Benefits June 8, 2001

Health Spending Increases Led Benefits Trends

June 8, 2001 (PLANSPONSOR.com) - Employers spent $5.3 trillion on total compensation in 1999, with wages and salaries accounting for 84% and benefits making up the remainder, according to the Employee Benefits Research Institute (EBRI)

Reported by

Camilla Klein

In comparison with employer benefits spending in 1960, in 1999 the proportion of total benefits spending on:

retirement benefits declined from 59.6% to 47.8%
health benefits increased from 14.3% to 48.1%
other benefits declined from 25.7% to 10.4%

In the 1980s, employer spending on all benefits increased at an average annual rate of 8.1%, falling to 3.7% in the following decade.

The rate drop was largely due to the slowdown in spending on group health insurance, which fell from an average growth rate of 11.9% to 4.5% in the 1990s.

The rate of employer spending on group health insurance has fallen steadily from 1981, when it increased by 17.5%, to a negative growth rate in 1997 of minus 4.9%. Since then, the growth rate of employer spending on this benefit has been increasing, reaching 7.4% in 1999.

Private Sector Benefit Spending $60 billion by 2000

Research by EBRI also shows that spending on retirement income benefits, excluding Social Security, increased at a rate of 4%, in comparison to a much slower average annual growth rate of 1.2% in the 1990s.

Spending on retirement benefit, excluding social security, is divided as follows:

Private-sector employers spent $55.3 billion in 1980, increasing to $62.6 billion in 1990 and falling to $60.4 billion at the end of the decade
State and local government spent $19.1 billion in 1980, rising to $33 billion ten years later, and increasing to $42.5 billion in 1999
The federal government spent $30.1 billion on retirement income benefits, less Social Security and railroad retirement in 1980. This increased to $58.8 billion in 1990, and to $69.6 billion in 1999.
In the 1980s, the 5.6% growth rate in employer spending for retirement income benefits, less Social Security, by state and local governments outpaced that of the private sector, which increased at an annual rate of 1.2%.

In the 1990s, private spending on retirement income benefits decreased at an average annual rate of minus 0.4%, in comparison to the 2.9% rate among state and local governments.