However, Norm Jacobson, a senior vice president at Sibson Consulting, tells PLANSPONSOR a comparison between last year and this year is difficult because the database of participating institutions has doubled in size.
This year’s study found 69% of public colleges and universities offer both a defined benefit (DB) and defined contribution (DC) retirement plan for employees, while 7% of private institutions do. Fifteen percent of public higher education institutions offer only a DB plan, and 1% of private institutions do. Sixteen percent of public entities offer a DC plan only, compared to 92% of private entities.
One trend among higher education retirement plan sponsors has been to consolidate vendors for DC plans, and that trend is continuing, Jacobson says. Thirty percent of the more than 400 institutions in Sibson’s study only use one DC plan vendor, 41% use two, 16% use three, and 13% use four or more.
According to the study, institutions’ contributions to participants’ DC plan accounts averaged 9.22% of salary, and 78% offer immediate vesting for employer contributions. “One interesting thing is that years ago, it seems almost everyone had immediate vesting, now many are moving to vesting schedules,” Jacobson says. He adds that the trend makes sense since most turnover at higher education institutions is within an employee’s first five years of employment. In the study, 9% of institutions indicated a participant will fully vest in employer contributions in three years, while 4% indicated five years.
Higher Education Health and Other Benefits
Jacobson notes one difference Sibson found this year in higher education benefit offerings is the percentage of institutions offering high-deductible health plans (HDHPs) has increased; 19% in the current survey indicated they offer HDHPs to employees. He says higher education institutions are looking at plan design alternatives to mitigate the 2018 excise tax on high-cost plans imposed by the Patient Protection and Affordable Care Act (ACA), and they want to encourage more consumerism in health care among employees.
This trend goes along with institutions offering more wellness programs, according to Jacobson. The study found the most common wellness initiatives higher education institutions are using include health risk assessments (64%), on-site fitness centers (53%), obesity/weight control programs (44%), tobacco cessation programs (42%) and flu shots (41%).
“I would say these trends come from a combination of factors,” Jacobson says. “The cost of health care has gotten so large—a large part of operating budgets and overall expense—but really, the focus is on changing how people use health care and making employees healthier. Offering HDHPs with savings accounts is one part of the process of changing that.”
Jacobson adds that even though the trend on medical is 8% for higher institutions, it is 8% of a huge number, causing employers distress. “The only way that can change is by employee wellness.”
More higher education institutions are offering employees the benefit of purchasing long-term care insurance. According to Sibson’s study, 79% offer long-term care insurance. Jacobson notes it is an unsubsidized benefit, employers are just giving employees access to the insurance. “People are living longer… long-term care needs have to be considered in concert with DC plans as an integral part of retirement income,” he says.
Other non-traditional benefits offered to employees by higher education institutions, according to the study, include group home/auto insurance (68%), on-site/reimbursement for day care (58%), general local business discounts (47%) and banking/credit union programs (45%).
Jacobson says employee education, HDHPs and wellness are a major part of institutions strategy in the next five years.
An infographic about the study is here.