Benefit Plan Trends - Volume 62, Issue 8

Lundstrom Insurance Agency, Inc.

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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


Automation Could Lead To Further Concentrations of Growth

Urban and rural economies across the U.S. have been on diverging trajectories for years, and unless well-targeted interventions are undertaken, automation could further concentrate growth and opportunity, while causing job displacement in rural areas and smaller cities, a recent report published by the McKinsey Global Institute warned.

"The future of work in America: People and places, today and tomorrow," was published in July 2019. The analysis of 315 cities and more than 3,000 counties showed that the United States can be viewed as a mosaic of local economies, with widening gaps between them.

The report found that 25 megacities and high-growth hubs, which account for around 30% of the U.S. population, have generated most of the job growth in the country since the Great Recession, with the high-growth industries of high tech, media, health care, real estate, and finance making up large shares of these local economies. The study also identified 54 trailing cities and around 2,000 rural counties, which collectively account for roughly 24% of the U.S. population, that have older and shrinking workforces, higher unemployment, and lower educational attainment. Between these extremes the analysis identified thriving niche cities and a larger "mixed middle" with modest economic growth, which together account for around 30% of the U.S. population. The remaining 16% of the population were categorized as residents of extended suburbs of U.S. cities, or the urban periphery.

According to researchers, these different starting points are likely to determine whether communities will have the momentum to cope with automation-related displacement. They projected that the 25 cities and peripheries that led the post-recession recovery will capture 60% of U.S. job growth through 2030, while the mixed middle and trailing cities will see modest job gains. By contrast, the analysis showed, rural counties are likely to experience a decade of flat or even negative net job growth. Researchers added that these shifts are occurring at a time when geographic mobility is at historic lows: while 6.1% of Americans moved between counties or states in 1990, this figure had declined to 3.6% by 2017.

The report also found that although the next wave of automation will affect occupations across the country, displacing many office support, food service, transportation and logistics, and customer service roles, the U.S. economy will continue to create jobs, particularly positions in health care, STEM fields, and business services, as well as roles requiring personal interaction.

Researchers observed that the challenges employers will encounter as a result of these trends will vary depending on the nature, mix, and geographic location of their workforce. For example, researchers noted, the challenges facing a retail or food chain with a distributed customer-facing workforce are not the same as those facing an employer with a geographically concentrated white-collar workforce.

"All employers will need to make adept decisions about strategy, investment, technology, workflow redesign, talent needs and training, and the potential impact on the communities in which they operate," the report concluded.


U.S. Households Burdened By Debt Find It Hard To Save

As saving for retirement can be challenging, especially while on a tight budget, a study published in July 2019 by the Center for Retirement Research at Boston College (CRR), attempted to answer the question of why so many U.S. workers report that they have little money set aside to absorb financial shocks.

The issue brief, "Why Are So Many Households Unable to Cover a $400 Unexpected Expense?" was written by Anqi Chen, assistant director of savings research at the CRR. Citing data from two recent Federal Reserve surveys, Chen observed that despite the strength of the economic recovery in recent years, 41% of households surveyed in 2017 said they would find it difficult to cover an unexpected expense of just $400. In her study, Chen used these data to analyze the question of why so many households say they are unable to manage a relatively small unexpected expense.

The study cited survey results showing that, as expected, lower-income households were most likely to say they would be unable to pay for an emergency expense of $400, with 72% of respondents earning less than $25,000 a year reporting that they would have trouble covering such an expense. However, the findings also indicated that 34% of households with annual earnings of between $75,000 and $99,999 and 17% of households with annual earnings of $100,000 or more admitted that they would find it hard to pay for a $400 unexpected expense.

Chen pointed out that other survey data show that just 21% of households reported having less than $400 in their checking or savings accounts. She added, however, that another 17% of the households included in this survey said they would have trouble paying for an unexpected $400 expense once they paid their outstanding credit card debt, despite having at least $400 in their bank accounts.

The study looked at several possible explanations for why so many households—and especially middle- and high-income households—appear to be unable to cover a relatively small unexpected expense, including financial literacy, education, and other socioeconomic characteristics. Based on an analysis that included measures for both financial literacy and educational attainment, Chen found that financial literacy scores had little ability to predict whether a household would have trouble covering a $400 unexpected expense, while educational attainment had strong predictive power.

Moreover, the results of a latent class analysis that examined the characteristics of these vulnerable households showed that a subgroup were less advantaged; i.e., they either recently lost their job, had a low income, or had a high school degree or less. However, a second subgroup of households were identified who had relatively high incomes, net worth, and rates of participation in retirement plans, but who also had relatively high mortgage payments, credit card debt, or other loan payments.

"Many of these households may have enough liquid assets to cover a modest emergency expense but they also have mortgages, student loans, and/or other installment loans," Chen observed. "These loan payments, which constrain their household budgets, could explain why so many middle- and higher-income households do not have precautionary savings."


Employers Report an Ongoing Commitment to Providing Employee Benefits

While employee benefit offerings are largely holding steady in the U.S. amid a stable labor market and regulatory environment, certain benefits, such as student loan repayment programs, paternity leave, telecommuting, standing desks, and telemedicine are becoming increasingly common, according to the results of an annual survey on employee benefits released by the Society for Human Resource Management (SHRM) on June 25.

In the survey, which was conducted in April 2019, 2,763 randomly selected HR professionals were asked whether over the past 12 months their organization had increased, decreased, or sustained their benefit offerings in certain categories. When the respondents were asked which benefit categories they consider most important, the leading answer was health care, followed by investment and retirement, leave, and flexible working.

The findings indicated that family-friendly and wellness benefits in particular are continuing to grow in popularity. The results showed, for example, that 60% of the employers surveyed currently offer standing desks, compared to one-quarter just five years previously. The survey also found that onsite lactation or mother's rooms are offered by 51% of employers, up 16 percentage points from 2015.

The survey provided clear confirmation that leave and flexible working benefits are gaining traction, with telecommuting on a part-time basis now being offered by 42% of employers. The results also indicated that the share of employers offering family leave above the time required by the Family and Medical Leave Act (FMLA) increased by six percentage points between 2018 and 2019. Moreover, the findings showed that although the share of employers offering paid leave benefits for new fathers went up only slightly between 2018 and 2019, it has increased 14 percentage points over the past five years.

In terms of health care benefits, the survey showed that 70% of respondents have maintained their health care benefits at existing levels in 2019, with just 20% saying they have increased benefits, and only 3% reporting that they have decreased benefits. The findings also showed that of the health plan types, preferred provider organizations (PPOs) continue to be the most popular health insurance option, with 85% of the organizations surveyed indicating that they offer PPO plans. The second-most popular plan type was found to be high-deductible health plans linked to a savings or spending account, with 59% of respondents reporting offering such plans.

Moreover, the results indicated that the share of employers providing telemedicine and telehealth services increased by 10 percentage points between 2018 and 2019. Additionally, 71% said they offer long-term disability benefits, 61% indicated that they offer short-term disability benefits, and 27% said they offer accident insurance.

While still relatively rare, the share of employers offering company-provided student loan repayment benefits was found to have risen from 4% in 2018 to 8% in 2019. According to researchers, this category is expected to gain additional traction if pending Federal legislation is approved. A further 56% of respondents said they offer tuition assistance.

In addition, the findings indicated that the share of companies offering relocation lump-sum payments increased by six percentage points between 2018 and 2019. Researchers noted, however, that while housing and relocation benefits were once commonly provided by employers, they are now offered by less than one-third of the organizations surveyed.


Slow Decision-Making Can Lead To Recruitment Challenges

To recruit and hire employees in the current digital era and hypercompetitive labor market, companies have to redefine the role of the hiring manager to ensure that they are acting decisively and quickly, as a lag in decision-making can cause organizations to lose out on the best candidates, according to a study recently released by technology consultancy Gartner, Inc.

In a report released on June 26, researchers cited an analysis showing that more than three-quarters of hiring managers do not act decisively. According to the study, the characteristics of decisive hiring managers include focusing on prioritizing future talent needs, broadening the candidate funnel, and sharing hiring decisions with experts across the organization.

The research indicated that decisive hiring managers can be highly effective, finding that such managers hire 10% more high-quality candidates and 11% fewer low-quality candidates than typical hiring managers. The study also found that organizations that reward decisive hiring manager behaviors report a 17% reduction in time-to-fill.

The results of the analysis further revealed that the amount of time it takes a hiring manager to make an offer after interviewing is currently 33 days, up 84% from 2010 to 2018. According to researchers, this longer decision-making stage results in a 16% reduction in the acceptance of offers by candidates. The findings also showed that only 31% of hiring managers understand the vision their business leader has for their team.

Researchers recommended that recruiting executives and their teams change how they partner with hiring managers. Specifically, they advised organizations to avoid relying on the hiring manager alone to determine and articulate future talent needs, and to instead encourage recruiting leaders tap into sources beyond the hiring manager to define hiring needs based on the future talent strategy of the organization, and not simply on the manager's short-term needs.

Citing evidence that candidates trust a hiring manager nearly four times as much as they trust a recruiter to provide the information they need to make a decision, researchers further recommended that hiring managers spend more of their time engaging with candidates. They also suggested that the recruiting function encourage hiring managers to prioritize candidate engagement, motivate leaders by linking hiring to their leadership role, and make it easier for hiring managers to go beyond their existing networks in sourcing talent.

The report pointed out that additional sources of information on future talent needs include business leaders, the workforce planning team, and the analytics team, who can provide insight into critical questions regarding the skills the business needs to grow, the skills and roles their competitors are hiring for, and the future development of the local 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.



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