Health Care Organizations Focused on Improving Retirement Plan Participant Savings

Implementing lessons learned from behavioral finance and measuring plan success by participant retirement readiness can help, according to Brodie Wood, with Voya Financial.

Top priorities over the next two years for sponsors of health care organization defined contribution (DC) plans are increasing employee savings/contribution levels (96% say this is very important or important), increasing plan participation (89%) and helping employees with holistic financial wellness (81%), according to the 2019 Voya health care report.

“Motivating employees to save adequately” is the top plan management challenge selected by 81% of the plan sponsors surveyed. “Perhaps one reason many health care organizations struggle with motivation is that they have yet to implement lessons learned from behavioral finance: techniques to overcome participant inertia and indecisiveness,” says Brodie Wood, national practice leader, health care, Voya Financial. “By changing the plan design and enrolling participants in the plan by default at a level that will bring them closer to retirement readiness, even those employees not motivated to save adequately will be on track to achieve retirement success.”

He adds, “Again, it is plan design changes—automatic enrollment at a high deferral rate, automatic deferral increases and stretch the match strategies—that can bring about progress beyond the incremental changes achieved with additional employee education and counseling.”

Wood notes that many health care organizations continue to measure plan success by the participation rate rather than by a retirement readiness score or average deferral rate. “Adopting automatic plan features makes ‘participation rate’ a moot point and leads organizations to adopt retirement readiness as the preferred gauge of success,” he says.

To make employees more retirement ready, some health care employers rely on on-site representatives of their service providers to do more—principally in the area of education. Nearly 60% say they would like to see more one-on-one and group education meetings. More than half (52%) say they would like to see on-site representatives do more to discuss topics beyond the retirement plan with participants.

Only 12% find plan service providers very effective at motivating employees to increase their contribution to an appropriate level, and another 12% find their plan service provider very effective at supporting participants with their overall financial well-being. Nearly six in 10 (59%) health care organizations depend on their plan advisers and consultants to meet with employees to provide retirement plan guidance or advice.

However, Voya finds DC plans in the health care sector are showing stats in line with those of DC plans in the corporate sector. On average, 67% of employees participate in their plan and contributions average 8% of pay.

The 2019 Voya health care report—Prescription for Retirement Plans in the Health Care Sector—presents findings and implications from a survey of 95 health care organizations. The survey was conducted during a three-week period in July 2019. Nearly two-thirds of all respondent health care organizations offer a 403(b) plan, nearly two-thirds offer a 457(b) plan, and nearly half (47%) offer both. Besides these plan types specific to tax-exempt organizations, 44% offer a 401(k) plan.