Health Care Plan Sponsors Shorten Vesting Periods to Attract Talent

In the wake of the COVID-19 pandemic and the consequent economic dislocation, health care plan sponsors expect to focus on attracting and retaining employees for the next several years.

These plan sponsors view robust retirement plans as “indispensable” to attracting and retaining employees, says Brodie Wood, National Practice Leader for healthcare, education and NFP Markets at Voya. And, according to industry experts, they are introducing shorter vesting periods and student loan repayment assistance programs to complement their retirement plans.

“The world has totally changed post-COVID-19,” he says. “It’s all about employee retention and attraction, [because] every hospital is really struggling with staffing. They’ve revisited plan designs with an eye for attracting and retaining employees. They have focused on things that are more meaningful for those employees, such as making their monies available sooner.”

Health care organizations are wrestling with how to handle increased turnover rates for clinicians over the next two years. A June TIAA report, “The Current State of Retirement Plans for Healthcare Organizations,” shows that over the next two years, 32% of nurses and 28% of physicians may leave their jobs. The Voya 2022 Health Care Report found that 88% of health care organizations understand that their defined contribution retirement plan helps attract and retain quality staff.

The TIAA report also shows that for nurses, turnover could reach 44% over the next four years.

According to feedback delivered to TIAA’s advisory council by health care plan sponsors in regard to their objectives for the next two years, “recruiting and retaining [employees] is not only their focus for ’22, but it’s the highest strategic priority for ’23,” explains Colin Pierce, managing director, healthcare national practice at TIAA.

“We’re hearing very clearly from our clients and from prospects that there is no bigger strategic priority for them for this year and for next,” he explains. “At a minimum, I would suspect into ’24.”

Plan Sponsors’ Pursuits

Devereux Advanced Behavioral Health, a Pennsylvania-based nonprofit provider of behavioral health services, is among many health care plan sponsors being challenged to recruit and retain talent.

Gayle Collins, national people operations director at Devereux, says the provider is addressing elevated employee turnover by communicating to workers critical information about their plan designs—that the vesting period for retirement contributions is one year, for example.

“The one [plan design] that really helped with our recruiting [was] to be able to tell people that you’re going to be eligible to get money from Devereaux after just one year of employment,” Collins says.

Retirement plan participants previously had to work for two years before being fully vested, and there was no partial accrediting option, Collins explains.

“We identified that, unfortunately, two years is a long time, and a lot of people don’t stay that long,” she says. “For a lot of people, [two-year vesting] didn’t help with recruitment, because they were thinking, ‘I’m probably not even going to be here in two years.’”

Devereux made the change in 2018, prior to the COVID-19 pandemic, but the change has served them well since then.

Longer vesting periods can be a barrier to entry for employees to begin contributing to an employer-sponsored retirement plan, particularly for younger workers and recent college graduates, Wood notes. Student loan debt is also a barrier; in 2020, Voya research found that 96% of individuals with student loan debt would save more for retirement if their debt was under control. 

“Student loan debt is really getting in the way of younger employees contributing to the retirement program,” he says. “A few of these plan sponsors said, ‘our employees in their 20s, they don’t even care about it, they’ve got bigger [financial] stuff.’”

Health care plan sponsors are adding student loan repayment options to attract and retain talent as well.

Devereaux works with recordkeeper TIAA and financial technology startup Savi to aid workers with student loan debt repayment assistance and help participants navigate federal student loan forgiveness programs, says Collins. 

The student debt program works with borrowers, at no cost, to lower their monthly payments, she adds.

“Since we implemented this program a few years ago, our employees that have enrolled in this have overall saved an average of about $188 a month in payments [by] lower[ing] their monthly payments,” says Collins. “For our employees, that’s a large amount of money—that is potentially [a] lifesaving amount of money that they’re saving.”

The program also helps to certify each year that participants have worked for a qualified employer enrolled in the federal student loan forgiveness program, “which over the years has been a really difficult program for people to navigate,” she adds.  

“[It] assist[s] people to get each of the years certified so that they can count them,” Collins says. “Some other people didn’t realize that during the pandemic, when loan payments were frozen and then people didn’t have to make them, that those months and those years still count towards those 10 years for the forgiveness, so they also help with that.”