1st Quarter 2019
Administration of disability and leaves of absence has always been a messy business for employers, but the landscape is becoming increasingly complicated with new statutory requirements and employers implementing and expanding their own paid leave programs in response to an increasingly diverse and competitive labor market. This article explores the new tools employers have at their disposal and explains three key areas of development that should give employers hope. Although leave administration may never be a pleasant experience, employers that are willing to invest time and money in the right solutions will find that the payoff can be significant.
An effective disability management program begins well before a disability claim is ever filed and can help with absence prediction and prevention. This article highlights, through the use of supporting claims studies, how integrated medical, behavioral and pharmacy claims data can be used to (1) identify individuals at high risk for filing a disability claim in the next 12 months, (2) provide employees with personalized health improvement resources as part of early interventions, (3) increase employee engagement in managing their own health and (4) decrease disability incidences and durations.
In this era of rapidly proliferating state and local paid leave laws, employers must take a coordinated approach to leave design and administration, focusing on the whole picture, not on the silos of disability, leave and paid time off (PTO). This article lists goals employers should keep in mind when taking a coordinated approach, including compliance; meeting employee and organizational needs; minimizing program overlaps; and ease of use for, and communication to, managers and employees. The authors then review steps employers should take toward an integrated approach to design and administration that creates compliant leaves and demonstrates a commitment to employee well-being.
The impact of mental health issues on the workforce is well-known. Mental health in the workplace remains on the forefront of public discourse. Some of the many concerns that employers have are: How can an employee return to work and stay at work effectively? Are there specific protocols to follow? What is the employee responsible for? What is the employer’s responsibility? What can ultimately be done to increase the likelihood that an employee who has gone on disability leave as a result of a mental health condition is able to return to work and, more importantly, remain at work successfully? This article will attempt to provide some answers to questions such as: When is the best time to contact employees on leave to find out when they will be ready to return to work? What can employers do to prevent an employee from going on disability leave repeatedly? How do employers differentiate poor work performance from mental health issues? This article will also detail specific return-towork strategies that can be implemented in a workplace
Government needs to constantly innovate and experiment to determine how to best implement effective and efficient services. In 2015, Congress renewed a law that allows the Social Security Disability Insurance (SSDI) program to test new ideas as pilot projects before those ideas are scaled to the entire population. The authority can be used to identify better ways to administer services and to encourage workers with disabilities to return to the labor force. But the Social Security Administration (SSA) faces numerous challenges in using that authority to generate timely and relevant evidence to inform policy debates. This article offers suggestions to address the biggest barriers to the more routine and productive use of SSA disability demonstration authority. It is essential to figure out how to better innovate and experiment in the disability program before the looming necessary action by Congress over the next decade. Not doing so could result in policy changes that harm—rather than benefit—program beneficiaries.
Preapproved plan documents—generally, plan documents with fixed provisions and an adoption agreement from which an employer may select plan features—can be a cost-effective document solution for retirement plan sponsors. However, it is crucial that the features selected reflect the intended plan design and that the plan sponsor fully understands any limitations imposed by the prototype document that could affect plan features or operation, because the plan sponsor is ultimately responsible for ensuring that its retirement plan complies with the Internal Revenue Code and the Employee Retirement Income Security Act.
2nd Quarter 2019
Based on a survey of recent retirement adequacy studies, the authors conclude that many Americans are at risk of having inadequate income in retirement. Although the studies differ in their focus, data and methodology, the consensus is that at least 30% of the population is at nrisk of falling short. The good news is that employer retirement plans have done much to improve retirement prospects for their participants, and Social Security has provided a helpful safety net. Some worrisome trends suggest that future retirees may not fare as well as current retirees, and there is concern about the retirement prospects of certain vulnerable groups not considered by the research studies. This article summarizes the existing research, points out its value to employers and plan sponsors, and highlights some of the trends that employers need to have on their radar.
In 2016-2017, the American Academy of Actuaries, the Australian Actuaries Institute and the Institute and Faculty of Actuaries in the United Kingdom sponsored a survey of working-age individuals in each country to assess their preparation for various retirement risks. The results of this survey were published in a 2017 report Retirement Readiness: A Comparative Analysis of Australia, the United Kingdom & the United States. Relying on the data from that survey, this article examines responses from Baby Boomers, Generation Xers and Millennials and analyzes similarities and differences in retirement preparation. The results suggest some areas of concern—particularly with respect to preparation by Gen Xers—and points to questions about all of the age cohorts.
Every organization should consider the importance of retirement readiness, what constitutes retirement readiness and how to help employees reach their retirement goals. While some organizations may measure retirement readiness as employees approach retirement age, a more comprehensive strategy is to track employees throughout their careers to help ensure they are financially on target to retire when they want. This article explains why assessing employee retirement readiness is important to employers, as well as what key metrics employers can use to determine it. The authors describe how organizations can help employees meet their retirement goals through a customized workforce analysis that can identify targeted solutions, such as personalized education and communication. Organizations that do so will be equipped to predict and address problems that could alter the natural progression of their workforce.
Will employees have a secure retirement? It’s a fundamental question, but a recent TIAA survey of plan sponsors shows they are increasingly worried that too many employees are not prepared. This article provides some actions, in addition to offering lifetime income options, plan sponsors can take in order to help their employees to secure adequate incomes in retirement. Actions include analyzing workforce demographics, considering measuring income as the desired outcome for the plan, building employee financial literacy, restructuring the match formula, evaluating all retirement income options and educating employees about retirement health care costs. Employers that help today’s employees reduce their financial risk also help to ensure the financial well-being of generations to come—supporting the overall economic health of our society.
As people live longer, retirees need more wealth, and they need it to last and outpace inflation longer. Yet they cannot afford the same elevated risks of an aggressive portfolio. At the same time, bonds—which investors depend on for their relative safety—no longer provide appropriate compensation for the risks they present and struggle to provide the level of income retirees need due to the still low-interest-rate environment. Plan sponsors seeking to overcome this retirement conundrum may want to consider the solutions discussed in this article that offer growth—in the form of equity market exposure—with risk management features that can limit equity market risk.
Something subtle, but very important, is occurring just outside the field of vision of defined contribution plan sponsors and outside fiduciaries. The authors’ review of the U.S Securities and Exchange Commission (SEC) Form ADV-2A for several plan service providers illustrates the economic incentives—and the inherent conflict—for plan providers (and their employees) to promote rolling over group retirement assets to nonplan-related advisory, investment and insurance products. This article explains the risks that promotion of nonplan products and services pose to sponsors and fiduciaries, the litigation outlook and why these risks are harder to identify than more traditional fiduciary risks. While no easy answers exist, plan fiduciaries and sponsors can take a number of steps to ensure they do not lose sight of plan service provider behavior outside of the plan that is enabled by access to plan participants and that can undermine fiduciaries’ and sponsors’ hard work to reduce plan costs.
3rd Quarter 2019
How are retirees financially faring? Only 18% are very confident that they will be able to maintain a comfortable lifestyle throughout retirement, according to find-ings from a 2018 survey by nonprofit Transamerica Center for Retirement Studies (TCRS). In analyzing the survey’s findings, the common theme emerges that employers could have done more to help retirees prepare for retirement. An examination of retirees’ experiences through the lens of current employee benefit offerings, based on findings from the TCRS 2017 survey of employers, illuminates these seven specific ways that employers can do more to prepare their employees for retirement: (1) offer a retirement savings plan, (2) encourage workers to ac-tively engage in retirement planning, (3) refresh retirement education and advice—and promote its availability, (4) promote short- and long-term financial security by offering a variety of benefits, (5) educate preretirees about Social Security benefits, (6) be an age-friendly employer and (7) enable workers to work past age 65 with a flexible transition into retirement.
U.S. employers and workers face game-changing challenges with the Baby Boomer generation transitioning from the workplace into their retirement years. These challenges include longer lives and longer retirements, reliance on account-based retirement plans, high health care costs and modest retirement savings. Proactive em-ployers can redesign their retirement and benefit programs and hu-man resource policies to meet the compelling needs of their older workers while at the same time enhancing the productivity of an aging workforce.
The Society of Actuaries (SOA) recently completed a major survey,
Financial Perspectives on Aging and Retirement Across the Generations. The study included survey results from respondents of the following generations: Millennials, Generation X, Late Boomers, Early Boomers and Silents. SOA also completed multifaceted research on individuals age 85 and over. These studies offer insights into the dif-ferences and similarities across generations on a number of key financial issues and behaviors, including financial priorities, retirement savings and planning, and obligations to family (both within and beyond the nuclear family). This article reviews key findings from this research and offers employers ideas about how these insights may affect financial and retirement planning. The research findings are helpful for the design of financial wellness and education programs as well as employee benefit structures.
Although few sponsors of retirement savings plans are willing to assume responsibility for addressing every financial issue and decision that workers must make, most plans can succeed as a holistic, lifetime financial instrument. Only a few changes may be needed to enable a 401(k) to do double duty: debts and deferrals, college and contributions. Con-trary to popular opinion, improving loan liquidity will reduce plan leakage and improve household financial well-being. This article explains how to structure 401(k) plans so workers can meet any financial need at any time—now, and up to and through retirement.
Required minimum distributions (RMDs) are one of the most complex aspects of the retirement income system for many retiree participants, particularly those with individual retirement accounts (IRAs). Behavioral economics has demonstrated that many people have difficulty dealing with complexity in financial matters, and this problem becomes worse for some people at older ages. For sophisticated retiree participants, however, the complex RMD rules offer economically significant strategies to avoid paying taxes on investments. This article proposes a number of changes simplifying the way RMDs are determined, the way their due dates are determined, the treatment of RMDs across different types of plans and their possible reinvest-ment. It also eliminates some of the options that provide opportuni-ties for extending tax preferences considerably beyond the ages at which most people are required to take RMDs.
Switching to a private health care exchange may make sense for your organization. But if you are considering this move, there are a wide range of factors to take into account. After careful consideration, some organizations have found an exchange model to be a viable solution. Others have discovered it would not be a good fit. While organizational leadership has the final decision about whether to move to a private exchange, a thorough analysis can provide a deeper level of knowledge to help make the best decision given the organization’s culture and its benefits and human resource strategies.
The decision to pay an expense from plan assets is a fiduciary responsibility. Before paying expenses from plan assets, employers should review all the surrounding p55 facts and circumstances and consider the available statutory and regulatory guidance. This article discusses settlor function expenses and general guidelines for the payment of plan expenses.