Benefit Plan Trends - Volume 62, Issue 10

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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Representation of Women on Boards Shows Signs of Expanding

The percentage of women board members on the corporate boards of companies in the Russell 3000 index exceeded 20% in the second quarter of 2019, marking the first time women have held more than one-fifth of Russell 3000 seats, according to the findings of a quarterly index that tracks gender representation on corporate boards released by corporate governance solutions provider Equilar.

The "Equilar Q2 2019 Gender Diversity Index" (GDI), published on September 11, is the latest report since the GDI was first published in January 2017. Researchers noted that at that time, just 15% of boards seats in the Russell 3000 index—an index that seeks to serve as a benchmark of the entire U.S. stock market by tracking the performance of the 3,000 largest publicly-traded U.S. companies—were held by women, and less than 25% of board vacancies that came open were being filled by women.

The latest GDI found that the percentage of women on Russell 3000 boards increased to 20.2% in Q2 2019, up from 19.3% in the previous quarter, and from 16.9% in Q1 2018. This acceleration caused the GDI to increase to 0.40, with 1.0 representing parity among men and women on corporate boards across the Russell 3000. The index also reported that 41.9% of newly appointed directors in Q2 2019 were women, down slightly from 46.8% in Q1 2019.

In addition, the index showed that as of Q2 2019, just 10.8% (309) Russell 3000 boards were still without a single woman member. Researchers pointed out that this represents a significant decline from the 376 boards without a woman member in Q1 2019. They also noted that the percentage of women who joined these boards as first-time public company board members has surpassed 50% three of the past four quarters.

The index also revealed, however, that just 48 Russell 3000 companies have currently achieved gender parity, while 2,811 have not. According to researchers, the Russell 3000 would require an annual growth rate of women on boards of 8.56% to reach full gender parity by 2030. The GDI Q4 2018 report had projected that based on the rate of growth observed at that time, gender parity on Russell 3000 boards would be achieved by 2034.


New Systems Approach Is Needed To Promote Workforce Development

While some U.S. workers are finding that their knowledge and skills are no longer up-to-date or in demand on the labor market, many employers are struggling to recruit workers who have the skills and knowledge required to keep their company competitive over the long term, according to a study published by the public policy research organization the RAND Corporation.

The report, "A System That Works: How a New Workforce Development and Employment System Can Meet the Needs of Employers, Workers, and Other Stakeholders," was published on September 19. The authors observed that as the American workplace changes in response to new technologies, globalization, and demographic shifts, employers still need workers with industry-specific knowledge, but they also increasingly value skills like effective communication and critical thinking.

Applying a systems approach to reconceiving the current workforce development and employment system, researchers attempted to identify the ways in which the system is failing both workers and employers, and to craft a plan for how educators, employers, workers, and other stakeholders can rebuild the current system to bring about the necessary changes.

First, the authors observed, the U.S. workforce development and employment system has changed little since the mid-20th century, and underperforms in a fast-paced and rapidly changing environment in which lifelong learning has become essential. They pointed out that as automation and shifting consumer demands have rendered some of the skills individuals learned years ago obsolete, many workers have an immediate need to acquire new knowledge and skills. In particular, researchers noted, there is greater demand for workers who can master information synthesis, creativity, problem-solving, communication, and teamwork; even as there is still substantial demand for skilled workers in positions that do not require post-secondary degrees or specific credentials.

The study also warned, however, that there is currently no well-defined path for workers to get the training they need. According to researchers, post-secondary training and education institutions generally offer the same structure of credentials and degrees they did years ago, and may be constrained in their ability to respond to changing job requirements by a lack of funding. Meanwhile, they added, in the workplace, employers are often willing to pay for additional training only for their more educated employees.

To tackle these challenges, the study's authors called for the creation of a workforce development and employment system that provides multiple on-ramps for transitioning workers to access training and employment opportunities, while matching workers and jobs. To build this system, the authors recommended developing data, metrics, and tools to monitor the current system in order to identify where it is failing, and where new approaches are warranted. They also suggested using gaming, competitions, and other strategies to measure the impact of policy interventions, and to create an open clearinghouse that collects and shares information about promising approaches.


Retirement Savers Value Lifetime Income Guarantees

As many Americans lack confidence that they will enjoy a financially secure retirement, significant shares say that having a guaranteed lifetime income is one of their top retirement planning goals, the results of a recent survey conducted by financial services provider TIAA indicated.

Published on September 23, TIAA's "2019 Lifetime Income Survey" includes responses from 901 Americans between the ages of 25 and 73 who completed an online questionnaire in May and June 2019. The aim of the survey was to uncover the factors that contribute to and detract from people's financial confidence, and to assess their attitudes toward financial products that can guarantee lifetime income.

When asked about their confidence in various financial aspects of retirement, just 35% of respondents expressed a high level of confidence that they will be able to maintain a good standard of living throughout retirement; 31% said they are very confident that they will feel financially secure throughout their life, including in retirement; 28% said they are highly confident they will never run out of money in retirement; and, of the respondents who are still working, 25% indicated they are very confident that they will be able to retire when they want to.

Broken down by generation, the survey results showed that baby boomer respondents expressed far higher levels of confidence in their financial preparation for retirement than younger respondents, with Generation X respondents reporting even lower levels of confidence than millennials. For example, while 53% of baby boomers said they are confident that they will be able to maintain a good standard of living in retirement, just 28% of millennials and 22% of Gen Xers indicated that they feel equally confident.

The survey also asked respondents how concerned they are about certain financial events occurring. The results indicated that the majority of the adults surveyed are worried about a major unexpected expense (54%), a major medical expense (53%), and significant cuts to Social Security and Medicare (53%); and that significant shares are also concerned about a major market decline (45%) and an increase in inflation (41%).

In addition, the findings indicated that of those respondents who participate in an employer-sponsored retirement plan, 69% cited guaranteed income for life as one of their top two goals for their retirement plan, and 45% said that guaranteed income for life is their top goal. Researchers pointed out that the respondents were more likely to rank having a guaranteed lifetime income as one of their top two goals than keeping their savings safe regardless of what happens in the market (56%), earning a competitive rate of return on their savings (46%), or saving a specific amount of money (28%). Among the reasons the respondents cited for valuing an investment product that provides guaranteed lifetime income were that it gives them a feeling of financial security (60%), and that it makes it easier to save for retirement (46%).

When asked to name the factors that most increase their long-term financial confidence, the leading factor cited by respondents was saving regularly (40%), with smaller shares mentioning saving aggressively (21%), understanding how to pay down their debt (20%), receiving a guaranteed lifetime income from a traditional pension plan (18%), and having diversified investments (15%). However, 52% of respondents admitted that they did not save as much as they should have in 2018, including 22% who indicated that they saved a lot less than they should have.

The findings also suggested that while Americans value knowing how much income they will have in retirement, there is still considerable confusion surrounding financial vehicles that guarantee lifetime income. The survey found, for example, that 32% of respondents who indicated that they have an employer-provided retirement plan said they do not know whether their plan offers an investment option that guarantees lifetime income; and that among those who said they think that guaranteed lifetime income is available in their plan, significant shares demonstrated that they incorrectly believe that mutual funds (35%) and target date funds (20%) secure lifetime income.

When questioned about their sources of financial advice, the respondents were most likely to report that they rely on a professional financial advisor (36%), followed by their employer or retirement plan provider (32%), their spouse or partner (29%), and online retirement or income calculators (27%). The survey found that those respondents who indicated that they rely on a financial advisor expressed more confidence in their ability to always be financially secure, never run out of money, and maintain their lifestyle in retirement than those who said they do not.


Health Plan Cost In-creases of Nearly 4% Projected For 2020

Health benefit costs are expected to grow by almost 4% in 2020, according to the early results from a survey of employer-sponsored health plans released by human resources consultancy Mercer on September 19.

Based on responses from 1,511 U.S, employers, the survey projects that the average total health benefits cost per employee will rise by 3.9% in 2020. Researchers observed that while this growth rate continues the trend of low single-digit increases that began in 2012, health benefit costs are still rising faster than overall inflation.

The survey also found that cost-shifting to employees is expected to play a smaller role in 2020 than in recent years, with just 43% of responding employers saying that they intend to raise deductibles or otherwise cut benefits to hold down costs in 2020. Researchers reported that the underlying medical trend, or the amount costs would increase if employers renewed plans without making any changes, has decreased from 8% in 2014 to 5.2% in 2020, which may have eased some of the pressure to make short-term cost reductions.

Researchers also pointed out that in recent years, employers have been adopting strategies for reducing costs via improved health outcomes, such as providing targeted support for specific health conditions and encouraging plan members to use higher-quality providers. For example, 39% of employers with 500 or more employees surveyed in 2019 reported that they provide access to a Center of Excellence (COE) for cardiology, bariatric surgery, cancer, and other complex treatments. Moreover, 16% of these employers said they steer employees to the COE through lower cost-sharing, or even require them to use it.

The survey findings further suggested that in support of providing higher-quality care, employers continue to add technology-enabled programs designed to help members with specific health issues, such as diabetes, insomnia, and infertility. The results showed, for example, that 62% of respondents with 500 or more employees reported offering one or more of these targeted solutions in 2019, compared to 55% in 2018.

In addition, the survey found that access to health benefits information and resources is increasing, as of the employers with 500 or more employees surveyed in 2019, 40% said that all or most of their benefit offerings are accessible to employees on a single, fully-integrated digital platform, most often through a smartphone app; up from 34% surveyed in 2018.


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.



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