Forthcoming Changes in Employee Benefits
Employees, and possibly even retirees, could be looking at higher expenses, but potentially more choices, when it comes to benefits. A CFO Research Services study of senior financial advisers found that an increasing number of employers intend to move to an “employee-choice” benefits model over the next two years.
Controlling the cost of company-provided health care benefits is the top benefits priority for 70% of the executives surveyed. Nearly two-thirds (65%) of executives said they are likely to shift a larger portion of health care costs to employees. This is despite the fact that 34% said that minimizing the increase employees incur for health care benefits was a top priority.
For the first time in the survey’s three-year history, reducing the cost of other employee benefits ranked among the top three priorities, with 33% of executives giving it importance. This is why a growing number of employers are considering or implementing “employee-choice” benefit packages. Under this model, employees are given a fixed amount of funding for choosing various benefits. In comparison, under the traditional “employer-choice” model, employers are responsible for choosing health care, retirement and group benefits.
Voluntary benefits may become more common as well. Group life and dental insurance could be made available to those employees willing to pay for them. About one-third of employers said they are now somewhat likely or very likely to offer voluntary benefits to retirees as well.
Pensions are more likely to stop being an employee benefit in the future. This year’s survey found 31% of respondents were either somewhat or very likely to freeze or terminate their defined-benefit plans over the next two years. This represents a significant increase from the 20% who indicated the same intention two years ago.
Among employers offering defined-contribution plans [e.g., 401(k) plans], 41% said their company will likely offer guaranteed lifetime income products (which are typically annuities) over the next two years. In 2010, just 30% of executives said their companies were likely to do so.
Source: “The Future of Retirement and Employee Benefits: Finance Executives Share Their Perspectives, CFO Research Services and Prudential Financial Inc.,” May 2012.