9%), Mexico (4.9%), and Singapore (4.0%). Meanwhile, the countries shown to have the smallest average salary budget increases in 2018 were Switzerland (2.2%), followed by Spain (2.6%), Japan (2.6%), France (2.6%), and Belgium (2.6%).


Many Americans See Social Security as Main Source of Income

While most Americans are aware of the steps they should be taking to prepare for retirement, many are struggling to build adequate savings, and thus expect to rely heavily on Social Security after they stop working, a survey carried out by digital wealth manager Personal Capital has shown.

The survey of 2,008 U.S. adults aged 18 and older—including 1,630 pre-retirees—was conducted on March 1-7, 2018. When asked to identify their primary source of retirement income, 27% of the pre-retirees surveyed cited an employer-sponsored plan, but one-quarter cited Social Security, including 15% of millennial and 29% of Gen X respondents. The findings also indicated that 51% of all of the pre-retirees surveyed and 62% of the millennial respondents plan to retire at age 65 or younger, or at least a year shy of the age at which Americans born after 1943 are entitled to collect the full Social Security benefit.

Somewhat surprisingly, the survey results indicated that Gen Xers are almost as likely as millennials to lack adequate savings, despite having less time to save before reaching retirement age. Even though more than half of respondents of both generations (56% and 57%, respectively) said they expect they will need to save more that $1 million for retirement, 34% of the Gen Xers and 39% of the millennials surveyed admitted they have no retirement savings. In addition, the Gen Xer respondents were less likely than the millennial respondents to report that they max out their employer-sponsored plan contributions (18% vs. 22%),

Moreover, the survey showed that younger workers are less likely than older workers to place importance on getting financial advice on retirement planning: just 24% of Gen Xer and millennial respondents said they believe that consulting a skilled financial advisor is crucial to achieving a comfortable retirement, compared to 30% of the baby boomers surveyed.

The survey also uncovered significant gender differences in retirement planning patterns. For example, more of the female than the male pre-retiree respondents indicated that they understand that sticking to a comprehensive financial plan (62% vs. 47%, respectively) and leveraging a skilled financial advisor (28% and 24%, respectively) are critical to securing a comfortable retirement. The results also showed, however, that 40% of the female respondents, compared to 33% of the male respondents, admitted that they have no retirement savings; and that 71% of female respondents, compared to 56% of male respondents, acknowledged that they do not know their net worth.

The findings suggested that the gender gap in retirement savings may be partially attributable to women being less likely than men to have access to a range of retirement savings options, as 27% of the employed women surveyed, compared to 19% of their male counterparts, reported that they are not offered an employer-sponsored retirement plan. But the survey results also showed that when women have access to these benefits, they often fail to take full advantage of them: the female respondents were found to be less likely than their male counterparts to contribute to a retirement plan offered by their employer (58% vs. 67%) or to max out contributions to their employer-sponsored retirement plan (16% vs. 26%).


Building Ecosystems to Gain Competitive Advantage

As global business leaders become increasingly concerned about disruptions to their current growth strategies, many report that they are seeking to gain a competitive advantage by building ecosystems in which they join forces with other companies to share data, customers, technology, and industry knowledge, a recent study by professional services provider Accenture Strategy has reported.

The findings of the study, "Cornerstone of Future Growth: Ecosystems," are based on a survey of 1,252 C-level executives at large companies spanning 13 industries and seven countries that was conducted in January 2018. The survey found that only 25% of the business leaders indicated that they are very confident they will achieve their 2020 growth targets, while 56% said they are concerned that current growth strategies are at high risk of disruption. The results also showed that 76% of the executives polled agree that their current business models will be unrecognizable in the next five years, and that ecosystems will be the main change agent.

In the study, an ecosystem is defined as a network of cross-industry players who work together to define, build, and execute market-creating customer and consumer solutions. Researchers estimated that ecosystems enabled by digital platforms could unlock $100 trillion of value for business and society over the next decade, and noted that the companies that are currently in the strongest position to take advantage of the synergies provided by ecosystems are operating in the telecoms, banking, and utilities sectors. Examples of such ecosystems include a furniture retailer partnering with an online job site to connect customers with workers willing to assemble the furniture, or health care providers that partner with rideshare services to transport patients to appointments.

The business leaders surveyed reported that they are seeking to capitalize on the opportunity by forming ecosystems to make major innovation plays (63%), increase revenue growth (58%), access new markets (55%), and attract new customers (55%). The results showed that 60% of respondents are looking to build ecosystems to disrupt their industry, 46% are actively seeking partners, and another 77% believe their company will generate more than half of its revenues from ecosystems in the next five years.

The study also pointed out, however, that many executives lack the experience and capabilities needed to design and execute market-leading ecosystems, and thus are not realizing the revenue growth they had predicted from ecosystem participation. The survey found that 58% of respondents targeted a growth rate of 3-4% from ecosystems, but only 40% are achieving it; and that just 12% are seeing growth of 5% or more from ecosystems.

Moreover, while half of executives surveyed said they are using platforms to share data and/or information across businesses, more than one-third admitted they are concerned about sharing intellectual property data (34%) and about cybersecurity (35%). In addition, while nearly two-thirds (63%) of respondents agreed that the technology/platform is the most important thing to get right in an ecosystem, nearly half (44%) acknowledged that they are worried about sharing company assets and secrets.

Nonetheless, large shares of the executives surveyed anticipate that ecosystems will have an impact on their business over the next three to five years: 56% of respondents said they believe ecosystems will create a new competitive advantage, 50% predicted that ecosystems will allow them to use data and analytics to better serve customers, 46% said they believe ecosystems will create new customer experiences, and 44% expressed confidence that ecosystems will drive innovation and disruption over this time period.


Employers Seek To Manage High Cost Health Plan Claimants

As a relatively small number of employees or their family members with intensive medical needs can drive up the costs of a workplace health plan, managing and monitoring high cost claimants is the top health benefits strategy U.S. employers will be focusing on for the next five years, according to the results of an analysis of survey data published by human resources consultancy Mercer on July 15.

The study's findings are based in part on responses to the Mercer National Survey of Employer-Sponsored Health Plans, 2017, which was conducted in 2017 with a sample of 2,481 employers. When asked to identify their main strategies for keeping health care costs under control, 77% of the large U.S. employers (500 or more employees) surveyed identified as important or very important the strategy of monitoring or managing high-cost claimants. Among the other strategies these large employers rated as important were taking focused action to manage specialty pharmacy costs (72%), and having a focused strategy for creating a culture of health (70%).

According to researchers, the rapid rise in high cost claims is most likely a key driving force behind this strategic prioritization by employers. Based on an analysis of information from a database containing approximately 1.6 million health plan members, the study found that a relatively small number of plan members drive a large majority of the costs. The analysis showed that, on average, the sickest 6% of an employer's population represent 47% of the total allowed medical and pharmacy spend.

The study also examined carrier claims data from Mercer Health Advantages (MHA), a program offered through select insurance carriers that features high-intensity care management for the sickest employees. Researchers emphasized that high-intensity care management programs differ from standard health advocacy programs, as the care manager works directly with the care team as well as with the patient and family, staying in contact with the patient after discharge to provide support and performing a supportive role in ensuring that the patient complies with treatment plans.

The data showed that the percentage of claims classified by the participating carriers as "high cost" (>$50K/claimant) has been increasing rapidly, but that MHA achieved a 3.3:1 return on investment for plan years 2015 and 2016, while also improving patient outcomes. Researchers observed that these results suggest that "high touch, nurse-centered care coordination can often produce the best possible health outcomes and as cost-efficiently as possible."



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.



2205 Point Blvd. Suite 200 | Elgin, IL 60123
p 847.741.1000 | f 847.428.8857