Survey Says | Published in September 2016

Are Health Benefit Costs Affecting Retirement Plans?

Healthcare costs are on the rise

By Rebecca Moore | September 2016
Art by Andrea Chronopolulos
With rising health care costs we asked NewsDash readers if those have impacted their company’s decisions about its retirement plan and what it has done, or not done, in terms of the plan, due to health benefits costs.
The majority (82.8%) of responding readers said the rising costs have not affected their company’s decisions about its retirement plan, while 17.2% said they have. Where their company did take action, 3.8% of respondents reported it had reduced the employer match or discretionary contributions, and the same percentage said their firm had changed providers/advisers in order to lower costs.
“Negotiated lower costs for plan services/investments” was selected by 7.7% of respondents.
Among those who chose “other,” the actions included changing the match to a “discretionary” match based on company profits; not increasing the match as the company had wanted to do; and freezing pensions or selling certain pension assets to an insurance company.
Nearly all (96.4%) of responding readers work in a plan sponsor role, while the rest (3.6%) are third-party administrators (TPAs), recordkeepers or investment managers. As always, verbatim responses reflect the opinions of individual readers and not the stance of PLANSPONSOR and its affiliates at Asset International.
“We actually increased our 403(b) match this year and plan to increase it again next year.”
“Six of the 11 committee members are participants in the soft-frozen DB [defined benefit] plan. Guess how they vote.”
“So far, we’ve not made changes to the retirement plan due to health care costs, but we have raised deductibles and lowered health reimbursement amounts. Every year it’s a juggling act to keep costs down while providing the best benefits package we can.”
“Our match was always 100% of the first 3%—in the two years we have had a discretionary match, we were at 2% and 2.5%. Still not equal to what it used to be.”
“We reduced the profit-sharing contribution from 10% to 5% due to the recession in 2008 and 2009 but have not been in a position to increase it again, nor do I think we ever will, simply due to the continued overall rise in expenses including health care.”
“Employees are decreasing retirement contributions to cover increasing health care costs. But, as an employer, it’s seen as the rising cost of maintaining the business.”
“Our employer match did not benchmark well against our peers’ so we actually raised the match by 1%.”
“Add up the new mandated coverages, increased provider costs and the price of prescription drugs, and health care costs are out of control.”
“Companies should find ways to reduce the actual health care costs rather than reduce other benefits.”
“We have put into place several of the items mentioned, for our retirement plan, because they were the prudent thing to do, regardless of the overall cost of benefits.”
“We’ve seen no greater increases to our self-funded administration and stop/loss costs due to the ACA [Patient Protection and Affordable Care Act] than the normal excessive annual increases we are subjected to due to ‘medical cost inflation’ per our stop/loss carrier.”

And the Editor’s Choice goes to the reader who said, “So far, health care costs have not affected our retirement plan decisions, but it may be just a matter of time.”