According to Aon Consulting’s 2006 National Employee Benefits Trend Survey, the lion’s share of employers are going the defined contribution route with nine in 10 fielding a 401(k), a 403(b) or a 457 plan. Meanwhile, just under a quarter (23%) have a defined benefit pension plan, 12% have a profit sharing program, 12% offer a non-qualified plan and 8% show an employee stock purchase plan in their benefits lineup.
With traditional pension and retiree benefits decreasing, defined contribution plans will play a more significant role in funding retiree health care costs and living expenses, the Aon report said. While nearly 85% of respondents contribute to their defined contribution plan, 26% believe that less than half of eligible employees are participating in their plans.
The survey data show that 84% of employers are offering at least 10 investment options in their DC plan design. Nearly 81% believe their employees understand, only to some extent, how to invest their defined contribution plan assets. Just over three-quarters (76%) of employers view retirement education as important, very important, or absolutely critical. Employers are providing employees more information about their retirement options through resources such as Web-based investment education tools (88%), advisor-based retirement planning tools (58%), and personalized total rewards statements (45%), according to Aon.
When asked whether their workers are properly getting ready for their Golden Years, 39% said they thought only half their workforce would have a nest egg of a sufficient size to retire between 62 and 65 years old.
Medical Benefit Plan Designs
Meanwhile, the 2006 benefits survey indicates that employers are implementing aggressive plan design changes within their traditional medical plans, as well as promoting health care consumerism by their employees. Employers are asking employees to take a more active role in their health care spending decisions.
Respondents to the survey typically offer more than one medical plan option to their employees:
- 32% offer two medical options
- 37% offer at least three medical plans from which employees can choose
With respect to type of plan:
- 72% offer a PPO (Preferred Provider Organization)
- 37% offer an HMO (Health Maintenance Organization)
- 23% a POS (Point of Service)
- 13% have implemented a Consumer-Driven Health Plan (CDHP). Of these CDHPs, Health Savings Accounts (HSA) and Health Reimbursement Arrangements (HRA) comprise almost equal shares.
- While most of the survey respondents offer multiple medical plan options, the majority of employees choose coverage under a PPO plan. Only 19% of respondents report that an HMO covers the majority of their employees.
Results from the benefits survey show 92% of employers consider employee communication important, very important, or absolutely critical and yet only 70% have a formal strategy for communicating benefits, HR, and company information to employees. Also, only 46% have a formal budget for internal or employee communication.
Sixty-six percent indicate their organizations communicate with employees as needed. Overall, employers most frequently focus communication on broad topics, such as: corporate mission; organization performance and financial results; and benefit programs. Technology provides the distinct advantage of communicating benefit changes or other employee issues through an Internet and/or Intranet site.
The majority of employers (75%) outsource at least one HR function and would renew their outsourcing arrangement with the same vendor, if given the opportunity. The responses are similar for organizations of all sizes and highlight the expansion of outsourcing arrangements beyond large employers to small and mid-sized employers as well.
Copies of the report are available by e-mailing email@example.com or calling (800) 438.6487. The report is also here .