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to achieve employee wellness, address the pocketbook as well as the waistline

August 15, 2010

in communication,health care,wellness

the rise of 401(k)s over the past decade or more means our financial future lies in our hands—and they’re not necessarily good ones. as this table from SHRM’s 2010 employee benefits survey shows, more employers are providing defined contribution plans while the offering of a defined benefit or pension plan has declined from 48% to 29%.

retirement by year shrm2010

(click table for clearer image)

the transference of responsibility for one’s retirement isn’t news. companies have been making this shift for years, and defined contribution plans are clearly the dominant retirement vehicle. what is troubling is the lack of available financial education accompanying this shift. fewer than half of the participants in SHRM’s study offer their employees individual investment advice or retirement planning services, and those who do plan to cut back on them this year. (only 1% of those surveyed plan to increase their retirement planning services.)

retirement savings benefits shrm 2010

(click table for clearer image)

employees are floundering financially. as they flounder, they make decisions with huge knock-on effects. a study by the hartford found that 37% said they’ve experienced “severe” financial impact, and laying hands on cash to pay the bills is a priority. in response, twenty-seven percent of respondents withdrew money from savings, investments or retirement accounts. another 7% took a loan from a bank or retirement account. drawing down their savings and retirement accounts may be the only way to stay afloat, or it may demonstrate a lack of understanding for how depleting their retirement base will hurt them in the long run. what’s more, employees are experiencing high degrees of financial stress—stress that has serious physical and mental consequences and that bleeds into work relations and productivity.

while employers ignore a much-needed benefit, metlife points out they may be cutting off their nose to spite their face, for providing retirement planning assistance yields an irreplaceable employer benefit: loyalty.

2010 metlife difference in priority employer and employee
with the quest for greater productivity and lowered health care costs accompanied by the drum beat of impending retention issues and flagging engagement, delivering retirement education seems like a no-brainer.

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{ 3 comments… read them below or add one }

Carol Harnett August 16, 2010 at 11:50 am

Great post, Fran.

I wrote a column on retirement for HR Executive a couple of months ago more out of obligation to expand my benefits topics than due to a particular interest I had in the subject. When I interviewed Mike Archer from Towers Watson and Ray Goldberg from Marsh, however, I became fascinated with origins and evolution of pensions and retirement plans.

Private pensions and defined benefit plans began as a way to help long-term employees who could no longer work due to disability, which was often associated with age. In the late 1800’s , people expected to work until they died. The design of these early plans was specifically related to employer loyalty.

As someone who is largely immersed in health care, disability and absence issues, I am completely taken with how employers are following the same shift from pensions to defined contribution plans with what they are now doing with health care benefits.

In many ways, we are returning to the early days when a person was responsible for their own retirement/disability and health care expenses. The shift feels sudden to employees and they are not prepared at all for how to make this transformation back to a way of life that was familiar to their grandparents and great-grandparents.

Of interest to someone like you with a strong communications background, Pru is releasing survey results of employers with 50 or more employees that indicates they will shift more and more benefits expenses to employees and, at the same time, decrease their communications about employee benefits until at least 2015.

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fran August 16, 2010 at 12:43 pm

carol, thanks for the comment and the heads-up about the pru study. i don’t take issue with the shift; i do take issue with the lack of support to make the shift less harmful and severe.

for people interested in carol’s article, check it out here: http://bit.ly/dgLZ2s.

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Carol Harnett August 16, 2010 at 1:48 pm

I agree with you, Fran.

We’re going back to a time when the responsibility for most aspects of our financial life (including the financial impact of health care) is shifting back to us. Employers will become the vehicle to purchase vehicles to help us at group rates, i.e., they will start to act more like associations. (Check out UnitedHealth offering health insurance to people who work in restaurants via the National Restaurant Association.)

BUT, we need help with the transition. As Mike Archer indicated, employers have the ability to design benefits like defined contribution with features that prevent us from doing ourselves harm. For example, taking loans out against our 401(k)s.

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