Health Care Plan Sponsors Bumping Up Automatic Options

December 1, 2006 ( - Nearly one-quarter of health care plan sponsors automatically enroll eligible employees in defined contribution plans, 9% offer automatic deferral rate increases, and 32% offer a managed account investment option, a recent survey found.

The 2006 survey by The American Hospital Association (AHA) and Diversified Investment Advisors, Inc. found that health care employers, like employers in other industries, are moving in a more automatic direction in terms of the retirement plans they offer, according to a news release.

Health care employers have also expanded their investment options, with 37% of plan sponsors saying they offer more than 20 funds, where 26% said they offered more than 20 last year, and 30% two years ago. More than one-half of the plan sponsors surveyed said they would like to add asset allocation, equity growth, balanced and stable value funds to their plan offering next year.

“Many plan sponsors are augmenting their fund array with additional funds from various families,” said David Ray, the not-for-profit practice leader at Diversified, in the press release. “As a result, we see a connection between the increase in the number of investment options and increased investment flexibility.”

While more funds make the investment choice more flexible, they also complicate the decision process and require employers to sharpen their focus even more on plan education, which continued to be the top challenge for 83% of respondents, along with encouraging employees to take appropriate action (71%). In addition, 63% of plan sponsors surveyed say they will improve education within the next year.

More Outsourcing

Health care plan sponsors are increasingly outsourcing plan administrative functions to their providers, with sponsors with at least 1,000 employees saying they outsourced hardship withdrawals (58% in 2006 vs. 56% in 2005), processing loans (62% in 2006 vs. 58% in 2005), and paperless enrollments (42% in 2006 vs. 39% in 2005).

“Health care plan sponsors are focused more on the day-to-day challenges of running a hospital,” said Amy Goble, vice president of account management, AHA Solutions, Inc., in the news release. “By outsourcing retirement plan administration, human resources departments can focus more on strategic HR issues such as hiring, retention and training.”

However, 44% of respondents said they want to maintain control in-house and 59% of employers feel they have adequate HR staff to handle day-to-day plan management.

For a copy of the survey contact Amy Lee at 202.626.2284.