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Benefit Plan Trends - Volume 62, Issue 12

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


Flexible Work Options Can Boost Growth and Productivity

As the widening gap between jobs and workers qualified to fill them is undermining productivity and growth at U.S. companies of all sizes, adopting flexible work models can help employers attract talent, while improving employee engagement and productivity and boosting the U.S. economy, according to a study conducted by the Centre of Economics and Business Research (Cebr) with support from Citrix Systems.

The report's findings are based on data from an online survey of 2,502 U.S. knowledge workers conducted in July. The aim of the study was to determine the potential value to the U.S. economy of a move toward a more flexible working culture by extrapolating the survey findings for each of the demographic groups represented in the sample to the U.S. knowledge worker population. The analysis showed that the total potential U.S. economic gains from a flexible working culture could amount to $2.36 trillion in gross value added (GVA) per annum, with 88% of the total potential boost to GVA coming from individuals who are currently unemployed or economically inactive rejoining the labor market, and the remainder contributed by productivity improvements among individuals currently in work.

The survey found that 69% of respondents who are currently unemployed or economically inactive because they are, for example, retired, full-time homemakers, or caregivers, indicated that they would be encouraged to start working if given the opportunity to work flexibly. The results also showed that 65% of respondents who reported that they currently work part-time said they would be inclined to work more hours if they could work remotely.

In addition, the findings indicated that if provided with the opportunity, 95% of the knowledge workers polled who are currently employed said they would like to work from home 2.4 days per week, on average. Moreover, between 60% and 70% of respondents said they would be willing to work from other locations, including local coffee shops and shared workspaces, one to 1.3 days per week, on average.

The survey also found that 86% of respondents who said they currently have the option to "work from anywhere" take advantage of this opportunity. Among current remote workers, 73% of respondents reported that flexible working improves their personal well-being and ability to balance work with outside activities, 69% said it improves their job satisfaction level, and 60% indicated that it facilitates their professional development (60%). Broken down by demographic group, working remotely was found to be most popular with respondents aged 16-55 who are currently working and have dependent children, with 92% of these respondents indicating they would use flexible working if the option was available.

When asked about the potential productivity benefits of working from home or from other remote locations, large majorities of all workers surveyed said they believe virtual/remote working would enable them to save money (72%), reduce their stress levels (70%), allow them to work at a pace or at hours that suit them (72%), make them more productive (71%), help them achieve better work/life balance (74%), enable them to get more work done as they would spend less time commuting (68%), and help them concentrate better because they would have fewer distractions (66%).


Claims That Americans Face a Retirement Crisis May Be Exaggerated

While many Americans fear their retirement savings will not be sufficient to allow them to retire, this fear is greatly overblown, as each generation of retirees has been better off than the previous generation, and this trend is expected to continue, a white paper recently published by Empower Institute has asserted.

The study, "The Over-Stated Retirement Crisis: An ever-improving retirement system is helping Americans be more prepared for retirement," was released in September 2019. The paper's authors noted that although the media have spread the narrative that American workers are facing a retirement crisis, research shows that in 2017, retirement assets were equal to 337% of employee wages, or seven times the share retirees saved in 1975, when traditional pensions were the main retirement savings vehicle.

According to the report, retirement planning in the U.S. began to transition from defined benefit plans to defined contribution plans with the passage of legislation in 1978. "This move shifted the savings burden from employers to employees, leading many to worry that Americans wouldn't be prepared for retirement," researchers observed.

However, the paper pointed out, defined benefit plans were associated with both systemic and individual plan challenges, as defined benefit coverage was not portable, and the share of workers covered was relatively low: about half of the private sector workforce had a defined benefit plan in 1960, but this share had fallen to 38% by 1980, and had reached 26% by March 2018. By contrast, researchers said, 71% of civilian employees currently have access to either a defined contribution or defined benefit plan, and in 80% of married couples, at least one spouse has access to a retirement plan.

In addition, researchers noted that thanks to modern plan design and automatic features that encourage better savings behaviors, employees in workplace retirement plans are currently saving more than at any time in the past, with total employee and employer contributions increasing from an average of 9.9% of employee salaries in 1984 to 12.8% of employee salaries in 2017.

The paper's authors also argued that statistics that cite low average 401(k) account values paint an incomplete picture, given that at the end of 2018, defined contribution plans and IRAs accounted for only about 40% of all retirement assets, while around 60% of retirement assets existed outside these accounts in defined benefit plans, fixed and variable annuities, and government retirement funds. They also pointed out that retirement savings should be seen not as a "three-legged stool," but as a "five-layered pyramid" that includes Social Security, homeownership, employer-sponsored retirement plans, IRAs, and other assets.

In addition, the paper cited statistics indicating that future retirees will be able to maintain the standard of living enjoyed by previous generations; i.e., that retirees born during the Great Depression had a median income equal to 109% of their average inflation-adjusted earnings, while Gen Xers are on track to replace 110% of their earnings.

Finally, the study's authors observed that refinement of regulatory oversight along with modern plan design and financial advice have resulted in better protections for savers than existed historically. "At the same time," they added, "the flexibility offered by defined contribution and other plans gives savers more control over where they work and how they save."


Employers Turn to Innovative Strategies to Limit Health Care Costs

As the average total health benefit cost per employee increased 3.0% in 2019 to reach more than $13,046, following a rise of 3.6% in 2018, health benefit cost management remains imperative for companies, the results of an annual survey conducted by human resources consultancy Mercer indicated.

The survey findings were based on a national probability sample of public and private employers completed by 2,558 employers in the summer of 2019. According to researchers, although 2019 marks the eighth consecutive year of health benefit cost growth in the low single digits, and employers expect costs to rise at a similar pace next year, cost increases continue to outpace overall inflation.

When asked about their priorities for the next five years, 42% of the large and midsize employers (500+ employees) surveyed identified addressing healthcare affordability for low-paid employees as an important strategy. The survey found that in 2019, most large and midsize employers did not hold down premium costs by requiring members to pay more out-of-pocket for health services. For example, researchers noted, the average individual deductible in a preferred provider organization (PPO) grew just $10 in 2019, to $992. However, the survey also showed that the average deductible increased by more than $250 among small employers (10-499 employees).

The findings further indicated that in 2019 some larger employers that had offered a high-deductible plan with a health savings account (HSA) as the only medical plan changed strategies and added a traditional PPO or health maintenance organization (HMO) as an option. But the survey also found that enrollment in high-deductible account-based plans has been rising steadily, to 36% of all covered employees in 2019, up from 33% in 2018, 23% in 2014, and just 9% in 2009.

Researchers observed that as employers search for cost management strategies that do not shift cost to employees, many are turning to innovative tech-enabled programs that help employees manage chronic conditions or other health needs, such as musculoskeletal conditions, infertility, and insomnia. The survey indicated that in 2019, 58% of all large and midsize employers, and 78% of employers with 20,000 or more employees, offer one or more such targeted health solutions. The survey also found evidence of the growth in telemedicine, with 88% of large and midsize employers offering a telemedicine program to their members in 2019, up from 80% in 2018, and only 18% in 2014.

Moreover, the survey indicated that spending on all prescription drugs increased 5.5% in 2019 among large and midsize employers, down from 6.5% in 2018 and 8.0% in 2015. Researchers noted, however, that spending on specialty drugs rose 10.5% in 2019, down only slightly from 11.9% in 2018. The results also showed that 52% of all large and midsize employers and 78% of employers with 20,000 or more employees now steer employees to a specialty pharmacy that typically provides enhanced care management.


HR Leaders Warned To Prepare For the Future of Work

Noting that only 9% of chief human resources officers (CHROs) agree that their organization is prepared for the future of work, technology consultancy Gartner, Inc. advised senior HR leaders to develop strategies to help transition their company to a future in which the workplace is shaped by artificial intelligence and other digital technologies.

In a report released on October 28, researchers identified five areas that deserve deeper consideration by HR leaders as work continues to evolve. First, they noted, data is increasingly used to make work-related decisions in talent acquisition and management, and even workplace design. The report cited recent research indicating that 75% of organizations are dramatically increasing their investment in analytics. The authors cautioned that this increasing focus on talent analytics is forcing senior HR leaders to consider how to collect and use data in an ethical way.

Second, researchers observed that 73% of CHROs surveyed say building critical skills and competencies is a top priority. The report warned, however, that the skill sets needed are changing significantly, as in nearly two-thirds of recent job postings, more than 25% of the required skills had changed since just five years ago. To provide employees with the learning opportunities they will need to develop critical skills, researchers said, HR should reimagine skills development to leverage new technology while still providing employees opportunities to develop.

Third, the report recommended that companies develop an internal transparency strategy. The study cited survey data showing that although nearly 60% of candidates believe they are well-informed about the companies they are applying to, 71% said they think employers should increase transparency. To meet employees' growing expectations for information transparency, researchers advised employers to train managers on how to operate in a more transparent environment in which employees are given access to more information.

Fourth, the study noted that research shows that 69% of a manager's current duties—including approving expenses, reviewing a project's status, and onboarding new employees—will be automated by 2024. The study recommended that HR leaders focus on determining which management tasks should be automated, establishing new expectations for managers, and designing career paths for growth with fewer management opportunities.

Finally, the report observed that AI deployment is already widespread, with 70% of CHROs surveyed reporting that they expect investments in AI to replace jobs in their organization within the next three years. However, while acknowledging that jobs that will be lost as new technology is implemented, researchers pointed out that technology will enable access for new talent pools, and advised companies to implement technology that can create an enabling work environment for new entrants to the labor market.


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
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