Employers Still Shell Out Most for Retirement Benefits

November 26, 2008 (PLANSPONSOR.com) - Retirement benefits remain employers' single largest sector of benefits spending, but health benefit costs are catching up, according to a new Employee Benefit Research Institute (EBRI) report.

According to a study published in the November 2008 issue of EBRI Notes,retirement benefits accounted for the majority of total benefit spending (59.7%) in 1960, followed by other benefits (25.8%) and health benefits (14.4%).

Nearly a half century later, in 2007, retirement benefits were still the largest component of all benefit spending, but had declined to 47.7% of the total; spending on health benefits had increased to 42.8%, while “other benefits” declined to9.5%.

Employers spent $7.8 trillion on total compensation in 2007, according to the most recent data from the U.S. Commerce Department’s Bureau of Economic Analysis (BEA), EBRI said.

Wages and salaries accounted for the lion’s share, $6.4 trillion (or 81.6%), while benefits made up the remainder, $1.5 trillion (18.4%). EBRI also found that U.S. employers’ total compensation spending increased by nearly 35% between 2000 and 2007 to almost $8 trillion by year-end 2007.

The EBRI report said that the average annual growth rate of employer spending on all benefits in the 1980s was 7.9% and fell 5% in the 1990s, due to the adoption of managed care among employment-based health plan sponsors.

The data summary is available here .

align="center"> Employer Spending for Benefits, 1960?2007

align="left"> 1960 1970 1980 1990 2000 2007

align="left">($ billions)

align="left">Total Compensation $296.5/ $617.1/ $1,651.1/ $3,337.5/ $5,781.8/ $7,810.7

align="left">Wages and Salaries 272.8/ 551.5/ 1,377.4/ 2,754.0/ 4,829.8/ 6,355.7

align="left">Total Benefits 23.6/ 65.5/ 273.7/ 583.5/ 952.6/ 1,454.9

align="left">Retirement income benefits 14.1/ 40.1/ 160.1/ 292.9/ 458.8/ 693.9

align="left">Social Security (OASDI) 5.6/ 16.2/ 55.6/ 137/.3 233.3/ 307.5

align="left">Private employers 4.9/ 13.1/ 55.3/ 63.8/ 113.5/ 199.9

align="left">Public employers 3.7/ 10.8/ 49.2/ 91.8/ 112.0/ 186.4

align="left">State and local governments 1.8/ 5.1/ 19.1/ 33.0/ 39.6/ 69.2

align="left">Federal government 1.9/ 5.7/ 30.1/ 58.8/ 72.4/ 117.2

align="left">Civilian Retirement 0.8/ 2.0/ 15.9/ 28.7/ 41.3/ 54.3

align="left">Military retirement 0.8/ 3.2/ 12.5/ 27.5/ 28.2/ 60.2

align="left">Railroad retirement 0.3/ 0.5/ 1.7/ 2.6/ 2.9/ 2.7

align="left">Health benefits 3.4/ 14.6/ 73.0/ 211.9/ 399.6/ 623.1

align="left">Medicare hospital insurance 0.0/ 2.3/ 11.6/ 33.5/ 67.0/ 88.5

align="left">Group health insurance 3.4/ 12.1/ 61.0/ 176.9/ 331.4/ 532.1

align="left">Military medical insuranceb 0.0/ 0.2/ 0.4/ 1.5/ 1.2/ 2.5

align="left">Other Benefits 6.1/ 10.8/ 40.6/ 78.6/ 94.2/ 138.0

align="left">Unemployment insurance 3.0/ 3.8/ 17.2/ 24.5/ 29.8/ 42.5

align="left">Workers' compensation 2.0/ 4.6/ 19.3/ 46.9/ 52.0/ 78.2

align="left">Group life insurance 1.1/ 2.4/ 4.1/ 7.2/ 12.4/ 17.3

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