Here’s a surprise: Employees view health insurance as far and away their most important employee benefit when deciding whether to stay at their current job or make a change. More than half of employees surveyed in the most recent Health & Workplace Benefits Survey, conducted by the Employee Benefit Research Institute and Greenwald & Associates, name health insurance as their top benefit consideration. Retirement plans rank a distant second, with just one in seven calling it most important.
This year the predominance of the health insurance benefit creates a significant problem for employers hoping that their benefit plans will help them attract and retain employees: The news about health insurance is likely to be bad, even very bad. Costs are going up and workers are being asked to contribute more. Furthermore, in many cases, deductibles are also going up and the richness of the plan is going down. Many workers are upset and many employers do not feel they can do anything about it.
I believe it is important for advisors to help their clients address this challenge by showing them ways to maximize the perceived value of the other employee benefits the employers offer, especially the retirement plan. In this climate, it is desirable to find ways of increasing perceived value without increasing costs, and for many companies this double win is achievable. I have a few suggestions for how many advisors can help plan sponsors increase the perceived value of retirement plans without spending more money.
As stated, retirement plans are the second most valued benefit. This is true across generations and even among Gen Yers (a.k.a. Millennials, ages 21 to 35). Gen Y employees — those young invincibles — actually place slightly less importance on health coverage compared to Gen Xers, but all rank retirement plans second, despite the fact that majorities, including three out of four Gen Yers, say saving for retirement is important to them. The importance of the retirement plan makes it the best place to start when it comes to creating a sense of greater value.
Research conducted with plan sponsors and plan advisors reveals that annual or even more frequent retirement plan review meetings are highly valued when they occur. Indeed, Greenwald & Associates research has found that effective meetings are a key driver of satisfaction with a retirement plan. But the opportunity for these meetings to create value has not been optimized by many employers. Although these meeting cost little or nothing beyond the minor amount of time away from work for participating employees, they are not held often enough. The focus of these meetings is frequently too narrow. Taking into account employee viewpoints, it seems that these meetings need to cover more than just investment performance.
Only 4 in 10 employees feel very comfortable with the idea that their employer picks their retirement plan provider. It would be useful for employers to let their workers know more about the due diligence they use in selecting the plan provider and the investment options in the plan. I have to assume that very few employees know whether or not their employer is working with a plan advisor to help them select a provider, which may make them feel more comfortable. Similarly, 77% of employees believe having a choice of investments is highly important, but how many do you suppose know the process a plan advisor and plan sponsor undergo to select funds and monitor performance? Plan advisors should work with sponsors to effectively communicate key elements of the process to employees to make them feel better and more confident about how their retirement savings are being handled. Plan advisors are not always as visible or accessible to employees as they should be, and often times, that seems to be because the plan sponsor limits interaction.
Our research finds that many plan sponsors want their plan advisors to take on a greater role with employee education, and that larger plans in particular want their advisor to help with other employee benefits in addition to retirement. Advisors can indeed play an important role in helping their clients drive more employee good will through the retirement plan.
Financial wellness is a hot topic in 2016 and it seems this will continue. Advisors should help their clients put in place an effective financial wellness program. It would be useful for plan advisors to discern what aspects of financial wellness are working especially well and to communicate that information to their clients. This is also a good time to review life insurance and disability programs and seek ways to decrease costs and/or find more compelling product designs.
Health insurance is likely to be a hard story for many employers. It will be useful for employers to offset this with good stories, such as affirmative steps to increase the financial wellness of their workforce. A financially secure work force is less stressed and more productive. A workforce that feels the employer is looking out for them is more likely to feel loyal to the employer. This is a time when the most important employee benefit is under pressure. It is time for the advisor to use other benefits to relieve this pressure.
Lisa Greenwald is an AVP at Greenwald & Associates, an independent research firm specializing in research for the retirement and financial services industries. This column first appeared in the Winter 2016 issue of NAPA Net the Magazine.