Given the outsized impact the pandemic has had on the health care sector, it’s not surprising that employee benefits have taken center stage to help address organizational challenges.
In fact, Voya Financial’s biennial survey of retirement plan management in the health care sector conducted in collaboration with the American Society for Healthcare Human Resources Administration finds that many organizations are looking to optimize their employer-sponsored retirement and benefit plans.
Amid the Great Resignation, health care organizations believe it is now “much more” or “somewhat more” important to attract and retain high-quality medical staff (83%) and support staff (82%). As a result, the value placed on benefits, including an employer-sponsored retirement plan, have become critical keys to success in maintaining and attracting high-quality employees, the study notes.
According to the findings, 90% of decision-makers from health care organizations agree that employee benefits programs overall help to attract and retain high-quality employees, with 88% agreeing their organization’s defined contribution plan specifically helps attract and retain high-quality employees. Consequently, since January 2021, roughly 4 in 10 (39%) health care organizations have begun offering or already enhanced their match to their employees’ retirement plan contributions.
Health care organizations also say that helping employees make-well informed investment decisions is the greatest challenge in managing their retirement plan.
According to the findings:
- 94% think it’s important to provide support/guidance to underserved employee populations to improve retirement readiness; and
- 80% say that adding or changing plan features such as enhancing or implementing auto features is an important priority.
But more organizations have focused on implementing a balanced approach to their overall health and wealth benefits offerings, including making work hours more flexible (54%), increasing salaries at a higher rate (52%) and expanding traditional and non-traditional benefits (45%).
Moreover, an overwhelming majority (93%) of health care retirement plan decision-makers agree more can be done to help employees optimize their benefit dollars across health and wealth benefits like retirement savings, HSAs, health insurance and emergency savings. What’s more, a significant amount (86%) also agreed that employees are interested in more support and information to help transition into retirement, including understanding Social Security benefits and health care costs.
“Many organizations, but particularly those in health care, have experienced great organizational challenges given the impacts of the pandemic,” said Brodie Wood, vice president and national practice leader for Voya’s Health Care Market. “As a result, these organizations now face even more unique challenges when it comes to attracting and retaining talent. In turn, they have needed to find new opportunities to approach their benefits offerings to be able to support their employees.”
Findings from Voya’s survey also revealed that health care organizations continue to measure the success of their retirement plan based on three key criteria:
- improving overall financial wellness;
- participation rate; and
- retirement readiness.
While most organizations are confident that their retirement plan will help employees achieve their retirement goals and save enough to maintain their lifestyle in retirement, improving overall wellness is now a top measure of success.
“An employer’s ability to offer wellness programs outside the retirement plan is growing in importance to employees, particularly as more employees today seek those unique benefits to help them with their entire savings needs,” added Wood. “We also found that nearly half (42%) of organizations that currently offer a financial wellness programs prefer to offer similar programs or capabilities outside the retirement plan, but the challenges organizations face in getting employees to engage with these programs and offerings still remains to be a hurdle for many.”
Employers Need Help
Additional findings show that retirement plan advisors and consultants continue to play an important role for many health care organizations, with more than half (56%) reporting that the level of service they receive has increased in recent years.
“These past two years—more than ever before—have asked retirement plan advisors to play a wide variety of roles, and some of the top services noted included plan design recommendations and acting as support with fiduciary responsibilities,” Wood further observes. “As the industry continues to evolve with changing legislation and ongoing trends, these individuals will continue to be critical to the success of organizations when it comes to helping them provide valuable benefits for all individuals.”
Administered by Greenwald Research, the study consisted of two phases, including an online survey conducted Feb. 4, 2022–March 8, 2022, among 214 retirement plan decision-makers from health care organizations that offer a DC plan, along with follow-up interviews among a select group of these decision-makers conducted March 2022.
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Working with several medical providers as clients, I note that the high-end earners tend to push for big tax deferral at the lowest cost for their supporting staff. Those who need to recruit quality staff will either choose better cash income as direct pay or safe-harbor DC plans coupled with a modest cash balance plan, but only if it fits with their own high level (6 figure) tax deferral.
If the principal owners are already financially set, the trend is to provide the bare minimum benefit or nothing at all.
It largely becomes a matter of what is in the best interest of the owners.
For larger institutions, there are multiple instances where a legacy defined benefit plan had to be managed to reduce the contribution risk, leading to cash balance designs or dropping the DB plans completely (if possible).