Awaiting fate of fiduciary rule, plan sponsors turn attention to fee reasonableness

Uncertainty around the fiduciary rule has muddied the waters for retirement plan sponsors and service providers who are still trying to wrap their heads around the role they are expected to play under the regulation. But while plan sponsors await the rule’s fate — which was vacated in a March ruling by the U.S. Court of Appeals for the Fifth Circuit — experts say fee reasonableness should remain a priority.

The fiduciary rule brought fee reasonableness — meaning that while benchmarking your retirement plan against others, your plan's fees should not be too high above the average — top of mind for many employers, says Shelby George, senior vice president, advisor services, at investment firm Manning & Napier. “It is often associated with confusion, both because the DOL never specifically defines what fee reasonableness is, and because it is an area where there has been an enormous amount of ERISA class action lawsuits,” she says. “If you are already accepting fiduciary responsibility, be cognizant that fee reasonableness is a key part of what you are evaluating in your fiduciary capacity.”

[Image Credit: Bloomberg]
[Image Credit: Bloomberg]

Those who don’t accept fiduciary responsibility will still have to keep reasonable compensation in mind because it is a foundational principal that applies throughout the world of financial advice, including the Internal Revenue Service, the Securities and Exchange Commission and the Financial Industry Regulatory Authority.

“Much of our understanding of what is and is not reasonable was shaped by ERISA class action lawsuits and allegations that have been made,” George says. “Those lawsuits were focused not on the fiduciary rule, but fiduciary responsibility to act in the best interest of plan participants. You need to make sure as fiduciaries you are only passing costs on to plan participants that are reasonable in light of the services they are receiving.”

Most tests of whether fees are reasonable don’t look at the value provided in return for the fees being charged, she says. Many assessments will look at market data and will conduct fee benchmarking both for advisory fees and investment management fees. If the fees being charged in a plan are much higher than what others are charging, the fees may not be considered reasonable.

A more subjective test will look at the value of the services being provided for the fee.

“The assessment needs to look at whether the value of the service is commensurate with the fee that is charged. That is very subjective and could be different depending on who is doing the evaluating. There is so much confusion over fee reasonableness,” George says.

Staying the course

In March, the U.S. Court of Appeals for the Fifth Circuit vacated the fiduciary rule. If that decision stands, the fiduciary rule will go away in May and the industry will go back to following the five-part fiduciary test that was used previously. Until the rule is either sent back to the full Fifth Circuit for a rehearing or is reviewed by the Supreme Court, however, the fiduciary rule’s best practices for when someone is considered a fiduciary will remain in effect.

Norma Sharara, a partner in Mercer’s employment practices risk management group in Washington, urges plan sponsors to keep following the rules as they have been. After the Fifth Circuit’s decision, she says, it is uncertain what the Department of Labor will do next.

“The DOL has a couple of choices. One is to do nothing,” Sharara says. “There’s no secret the Trump administration is not a fan of this rule. Some people are wondering why they would challenge what is a good outcome for them politically.”

The DOL could defend the agency’s right to make its own rule, she adds, by asking the Fifth Circuit to rehear the case with a full complement of judges. The Fifth Circuit opinion handed down on March 15 was made by only three Fifth Circuit justices out of 17. If the DOL opts for this course of action, she says, that request has to be filed by April 30. If the DOL doesn’t ask for a full circuit review or ask for an extension, the rule will be officially dead in May.

If the Fifth Circuit denies a rehearing, the DOL must file a petition with the Supreme Court to review the decision within 90 days of the denial.

“We don’t know that until we see what the Labor Department is going to do. The third option is to withdraw the rule. It seems to be what the Trump administration thought it could do when it took office last year,” Sharara says.

In the meantime, “plan sponsors and investment advisers need to stay the course to see what the Labor Department does next. It is a game changer for investment advisers,” she adds.

If the rule is officially killed, the fiduciary rule will go back to where it was since 1975. If that is the case, it is up to plan sponsors to reconnect with all of their plan service providers to make sure they know who is acting as a fiduciary to their retirement plan, she says.

Source: Gladych P. (2 April 2018). "Awaiting fate of fiduciary rule, plan sponsors turn attention to fee reasonableness" [Web Blog Post]. Retrieved from Employee Benefit News.


Eligibility, lack of plans keep millennials from retirement saving

As millennials reach the age to save for retirement, there is a clear lack-of-knowledge in the arena of what plans they need and how to save for them with the continuing costs of their lifestyles. In this article, we take a look at why this is.


Millennials are way behind on retirement savings, but it has nothing to do with self-indulgence or feasts on avocado toast.

Instead, what they actually need are retirement plans, and earlier eligibility to save in them.

A new report from the National Institute of Retirement Security highlights millennials’ precarious retirement futures with the news that only a third are saving for retirement. It’s not because they don’t want to, or are being extravagant, because when the numbers are crunched they actually save at rates equal to or higher than those of their elders—even if not as many of them can do so.

Millennials are getting a raw deal. Not only are traditional defined benefit plans disappearing, with the likelihood that a millennial might actually be able to participate in one, they’re worried that Social Security—which runs way behind the cost of living anyway—will be of even less help to them in the future as an income replacement than it already is for current retirees. Add to that the fact that more than half of millennials are expected to live to age 89 or even older, and they have the added worry of outliving whatever savings they might have managed to stash.

In fact, millennials need to save way more than their elders to stand a chance of having a retirement that honors the meaning of the word. Says the report, “[S]ome experts estimate that millennials will need to make pretax retirement plan contributions of between 15 percent to 22 percent of their pretax salary, which at 22 percent, is more than double the recommendation of previous generations.”

They’re viewed as irresponsible, but 21 percent are already worried about their retirement security, says the report, and while 51 percent of GenXers and boomers contribute to their own retirement plans, just 34.3 percent of millennials participate in an employer’s plan, although 66 percent work for bosses that offer such plans.

In fact, 66.2 percent of millennials have no retirement savings at all. Zip, zilch, zero. And millennial Latinos? A whopping 83 percent have a goose egg, not a nest egg. Latinos have it much worse, incidentally, than any other millennials group, with just 19.1 percent of millennial Latinos and 22.5 percent of Latinas participating in an employer-sponsored plan, compared with 41.4 percent of Asian men and 40.3 percent of millennial white women—who have the highest rates of participation in a retirement plan.

Despite working for an employer who provides workers with a retirement plan, millennials don’t always have a way to save, since said employer may have set barriers in place to prevent participation until an employee has been with the company for at least a year. And millennials are, of course, known as the job-hopping generation—so if they don’t stay in one place they never qualify. Close to half of millennials—40.2 percent—say they’re shut out of retirement plans because of employers’ eligibility requirements, including working a minimum number of hours or having a minimum tenure on the job.

But don’t accuse them of having no desire to participate: when they’re eligible, more than 90 percent do so.

Read the article.

Source:
Satter M. (2 March 2018). "Eligibility, lack of plans keep millennials from retirement saving" [Web Blog Post]. Retrieved from address https://www.benefitspro.com/2018/03/02/eligibility-lack-of-plans-keep-millennials-from-re/


DOL cracks down on efforts to find missing retirement plan participants

In this article from Benefits Pro, the DOL auditors are taking action on missing participants in retirement plans.


The Department of Labor’s auditors are pushing harder on plan sponsors to make better efforts to find missing terminated vested participants in retirement plans. In return, there’s a call for more guidance on just how far sponsors have to go to do so.

According to a report in Pensions & Investments, the matter has become more urgent in the wake of MetLife’s experience. After the company had “lost track” of some 13,500 participants, the DOL entered the picture. The company’s earlier efforts to find those lost participants were deemed unacceptable, and then state and federal inquiries began.

But DOL auditors, according to a letter from the American Benefits Council to Deputy Assistant Secretary of Labor Timothy Hauser last fall requesting formal rulemaking on comprehensive guidance for plan fiduciaries, have been “inconsistent and alarming” in routine examinations.

The report says, “Some auditors said that failure to find a missing participant was a breach of fiduciary duty, or forfeiting funds back into a plan until participants are found is a prohibited transaction, and plan sponsors could be penalized. Auditors also have insisted that sponsors try different search methods every year or reach out to friends and former colleagues of the missing participant or through social media. Some plan sponsors have been told they must do ‘whatever it takes’ to find participants who are missing or not responding to communications.”

Large defined benefit plans are creating the loudest outcry, according to members reaching out to the ERISA Industry Committee in Washington on the issue. “It’s frustrating for them because there is just a lack of guidance on what activities they have to engage in, and how long they have to be engaged in it,” Will Hansen, senior vice president of retirement and compensation policy, is quoted saying in the report.

DOL officials are aware of the lack of guidance. A DOL spokesman says in the report that “the agency places a priority on consistent actions across our compliance assistance and enforcement activities, and will continue to work with plans and plan sponsors to connect retirees and beneficiaries with their pensions.”

Still, given the agency’s focus on employers’ responsibilities, experts say that employers should try to get ahead of the issue, guidance or not. The report cites David Rogers, partner at Winston & Strawn LLP in Washington, saying, “Given the potential penalties involved and the need for a coordinated response, it is a good practice to have a missing participants policy and designated persons within the organization who make regular efforts to keep participant information current.”

In addition, it quotes Norma Sharara, a principal with Mercer’s Washington resource group, saying, “The rational plan sponsor would be well advised to up their game. At least revisit the issue so when someone comes knocking your door, you are prepared. All along you need to be in constant contact with anybody you are holding money for. Somebody has to be responsible and the Labor Department is placing the burden on the shoulders of the employer.”

On March 1, Senators. Elizabeth Warren, D-MA, and Steve Daines, R-MT, reintroduced the Retirement Savings Lost and Found Act, bipartisan legislation that would create a national online lost-and-found for retirement accounts. The bill is supposed to make it easier for participants to find accounts, as well as for employers to connect with former employees. Employers could also invest abandoned accounts in target-date funds more easily, the report said.

Read the article.

Source:
Satter M. (5 March 2018). "DOL cracks down on efforts to find missing retirement plan participants" [Web Blog Post]. Retrieved from address https://www.benefitspro.com/2018/03/05/dol-cracks-down-on-efforts-to-find-missing-retirem/


Financial shocks could disrupt tomorrow’s retirees

While today’s retirees, dependent as they are on Social Security and traditional pensions rather than 401(k)s, are better able to withstand financial shocks, tomorrow’s retirees won’t have it so easy.

They will be more in danger of being forced to downsize or spend down their assets to meet unexpected expenses such as a spike in medical bills or a loss of income through being widowed.

So says a brief from the Center for Retirement Research at Boston College, which investigated the financial fragility of the elderly to see how well they might be able to deal with financial shocks.

The reason the elderly are seen as financially fragile, the brief says, stems from the fact that, “once retired, they have little ability to increase their income compared to working households.”

And with future retirees becoming ever more dependent on their own retirement savings, and receiving less of their retirement income from Social Security and defined benefit plans, those financial shocks will get harder and harder to deal with.

To see how that will play out, the study looked at the share of expenditures a typical elderly household devotes to basic needs. Next, it looked at how well today’s elderly can absorb those aforementioned major financial shocks. And finally, it examined the increased dependence of tomorrow’s elderly on financial assets, whether those assets are sufficient, and how well those assets do at absorbing shocks.

Nearly 80 percent of the spending of a typical elderly household, the report finds, is used to secure five “basic” needs: housing, health care, food, clothing, and transportation. In lower-income households or the homes of single individuals and in households that rent or have a mortgage, those basic needs make up even more of a household’s spending.

And while there are areas in which a household can cut back—such as entertainment, gifts or perhaps cable TV—as well as potential cutbacks on basic needs, typical retirees can’t cut by more than 20 percent “without experiencing hardship.” And among those lower-income and single households, as well as those with rent or mortgages to pay, the margin is even slimmer.

The need for medical care is so important to those who need it, says the report, that the question becomes whether medical expenditures crowd out spending on other basic items.

And while a widow is estimated by federal poverty thresholds to need 79 percent of the couple’s income to maintain her standard of living, other studies indicate that widows get substantially less than that from Social Security and a pension—estimates, depending on the study, range from 62 percent to 55 percent. And that likely does not leave a widow enough to meet basic expenses.

Among current retirees, only 10 percent report having to cut back on necessary food or medications because of lack of money over the past 2 years.

However, retirees tomorrow, if they have failed to save enough to see them through retirement, are likely to experience income declines of from 6 to 21 percent for GenXers—and that’s assuming that GenXers “annuitize most of their savings at an actuarially fair rate…” despite the fact that very few actually annuitize, and cannot get actuarially fair rates even if they do.

And since the brief also finds that the greater dependency of tomorrow’s retirees on whatever they’ve managed to save in 401(k)s means that they’re exposed to new sources of risk—“that households accumulate too little and draw out too little to cushion shocks and that their finances are increasingly exposed to market downturns”—that means that future retirees will be subjected to a reduced cushion between income and fixed expenses.

To compensate, they will need to downsize and cut their fixed expenses. Neither one bodes well for a comfortable retirement.

Read the article.

Source:
Satter M. (1 March 2018). "Financial shocks could disrupt tomorrow’s retirees" [Web Blog Post]. Retrieved from address https://www.benefitspro.com/2018/03/01/financial-shocks-could-disrupt-tomorrows-retirees/


Top Misconceptions about Long Term Care Insurance

What do you know about long-term care insurance? Here is a great article from our partner, United Benefit Advisors (UBA) by Christine McCullugh on the top misconceptions people have about long-term care insurance.

In conversations with HR professionals and benefit brokers, we find that the topic of long-term care insurance (LTCi) is often covered in less than two minutes during renewal meetings. When I ask why the topic of conversation is so short, they tell me, “Employees just aren’t asking about it, so they must not be interested.”

If employees aren’t asking about LTCi, does it mean they aren’t interested? They just may be unaware of the value of LTCi and that it can be offered by their employer with concessions not available in the open market. Here are the top seven reasons why LTCi should be a bigger part of the employee benefits conversation.

  1. Do you know LTCi can be offered as an employee benefit?
    There are multiple employer-sponsored products, including those with pricing discounts, guarantee issue, and payroll deduction.
  2. Do you believe Medicaid and Medicare will provide long-term care for employees?
    This is a popular misconception. Medicare and Medicaid will restrict your employees’ choices of where and how they receive care. These options will either not offer custodial or home care, or they’ll force employees to spend down their assets for care.
  3. Do you think LTCi is too expensive, or that your employee population is too young to need it?
    Many plans can be customized to meet personal budgets and potential care needs. It’s also important to know that rates are based on employees’ ages. The younger the employees are, the lower their rates will be.
  4. Are you aware of the variety of LTCi plans?
    Many policies offer flexible coverage options. Depending on the policy an employer selects, LTCi can cover a wide range of care—in some cases even adult day care and home safety modifications.
  5. Do you believe the market is unstable?
    Today’s products are priced based on conservative assumptions, and employers are enrolling very stable LTCi plans for their employees. Each month, we see new plan options and products being introduced along with new carriers entering the market.
  6. Do you already offer an LTCi plan but it’s closed to new hires?
    Being able to offer a similar LTCi benefit to all employees is crucial for most employers. Find a partner that can assist with the current LTCi plan and can assist with bringing in a new LTCi offering for new hires.

See the original article Here.

Source:

McCullugh C. (2017 July 6). Top misconceptions about long term care insurance [Web blog post]. Retrieved from address http://blog.ubabenefits.com/top-misconceptions-about-long-term-care-insurance


HSAs and 401(k)s are Becoming More Closely Linked

As HSAs continue to grow, more employers are starting to work HSAs into their retirement programs. Take a look at this great article by Brian M. Kalish from Employee Benefit News and see how employers are using HSAs as a tool to help their employee plan for their healthcare cost in retirement.

There has been progress among leading-edge advisers and employers to more closely link HSAs and 401(k)s in order to allow employees to use a health savings account to save for healthcare expenses post-retirement.

Eighty percent of Americans have a high concern about healthcare costs in retirement, according to Merrill Lynch, and healthcare is the largest threat to retirement savings and the most important part of a retirement income plan, according to Fidelity, which is why there has been a recent push to more closely link HSAs and 401(k)s, or health and wealth.

HSAs are triple tax-free, Brian Graff, CEO of the American Retirement Association, an Arlington, Va.-based trade group said at a recent event hosted by AFS 401(k) Retirement Services

The fact of linking health and wealth “is a big idea and there is some continued focus on it moving forward,” says Alex Assaley, managing principal of Bethesda, Md.-based financial services advisory company AFS 401(k).

“There is a lot more interest in HSAs by pretty much everybody,” explains Nevin Adams, chief of marketing and communications at the American Retirement Association.

According to the Employee Benefit Research Institute, nearly 30% of employers offered an HSA-eligible health plan in 2015 and that percentage is expected to increase in the future both as a health plan option and as the only health plan option. Most of the growth has been recent as more than four-in-five HSAs have been opened since the beginning on 2011, according to EBRI.

At an event hosted by Assaley’s firm in 2016, he said there was not a lot of traction around the idea of using HSAs to save for healthcare expenses post-retirement. But, now, there is a bigger push.

As HSAs continue to grow, employers, employees and advisers are “understanding there is an ability to accumulate money in the HSA and use that for healthcare or something [employees] want to set aside because they are not sure what their healthcare cost situation in the future is going to be,” Adams explains.

Assaley adds that there has “definitely been a good deal of refinement and evolution in the HSA marketplace [recently], whereby … you are now seeing more companies offering HSAs as a part of their medical and retirement strategy. You are also seeing more employees thinking about HSAs as part of their overall holistic fin wellness program.”

In one-on-one coaching sessions with employees, conversations are becoming more prominent, as advisers help employees, “understand how all employee benefits tie together to make wise financial decisions today, tomorrow and for their retirement,” Assaley says.

“With certainty, there has been a great deal of growth in the marketplace and evolution in how HSAs and 401(k)s are starting to interlock together,” he adds.

Saving for the future
Looking down the road, Assaley expects the linking to continue, especially if proposals to alter the maximum accounts that can be contributed pre-tax to an HSA is tweaked, as has been proposed by legislators on Capitol Hill. Some proposals shared amongst the industry, Assaley says, propose doubling the pre-tax amount.

“If that happens or there is any sort of meaningful increase, then I think you will see an exponential growth in the numbers of HSAs,” he says.

For advisers, the work is not done as they need to help employees better understand how a HSA works and from there help employees understand the benefits of a HSA and the different ways to structure one, Assaley explains.

“Even today, there is a large knowledge gap on what an HSA is, how it works and how someone can use one as part of health and retiree healthcare needs,” he says.

See the original article Here.

Source:

Kalish B. (2017 July 5). HSAs and 401(k)s are becoming more closely linked [Web blog post]. Retrieved from address https://www.benefitnews.com/news/hsas-and-401-k-s-are-becoming-more-closely-linked?feed=00000152-18a4-d58e-ad5a-99fc032b0000


How Rising Healthcare Costs are Changing the Retirement Landscape

Has rising the rising cost of healthcare impacted  your plans for retirement?  Here is a great article by Paula Aven Gladych from Employee Benefit News on how healthcare is reshaping the way people are planning their retirement.

It’s hard enough getting employees to save for their retirement. It’s even harder to get them to think about how much they need to save for medical expenses in retirement.

“Most Americans don’t think about what the medical component will be for them,” says Robert Grubka, president of employee benefits at New York-based Voya Financial. “They often think that Medicare and government-provided healthcare is enough and what people quickly find out is, it is helpful but it doesn’t mean it’s enough.” When people think about their retirement plan, the medical piece is “one of the most surprising aspects of it,” he says.

But talking about managing healthcare costs during post-work years is now a vital element of retirement planning. And it’s one employers need to consider, especially as new statistics shed light on the seriousness of the issue.

As a person’s retirement savings shrinks in retirement, their medical expenses continue to increase, according to Voya Financial’s report “Playing the long game – Understanding how healthcare costs can impact your retirement readiness.” Healthcare costs rose 6.5% in 2017, but inflation only went up 2.4%, Voya found.

“The rapid rise of healthcare costs could have a large impact on quality of life in retirement,” according to the report. Forty-two percent of pre- and post-retirees say that healthcare is their biggest concern, especially since nearly half of retirees or their spouses experience a serious or chronic health problem.

Meanwhile, Medicare data finds that those in their 70s spend about $7,566 per person in healthcare costs annually. That figure more than doubles to $16,145 by the time a person reaches age 96. According to Voya, Medicare will only cover about 60% of all retirement healthcare costs, which means people need to figure out a way to cover that other 40%.

The Employee Benefit Research Institute estimates that the average couple will need $259,000 to cover their out-of-pocket medical expenses in retirement. That figure includes premiums and costs related to all Medicare plans and the cost of supplemental insurance. When asked how much they should stock away for medical expenses, 69% of baby boomers and 66% of retirees thought they needed less than $100,000.

As the retirement industry has shifted away from defined benefit pension plans to defined contribution plans, employers have tried to compensate for some of the missing perks of having a pension plan. That includes offering options like life insurance, disability insurance, accident insurance, critical illness insurance or a hospital confinement indemnity.

A 2014 report by the Council for Disability Awareness found that more than 214,000 employers were offering long-term disability insurance plans to their employees in 2013, a slight increase from the previous year.

The other component that is relatively new is the high-deductible health plan that usually comes with a health savings account. The money saved in an HSA can be used for medical expenses in retirement if a person doesn’t use up their balance every year. Any extra funds are invested, just like they would be in a typical retirement plan.

High-deductible health plans make the plan participant more responsible for how those health care dollars are spent. It also has “sped up the recognition of the healthcare issue,” Grubka says.

According to the 2016 Employer Health Benefits Survey by the Kaiser Family Foundation, 29% of covered workers are enrolled in a high-deductible plan with a savings option. Over the past two years, enrollment in these high-deductible plans increased 8 percentage points as enrollment in PPOs dropped 10 percentage points, the report found.

Many times, individuals must pay out most or all of their deductible at once, which could be $2,500 for an individual or $5,000 for a family. That’s when people start taking loans from their retirement plan to help cover costs.

That’s why some of these ancillary products, like critical illness or disability insurance, are so important.

“It is so people can get through the chunky expenses and not get to the point where they have to tap their savings or their retirement plan,” Grubka says.

It’s critical that employees try and determine what all of their expenses will be in retirement. Individuals must try and determine how long they will live, by looking at their family history and making an educated guess. Then they should calculate their projected monthly Social Security payment by setting up an account with the Social Security Administration. They should then add up their expected monthly living expenses like rent/mortgage, groceries and utilities and any healthcare expenses that are not covered by Medicare to come up with a target number.

They should base how much they set aside for retirement on that figure.

See the original article Here.

Source:

Gladyech P.  (2017 July 4). How rising healthcare costs are changing the retirement landscape [Web blog post]. Retrieved from address https://www.benefitnews.com/news/how-rising-healthcare-costs-are-impacting-retirement-planning


3 Key Points for Choosing a Wellness Provider

Are you in the process of searching for a new wellness provider? Take a look at this article by Rick Kent from Employee Benefit Adviser and check out these 3 great tips on what you should be looking for when searching for your next  wellness provider.

Saddled with low savings rates and high household indebtedness, many American workers are relying on company-sponsored retirement plans like 401(k) programs as their last great hope for retiring with dignity someday. Unfortunately, rapidly escalating costs and tougher regulatory obligations have made supporting such plans among employers and third-party benefits consultancies a far more complex task than ever before.

Naturally, these events have raised the importance of offering robust financial wellness programs that complement company-sponsored retirement plans. Employees need offerings that provide valuable educational resources, personal finance coaching and relevant benchmarking data to plan participants and plan sponsors.

But how can employee benefits consultancies, already frequently strapped for time, deliver such tools and resources to their clients? Do they need to build this on their own, or should hiring an in-house expert or acquire a smaller provider?

The good news is “neither.”

Over the past few years, a number of dedicated financial wellness service providers for company retirement plans has emerged and are able to serve true third party, turnkey offerings that can be integrated with the offerings of employee benefit consultancies. In many instances, these services can be "white labeled" under the consultancies' own brands.

But caveat emptor: As with capturing any potential growth opportunity with an outsourced provider, it’s important to team up with the right partner.

With that in mind, here are the three key considerations to bear in mind for benefits consultants who are seeking the right third party, turnkey financial wellness provider to partner with and drive greater value for clients.

Look for educational and training materials that are robust and tailor-made to the plan participants. Any reasonably good financial wellness provider should be able to offer educational and training materials that cover a wide range of topics, including basic financial and investing concepts, tips for paying down debt and general keys to improving retirement preparedness. Frankly, that’s easy enough to accomplish, and required nothing more than bit of time and some money.

But what separates great financial wellness solutions from those that are merely good is both the willingness and capability to customize that content to the size of the plan and unique needs, goals and aspirations of the participants. An educated plan participant, one who is armed with information that is tailor-made for them, is far more likely to take the steps necessary to improve their financial wellness.

Demand data analytics programs that can demonstrate ongoing financial health and retirement readiness. It’s one thing for plan participants to have the knowledge they need to understand better what takes to one day retire comfortably. It’s an entirely different thing, however, knowing whether they are actually on track to do that.

That’s why it’s critical for a financial wellness provider to have data analytics programs in place that monitor key metrics and can determine, in real time, whether someone is making the behavioral changes necessary to become financially healthy and retirement ready. Importantly, providers should also be able to aggregate this data for plan sponsors, since that would provide important clues about the overall effectiveness of the plan.

Provide access to financial wellness resources without disrupting or tearing down current technologies. Nearly every benefit company has their own technology portals that allow plan participants to adjust their contribution amount or swap investments, as well as to view balances, statements and other critical information about their account. Obviously, not many companies will want to rebuild or make significant changes to their technology infrastructure to add financial wellness resources.

Therefore, look for providers that can integrate their own turnkey solutions into existing platforms with little, if any, disruption. This includes giving benefit companies the option of white labeling those resources under their own brand.

Not only is there a clear opportunity for employers to invest in financial wellness programs to seek to maximize productivity by minimizing personal finance-related stress in the workplace, but there are also heightened risks of regulatory fines and penalties from the U.S. Department of Labor. These regulations are aimed at company retirement plans that fail to provide plan participants with the tools and guidance they need to make the most of their retirement plan savings and investments.

Given this extra layer of liability, it will be more important than ever for plans sponsors and employee benefits companies to pair up with the best possible financial wellness provider to give plan participants a better sense of their options and better prepare them for the future.

See the original article Here.

Source:

Kent R. (2017 June 21). 3 key point for choosing a wellness provider [Web blog post]. Retrieved from address https://www.employeebenefitadviser.com/opinion/three-key-points-for-choosing-a-wellness-provider


10 Ways Millennials are Saving for the Future

Have your millennial employees started saving for their retirement? Check out this article by Marlene Y. Satter from Benefits Pro and see what millennial across the country are doing to prepare themselves for retirement.

They’re called spendthrifts by other generations, are laden with student debt and burdened with lower-paying jobs.

But that doesn’t mean that millennials aren’t thinking about the future and saving for it.

And they could certainly use a little help—from human resources and from plan sponsors—to be more successful at it, since both the debt and the jobs don’t leave them much to work with when all expenses are accounted for.

Both HR and sponsors might want to consider how retirement savings plans and their features—auto-enrollment, auto-escalation, employer matching funds—could be tweaked to give millennials a boost in meeting major life goals and in saving for retirement, as well as for the health expenses it undoubtedly will bring along with it.

In the meantime, they can consider how millennials are already trying to stretch every dollar till it snaps—some in very unconventional ways.

In a survey, digital banking app Varo Money, Inc. has uncovered a range of methods millennials are using to make those paychecks go farther.

And while retirement is certainly on their radar, that’s not the only goal they’re pursuing; of course they have a whole life to live first. Some of their prime goals are travel, buying property and dreaming about a new car, while

Here are some of the strategies to which millennials resort in the quest to fund their futures. Can plan sponsors be less imaginative than some of these? Surely not….

10. Half of millennials surveyed save automatically.

While respondents say they aren’t fond of spreadsheets—they don’t track their money constantly, or input figures into programs like Excel or Mint to create detailed, category-based budgets—they do watch their bank balances regularly and are pretty aware of what they spend monthly.

They view it as “hands-off” money management.

What they do, however, is save automatically out of each paycheck, with 50 percent socking away a percentage every payday. So they’re prime candidates for savings plans with auto features—enrollment, escalation, etc.

report from the Society of Human Resource Management points to multiple studies indicating that auto escalation in particular—but to a high level such as 10 percent—results in higher savings for employees, since few actually opt out of a rate higher than they might have chosen for themselves.

9. Millennials are looking to climb the corporate ladder—to a higher paycheck.

An impressive 39 percent of millennials are on the prowl for a better-paying job opportunity, which is yet another reason that HR personnel and plan sponsors hoping to retain good staff might want to keep an eye on millennials’ rate of pay, as well as their rate of savings.

Reviewing other benefits wouldn’t hurt, either, since the more attractive an existing job is, the more likely an employee is to stay.

Considering the cost of finding, hiring and training replacements, a raise and better benefits might be cheaper in the long run.

8. Millennials know food is cheaper at home, especially with a partner to share it.

Millennials, despite their spendthrift reputation, are willing to skip little luxuries like the much-vaunted avocado toast or make coffee and meals at home.

In fact, 36 percent stick with the coffeepot on the counter instead of the barista at the corner, while 11 percent of men and 3 percent of women are willing to abandon the avocado toast—after all, everyone has his, or her, breaking point when economizing.

And 26 percent of respondents point out that cooking for two is cheaper than dining solo at home—much less in a restaurant.

7. Millennials recognize how much cheaper it is to live as a couple.

While 75 percent of millennials are conscious of the financial benefits in being half of a couple. 44 percent point to the cheaper rent when there are two to share the load.

And that helps them both save more.

Even those who aren’t part of a couple are looking for roommates, according to Mashable, which reports on a SmartAsset study finding that in high-rent cities like San Francisco, New York and Boston a person can save at least $700 a month by having a roommate.

Cue in the cooking-at-home technique for group meals, and the savings grow even more.

6. Millennials go on fewer dates to save money.

Being in a relationship, say 16 percent of millennials, is cheaper than still looking, since they save money by not going out on so many dates.

5. They save on taxes if they’re married.

Ever-practical, these millennials. They recognize that being half of a married couple can save on their tax bill—and they don’t forget that either when looking for cash to stash for the future.

4. They bargain-hunt for credit card perks.

Make no mistake, among millennials travel is a big deal: 58 percent said travel destinations are their favorite topic of conversation.

And asked what they would purchase with $2,000 if they could only spend it on one thing, 25 percent said plane tickets.

As a result, they tend to be particularly savvy when it comes to being able to travel, with 16 percent seeking out credit cards that provide big mileage bonuses.

3. They leverage perks to pursue other little luxuries without having to lay out cash for them.

In fact, they’re fond of doing it for travel, with 7 percent using airline miles to upgrade to business class.

In addition, 7 percent use status from premium credit cards for hotel upgrades, and 6 percent use premium cards for lounge access.

2. They’re planning on grad school.

While that may not seem like saving—even though it’s definitely ahead of the 11 percent of male millennials who are saving for a new luxury car and the 12 percent of female millennials saving for a new wardrobe—they’re looking toward an advanced degree for a leg up the job ladder.

Oh, and 27 percent are saving for a place of their own.

1. They stay away from credit cards.

Mashable reports that, despite their spendthrift reputations, millennials are actually opting for other types of technology—digital wallets, for instance—but not so much credit cards.

It cites a BankRate finding that in fact, 67 percent of millennials don't have credit cards—the lowest amount of people without credit cards in any demographic, among adults.

And they’d rather be paid in cash, thank you very much. So say 58 percent, and they’re smart; it wards off unnecessary purchases and helps keep them out of credit card debt.

See the original article Here.

Source:

Satter M.  (2017 June 29). 10 ways millennials are saving for the future [Web blog post]. Retrieved from address http://www.benefitspro.com/2017/06/29/10-ways-millennials-are-saving-for-the-future?ref=mostpopular&page_all=1


How to Build Financial Wellness into a More Holistic Wellness Program

Are you looking for new ways to help your employees increase their financial wellness? Check out this great article by Michelle Clark from SHRM highlighting what HR can do to help employees engage with the company's benefits program to improve their financial situation.

The majority of HR professionals give their employees a financial health rating of “fair” and nearly 20 percent report that their employees are “not at all” financially literate according to a national SHRM survey.

That’s an issue. Because when employees are stressed about money they don’t turn their worry off at work – and the price is paid in lost productivity.

You can help fix the problem. Everyone wins when traditional employee wellness programs are recast in a more holistic, well-rounded way – with financial wellness an important cornerstone.

There is no cookie cutter solution. But if you build a customized program that’s responsive to specific requirements and comfort levels of different employee groups, it can be rewarding and valuable.

First, review your employee demographics to get an idea of what their financial situations may look like. For example, it’s understood that the majority of today’s workforce is comprised of three age groups: Baby Boomers, Generation X and Millennials. Each has different financial stressors and preferences on how they prefer to receive assistance:

  • Boomers on the verge of retirement are wondering if they can afford it or even want to retire. If they need to work, they are worried they’ll have a hard time finding a job.
  • Generation X can barely think about retirement planning when they’re trying to cover the mortgage, raise kids, save money for college and shoulder responsibilities for aging parents.
  • Millennials are burdened by student loan debt while trying to stretch their paychecks so they can live on their own instead of with their parents.

There also are vastly different ways each accesses support. Boomers may be okay with online resources and one-on-one coaching. But Millennials and Gen Xers may want more high-tech resources such as websites offering basic money courses and worksheets to help with budgets, housing or investment planning.

Once a solution has been established, the next step is getting people to partake. You don’t want to target employees, since privacy is a major consideration. Offering options allows employees to engage privately on their own terms. That’s why the online solutions are ideal for individual financial issues, offered in tandem with more on-site sessions on general concerns. And there’s always the potential of offering one-on-one financial counseling or financial wellness coaches to round out your program.

See the original article Here.

Source:

Clark M. (2017 June 16). How to build financial wellness into a more holistic wellness program [Web blog post]. Retrieved from address https://blog.shrm.org/blog/shrm-blog-june-2017-how-to-build-financial-wellness-into-a-more-holistic-we