SURVEY SAYS: Health Benefit Costs Affecting Retirement Plans

Employers must balance their benefits budgets, and with health care costs increasing, it may affect decisions regarding retirement plan benefits.

Last week, I asked NewsDash readers, “Have rising health care costs affected your company’s decisions about its retirement plan, and what has your company done or not done with the retirement plan due to health benefits costs?”

Nearly all (96.4%) of responding readers work in a plan sponsor role, while the rest (3.6%) are TPAs, recordkeepers or investment managers.

The majority (82.8%) said rising health care costs have not affected their company’s decisions about its retirement plan, while 17.2% said they have.

Among those whose company has taken action with its retirement plan due to health benefits costs, 3.8% of respondents reported they have reduced employer match or discretionary contributions, and the same percentage said they have changed providers/advisers to lower costs. ‘Negotiated lower costs for plan services/investments’ was selected by 7.7% of respondents. Among those who chose ‘other,’ actions included changing the match to a ‘discretionary’ match based on company profits, not increasing the match as the company wanted to do and freezing pensions or selling certain pension assets to an insurance company.

In verbatim comments, one reader noted that his/her company has made many of the changes listed in the survey, but did so because they were prudent things to do, not due to rising health care costs. Another reader suggested plan sponsors should work to reduce health benefit costs rather than reduce other benefits. Several readers lamented over the continuing increases in health care costs. Editor’s Choice goes to the reader who said, “So far health care costs have not affected our retirement plan decisions, but it may be just a matter of time.” 

A big thank you to all who participated in the survey!


We actually increased our 403(b) match this year and plan to increase it again next year.

Six of the 11 committee members are participants in the soft-frozen DB plan. Guess how they vote.

So far, we've not made changes to the retirement plan due to rising health care costs, but we have raised deductibles and lowered health reimbursement amounts. Every year it's a juggling act to keep costs down while providing the best benefits package we can.

One of the many reasons we froze our DB plan to new hires ten years ago.

Our match was always 100% of the first 3% - in the two years we have had a discretionary match, we were at 2% and 2.5%. Still not equal to what it used to be.

We reduced profit sharing contribution from 10% to 5% due to the recession in 2008 and 2009 but have not been in a position to increase it again, nor do I think we ever will simply due to continued overall rise in expenses...including health care.

Employees are decreasing retirement contributions to cover increasing health care costs, but as an employer, it's seen as the rising cost of maintaining the business.

The entire health care arena is getting very scary. I'm glad I'm nearing retirement to get away from the administration of it, but I still won't be able to get away from the rising costs!

Our employer match did not benchmark well against our peers so we actually raised the match by 1%.

A real Catch-22, eh. Too poor to retire and too sick to give up the medical benefit. It's a serf's life for me.

Add up the new mandated coverages, increased provider costs, and the cost of prescription drugs, and health care costs are out of control.

So far health care costs have not affected our retirement plan decisions, but it may be just a matter of time.

Companies should find ways to reduce the actual health care costs rather than reduce other benefits.

We have put into place several of the items mentioned for our retirement plan that you asked if they were done due to health benefits costs. We implemented them because they were the prudent thing to do regardless of the overall cost of benefits.

We've seen no greater increases to our self-funded administration and stop/loss costs due to the ACA than the normal excessive annual increases we are subjected to due to "medical cost inflation" per our stop/loss carrier. The ACA seems to have had little economic effect on us. However, we have had to suspend our company match due to declining revenues which are occurring not just to us but in general in the publishing business.


NOTE: Responses reflect the opinions of individual readers and not necessarily the stance of Asset International or its affiliates.