Benefit Plan Trends - Volume 62, Issue 1

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

Optimism About the Economy Shows Signs of Declining

The level of optimism about the outlook for the U.S. economy declined among business executives in the fourth quarter of 2018, but most of these leaders continue to hold a strongly positive view of their own company's prospects, the results of a quarterly survey of executives and senior financial managers at U.S. companies conducted by the American Institute of CPAs (AICPA) indicated.

The survey, which was conducted November 7-28, 2018, included 938 responses from certified public accountants who hold a leadership position in their company, such as CEO, CFO, or controller. While 57% of survey respondents expressed optimism about the U.S. economy over the next 12 months, researchers noted that this share was down 12 percentage points from last quarter, and represents a steep decline from the post-recession high of 79% set at the start of 2018.

When the respondents who said they have a negative view of the U.S. economy were asked about their reasons for pessimism, they cited concerns about trade issues, rising interest rates, the U.S. deficit, and underlying issues such as corporate and personal debt levels. Meanwhile, the respondents who expressed optimism tended to cite the continued strength of a broad range of economic indicators.

However, when asked about the outlook for their own company, the share of respondents who reported having an optimistic outlook held relatively steady at 69%, down just a single percentage point from the third quarter. Similarly, the percentage of survey respondents who said they expect their company to expand in the next 12 months fell only slightly, from 70% to 67%. Researchers pointed out that from a historical perspective, this rate remains high.

The results of the fourth quarter survey also indicated that the availability of skilled personnel is the top challenge respondents face, followed by employee and benefit costs. Almost half of respondents (48%) said they plan salary, wage, or commission increases in the next 12 months to improve their company's chances of recruiting and retaining employees in the tight labor market, while 18% said they intend to improve their company's benefits. A majority (62%) of respondents who said they plan to increase compensation indicated that they expect the increases to be in the 3% to 5% range.

In addition, the survey showed that hiring plans continue to be strong, although many of the executives reported facing a scarcity of candidates with the right skills and experience. Around half of respondents said their company currently has the right number of employees. Of the 42% of respondents who indicated that their company has too few employees, 14% reported they are reluctant to hire, while 28% said they intend to start hiring immediately.


Personalized Guidance for Retirement Plan Participants

Many Americans remain cautious about their investment decisions in the wake of the financial crisis, and members of the millennial generation in particular may need personalized guidance from employers in making retirement planning decisions, according to a study on retirement plan participation recently released by Broadridge Financial Solutions.

The findings of the report, "Retirement 2020: Capitalizing on trends to maximize participation, boost efficiency and accelerate outcomes," are based in part on a survey of 1,003 U.S. respondents aged 22-59 that was conducted July 10-16, 2018. The survey findings indicated that whereas 72% of baby boomer respondents have confidence in a workplace retirement plan, only 58% of millennial respondents feel the same way.

The report emphasized that the millennials surveyed expressed investment preferences that run counter to conventional financial advice. For example, researchers noted, the millennial respondents said they are equally confident investing in a private business as they are in the global stock market, and many prefer traditional low-yield savings accounts to employer-sponsored plans. The survey results showed that among all respondents, just 24% reported seeking financial advice from a professional advisor, while 27% said they seek financial advice from family and friends.

The report cited a previous study showing that the main reasons why workers of all ages decrease their retirement plan contributions are needing to pay down debt/bills (27%), needing money for day-to-day expenses (25%), facing a major life event (18%), and having less income (16%). The report noted that debt is a big problem for millennials in particular, as one-half of millennials with a bachelor's degree, and one-quarter of all millennials, hold student debt; and the median loan balance for millennials with a bachelor's degree is $25,000.

Researchers observed that the financial crash in 2008 hit investors hard, both psychologically and financially, as the survey showed that a significant number of investors now distrust Wall Street and have an inflated view of market risk: nearly 25% of all respondents said they think it is likely that they will face another market crash like the one that occurred in 2008, and 20% said they believe the stock market is a rigged game they cannot win.

The report also noted that because workers often fail to seek professional advice, many are not aware of, and are thus are unable to evaluate, the available investment options. For example, researchers observed, a recent survey showed that more than 40% of investors have no familiarity with health savings accounts (HSAs) and their triple-tax advantage, and only 30% make regular contributions to a HSA. This survey also found that of those respondents, 65% said they use their HSA funds to cover current health care needs, while only 8% indicated that they use their HSA to save for the future.

Given these challenges, the report recommended that retirement plan sponsors take advantage of technology tools that will allow them to engage plan participants by creating personalized experiences, while streamlining operations and lowering costs. Researchers advised plan sponsors to consider using data-driven content creation platforms to facilitate workflow automation, and cloud-based tools to enable multiple compositors to collaborate from any location.


Broadening the Scope of Employee Benefits

Employers are broadening the scope of their employee benefit offerings to meet the changing needs of their workforce, according to the results of a survey on the use of rewards programs among U.S. companies conducted by nonprofit human resources association WorldatWork with underwriting support from talent management consultancy Korn Ferry.

The survey of 1,072 employers was conducted between August 15 and September 14, 2018. The results showed that there were statistically significant increases in the rates at which employers offered certain benefit programs from 2017 to 2018. Among the programs that respondents reported offering at higher rates in 2018 than in the previous year are telemedicine services, identity theft insurance, unpaid sabbaticals, paid parental leave, elder care resource and referral services, women's advancement initiatives, and disaster relief funds. Among the programs that the companies surveyed reported offering at lower rates in 2018 are charitable fundraising programs, floating holidays, onsite fitness centers, and college scholarships.

The vast majority of the employers surveyed said they provide certain health and wellness-related benefits to some or all of their employees, including dental benefits (99%), employee life insurance (99%), long-term disability insurance (98%), employee assistance programs (97%), flexible spending accounts (95%), spouse/dependent life insurance (94%), short-term disability insurance (94%), preferred provider organization (PPO) medical plans (87%), and/or high-deductible medical plans (80%).

In addition, more than three-quarters (77%) of respondents said they offer health savings accounts (HSAs), immunization clinics or promotions (79%), and/or biometric or wellness screening (77%); while smaller shares indicated they offer health maintenance organization (HMO) plans (38%) and/or health reimbursement accounts (HRAs) (31%).

The survey also found that most of the employers polled offer certain health-related benefits as part of their health plans or as standalone benefit programs, including prescription drug plans (100%), vision plans (98%), behavioral health plans (90%), and telemedicine services (81%). The results further indicated that more than two-thirds (67%) of respondents provide child care and/or elder care referral services. Among the other wellness programs offered by large shares of respondents are tobacco or smoking cessation support (83%), fitness club membership discounts or subsidies (71%), weight management programs (70%), and nutritional counseling (68%).

When asked about the paid leave benefits they offer their employees, most of the companies surveyed said they provide holiday pay (98%) and bereavement leave (97%). Just under half (47%) of respondents said they offer paid vacation and sick leave benefits through a paid time off (PTO) bank, while 59% said they provide these benefits separately. In addition, 52% of respondents indicated that they offer paid parental leave, 20% said they offer paid caregiver leave, 9% said they offer unlimited time off, and 8% said they offer paid sabbaticals.

The findings also showed that nearly all (99%) of the employers surveyed offer defined contribution retirement plans and 50% offer nonqualified deferred compensation plans, while smaller shares sponsor defined benefit plans (39%) and/or an employee stock ownership plans (ESOPs). Moreover, the survey found that 32% of respondents said they offer retiree health care benefits, and 31% indicated that they offer phased retirement.

The results further indicated that more than half of the employers polled sponsor culture and community
involvement initiatives, including charitable fundraising programs (69%), corporate social responsibility programs (63%), work environment initiatives (83%), and/or diversity or inclusion initiatives (58%). In addition, more than one-third (36%) of respondents reported offering women's advancement initiatives.


Both Hard and Soft Skills Are In Demand by U.S. Employers

The number of jobs in artificial intelligence (AI) and other technical fields has been growing over the last five years, but employers continue to report large gaps in soft skills like oral communication, leadership, and time management, a study published by professional networking site LinkedIn indicated.

The "Emerging Jobs Report," released on December 13, 2018, was created by analyzing LinkedIn's economic graph data between 2014 and 2018. The report provides information on the positions that have been growing most rapidly across the U.S., the skills associated with these jobs, and the roles that have emerged over the last five years.

According to the report, growth in fields and functions related to AI is likely to continue, as six out of the 15 emerging jobs in 2018 were related in some way to AI. Researchers also pointed out that skills related to AI are starting to infiltrate every industry, and are among the fastest-growing skills on the network. The analysis showed that globally, the demand for AI skills increased 190% from 2015 to 2017.

The study also found that the demand for basic business functions is surging, as basic operational functions like Administrative Assistant, Assurance Staff, and Sales Development Representative were identified as emerging jobs. The findings further indicated that nearly all of the fastest-growing roles in 2018 are jobs that have been growing steadily for years, including Software Engineer, Account Executive, and Recruiter.

In addition, researchers noted that the largest skills gaps are in interpersonal or soft skills, as on average, 26% of all skills reported in 2017 by the network's U.S.-based members can be classified as interpersonal or soft skills, and soft skills like project management and leadership are among the fastest-growing "unique" skills demanded by employers. Researchers also pointed out that for positions like System Engineer, soft and interpersonal skills made up less than 1% of the skills demanded in 2015, but now account for 8% of the required skills.

The analysis showed that the jobs that grew the fastest in 2018 are Blockchain Developer (33x growth), Machine Learning Engineer (12x growth), Application Sales Executive (8x growth), Machine Learning Specialist (6x growth), and Professional Medical Representative (6x growth). The jobs that were found to have experienced large and sustained year-over-year growth during the study period are Software Engineer, Account Executive, Realtor, Account Manager, and Recruiter.

The skill groups identified as having the biggest shortfalls in 2018 are oral communication, people management, development tools, social media, business management, time management, leadership, graphic design, data science, and web development.

"There is no doubt that AI skills are on the rise, but some typically human skills that today cannot be replicated by machines have been growing almost as fast and are here to stay," the report concluded.


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 © 2019 Liberty Publishing, Inc. All rights reserved.



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