Employers Balance Costs with Effective Benefits

November 14, 2012 (PLANSPONSOR.com) Fifty-eight percent of executives say employee benefits costs are the leading factor impacting total reward decisions.

According to the 2012/2013 Verisight and McGladrey Compensation, Retirement and Benefits Trends Survrey, employers are consequently balancing the need to control costs with the desire to attract (47%) and retain (48%) key employees.  

When it comes to evaluating retirement plans, costs of investments (59%), costs of services (57%) and quality of service (53%) continue to be the major factors influencing decisionmaking. The overwhelming majority of employers (98%) received disclosures from their plan providers regarding fees. After reviewing these disclosures, 16% report they have a better understanding of fees while 69% feel they fully understood costs prior to receiving the disclosures.  

Fiduciary status is also becoming an increasingly important issue for employers today. Overall, 84% of organizations surveyed use external or third-party advisers for consultation about their defined contribution (DC) plans. Of these, 73% say they understand their adviser’s fiduciary status, up seven percentage points from 2011 (66%).

Defined contribution plans remain the dominant retirement savings vehicle across the U.S., regardless of company size: 99% of employers surveyed sponsor a DC plan. Fourteen percent have defined benefit (DB) plans, while 6% offer an employee stock ownership plan (ESOP).  

As employers strive to attain appropriate investment diversification without overwhelming their participants, providing choices to employees remains paramount. Half (51%) of the employers surveyed offer 11 to 20 plan investment options. Mutual funds are still the most common investment type and are offered by 92% of retirement plans.  

Eighty percent of employers in the survey experienced an increase in health care costs in 2012. One-third say their health plan costs rose by at least 8% from 2011 to 2012. To address this increase, employers are passing more of the cost to employees by raising their share of the premiums, deductibles and co-payments.   

For companies overall, the average monthly premium for family coverage edged up to $1,252 for 2012, with employees contributing a historically high 36% of the cost. The average monthly premium for employee-only coverage was $539 with employees contributing 22% of the cost.

Twenty-six percent of employers surveyed are undecided about whether they will continue group health coverage in the next 24 months. Nearly half of respondents (45%) already offer wellness programs, and three out of four plan to improve their programs in the upcoming year.    

Preferred provider organization (PPO) plans remain the most popular healthcare option: 75% of employers offer a PPO. Thirty-nine percent sponsor a high deductible health plan (HDHP) compared to 36% that use a health maintenance organization (HMO). 

Conducted online from August through October 2012, the survey polled more than 958 organizations drawn from a national sample. The majority of respondents are midsized companies; however, small and large firms are also represented. Respondents reflect a wide range of industry types including finance/banking, health care, manufacturing, distribution, construction, not-for-profit and services.  

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