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Benefit Plan Trends, Volume 62, Issue 11

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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Employer Health Care Costs Projected To Increase Nearly 5% In 2020

As employers anticipate health care cost increases of 4.9% in 2020, up from 4.0% in 2019, keeping health care affordable is an ongoing challenge for companies, according to the findings of a survey on employers' health benefit strategies conducted by human resources consultancy Willis Towers Watson.

The survey of 610 U.S. employers was completed between June and July 2019, and reflects respondents' 2019 health program decisions and strategies. The results showed that while reducing the cost of health care and increasing its affordability remain the top priorities for 93% of the employers surveyed over the next three years, 63% of respondents said they see health care affordability as the most difficult benefits challenge they will face over the same period.

Nonetheless, 95% of respondents expressed confidence that their organization will continue to sponsor health care benefits for active employees in five years' time, and 74% said they are confident that their company will be sponsoring these benefits in 10 years' time. The findings also suggest that the rising cost of health care puts financial pressure not just on employers, but on employees, as 89% of the employers surveyed said they believe rising health care costs are a significant source of financial stress for their employees.

Researchers observed that employers are seeking to reduce health care costs by focusing on three main areas. First, they noted, given that one of the main drivers of growing affordability concerns is pharmaceutical spending, and especially the rising cost of specialty pharmaceuticals, employers are increasingly adopting solutions aimed at lowering drug costs. For example, the survey found that the share of employers surveyed who said they plan to implement coverage changes to influence site of care for specialty pharmaceuticals dispensed through the medical benefit is set to more than double over the next few years, from 21% in 2019 to 55% by 2021.

Second, the findings indicated, more employers are continuing to make stepwise changes in implementing value-based designs to manage costs, while also driving better health outcomes for their employees. The survey found, for example, that the share of employers reducing out-of-pocket costs in order to steer employees toward using services proven to produce positive health outcomes at a lower price is expected to nearly triple over next few years, from 17% in 2019
to 46% by 2021.

Third, the results showed that even as employers seek to reduce their overall costs, mental and behavioral health was cited by employers as the top clinical area of focus over the next three years. For example, the survey indicated that the percentage of employers redesigning their employee assistance programs to enhance the emotional and financial well-being of employees is expected to increase from 33% in 2019 to 74% in 2021; and the share of employers measuring the stress level of their employees is on track to triple by 2021, from 16% to 53%.


Recruiters Report Gaps between Employer Requirements and Candidate Skills

While most recruiters express confidence that they can find the right candidates for open positions, and claim to be satisfied with the quality of the available candidates, they also report having difficulties filling positions, the results of a survey of recruitment professionals in North America and Europe conducted by job website Monster indicate.

The survey measured opinion on recruitment and the role that recruiters play in finding quality candidates among 1,700 recruiters in the U.S., Canada, the United Kingdom, France, Germany, and the Netherlands between August 6 and September 17. Of the recruiters surveyed, 95% of said they are confident they can find the right candidate for open positions, and 77% said they consider the active candidates to be high quality.

Nonetheless, 71% of the recruiters polled acknowledged they sometimes struggle to fill a position because of candidate skills gaps. Additionally, 85% of respondents said they believe that candidates exaggerate their skills and competencies on their resume, and 70% reported having to adjust the employer's expectations to consider candidates with most or some of the necessary skills to find the right fit.

Researchers observed that as members of Gen Z (ages 18-24) enter the workforce, recruiters are having to adapt their recruitment strategies, in part by consulting the slightly older millennials. They cited the results of a 2019 Monster survey of job candidates showing that 94% of Gen Z candidates agree that a video of a recruiter would help them better understand a job opportunity. Specifically, the survey found that significant shares of Gen Z candidates believe that video will play a role in the job search process in the future through video calls with recruiters/potential employers during the interview process (43%), job descriptions (32%), and application submissions (31%).

Meanwhile, the survey of recruiters indicated that millennial recruiters are ahead of the curve and more interested in using video in the job search process than their Gen X and baby boomer colleagues. For example, 92% for millennial recruiters, compared to 88% of Gen X and 78% of baby boomer recruiters, said they would consider interviewing candidates live via video. The survey also showed that millennial recruiters, compared to their Gen X peers, were more likely to say social media advertising is an effective tool for recruitment (79% vs. 66%), and to report that they always use social media advertising to find candidates (41% vs. 34%).

In addition, although 46% of the recruiters surveyed said they continue to rely on the in-person interview to determine if a candidate is the right fit, the findings suggested that there is a generational shift among recruiters away from interviewing candidates in person, with millennial recruiters (38%) placing less emphasis on such interviews than Gen X (52%) or baby boomer (68%) recruiters.

When asked to identify the benefits candidates are most often seeking, 45% of the recruiters cited a flexible schedule, 35% said paid time off, and 32% mentioned work from home options. Not surprisingly, the North American recruiters (50%) were more likely than the European recruiters (22%) to report that candidates are looking for a job with health care benefits.


Working Longer Significantly Decreases the Risk of Retirement Shortfalls

Although current estimates suggest that half of working families in the U.S. are at risk of not being able to maintain their standard of living if they retire at age 65, the retirement readiness of households improves considerably if people work two years longer, especially if they also increase their savings, a study published in October 2019 by the Center for Retirement Research at Boston College has concluded.

The study, "How Would More Saving Affect the National Retirement Risk Index?" was written by Alicia H. Munnell, Wenliang Hu, and Geoffrey T. Sanzenbacher. The authors examined the impact on the National Retirement Risk Index (NRRI) of increasing contribution rates for workers, and of working two additional years. Using data on U.S. households from the 1983-2016 Surveys of Consumer Finances (SCFs), the NRRI indicates the share of households whose projected replacement rates, or retirement income at age 65 as a share of pre-retirement income, are more than 10% lower than their target replacement rates, or the income these households need to maintain their pre-retirement standard of living.

According to the study, in 2016, the year of the most recent SCF, the NRRI was 50.2% across all households, 48.1% for households with access to a 401(k) plan, and 62.4% for households with no retirement plan access. Researchers then increased the contribution rate for those households with access to a 401(k) plan by various percentage points and analyzed the effect on the NRRI. The results showed that increasing each household's contribution rate by one percentage point would reduce the NRRI to 46.9%; increasing the rate by five percentage points would lower the NRRI to 41.6%; and increasing the rate by 10 percentage points would reduce the NRRI to 33.8%.

The study's authors acknowledged that the finding that even a five-percentage-point increase in the contribution rate has only a modest impact on the NRRI may seem surprising, but pointed out that previous analyses have shown that given the structure of Social Security benefits, the only way to dramatically improve the retirement readiness of households is to increase the age at retirement. Specifically, they found that if the analyzed households retired at age 67 (Social Security's eventual full retirement age), rather than at age 65 (as assumed in the NRRI), the NRRI would decline from 50.2% to 31.5% without any additional contributions, and would drop to 23% if combined with a five-percentage-point increase in the contribution rate.

"The only way to make a dramatic dent in the retirement risk problem is to combine saving more with working two years longer," the study's authors argued. "This finding suggests that policymakers, employers, and households could have the biggest impact on meeting the retirement challenge by using more than one tool in their arsenal."


Women Remain Underrepresented In Leadership Roles

The number of women in senior leadership positions at U.S. companies has risen over the past five years, but women continue to be underrepresented at every level of management, indicating that companies need to focus their recruitment and promotion efforts earlier in the leadership pipeline to move toward gender parity, according to a research report published in October 2019 by McKinsey & Company.

The report, "Women in the Workplace 2019," provides details of the consultancy's fifth year of research on women in the workplace, conducted in partnership with LeanIn.Org. The study includes data and insights collected since 2015 from nearly 600 companies, more than a quarter of a million employees surveyed about their workplace experiences, and more than 100 in-depth one-on-one interviews.

The analysis showed that between 2015 and 2019, the representation of women has increased from 17% to 21% in C-suite positions, from 23% to 26% in senior vice president positions, from 32% to 34% in senior manager/director positions, and from 37% to 38% in manager positions. The research also indicated that the number of women in C-suite positions has increased over this period, as the share of companies surveyed that had three or more women in these roles jumped from 29% in 2015 to 44% in 2019.

According to the study, 87% of the companies surveyed in 2019 reported that gender diversity is a top priority for the organization, up from 74% in 2015. However, of the employees surveyed, 61% of female respondents and 51% of male respondents in 2019 agreed that gender diversity is a top priority for their employer, up from 44% and 33%, respectively, in 2015. Moreover, when asked in 2019 if they are actively working to address diversity and inclusion in the workplace, only 47% of female senior leaders and 45% of male senior leaders, and just 19% of female managers and only 13% of male managers, indicated that they are doing so.

Researchers observed that progress for women at the top is limited by a "broken rung," as the biggest obstacle women face on the path to senior leadership is at the first step up from the entry level to the manager level. The analysis revealed that in 2019, for every 100 men promoted or hired at the manager level, only 72 women, 58 black women, and 68 Latina women were promoted to or hired at the manager level.

The report's authors recommended that companies take steps to fix this broken rung, and, ultimately, their talent pipeline. Noting that currently around one-third of companies set targets for the representation of women at first-level management, compared to 41% for senior levels of management, researchers advised companies to set more aggressive targets for hiring women at the lowest management level, and provide unconscious bias training even for employees involved in entry-level employee reviews.

Researchers also recommended that companies require more diverse slates of candidates for all management positions, and that they establish clear evaluation criteria that are designed to gather
objective, measurable input before the hiring and review process begins. Finally, they suggested providing women with leadership training, sponsorship, and high-profile assignments that will put them in line for promotion.


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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