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Uncertainties Shadow Health Care, Retirement Plans
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Copyright 2009 Crain CommunicationsAll Rights Reserved Business Insurance
January 5, 2009
NEWS; Pg. 1
1210 words
Cost-cutting in benefits; Uncertainties shadow health care, retirement plans
KRISTIN GUNDERSON HUNT
Benefit managers have entered 2009 with a host of concerns regarding their departments' operations and their employee benefits offerings in the wake of the dismal economy.
From curbs on benefits offerings as companies look to cut budgets, to retirement savings issues as workers see their 401(k) accounts shrink, and health care reform as a new administration takes office, benefit managers face numerous uncertainties as the year begins.
Jack Towarnicky, associate vp-benefits planning at Nationwide Mutual Insurance Co. in Columbus, Ohio, said he realizes cuts will have to be made somewhere-he just doesn't know where yet.
``Like many other large financial services firms, the economic downturn means we're likely not going to hit all our financial metrics,'' Mr. Towarnicky said. ``Expense savings are expected throughout the organization, including benefit plans.''
However, his organization and others still were able to enhance their benefit packages for 2009. Nationwide did not raise employee contributions for its two most popular health care options from 2008. It did not change dental coverage or rates, or life insurance or rates, and it lowered the cost of vision coverage. He said the company still is matching a portion of contributions to health savings accounts and it didn't reduce its 401(k) match. It continues to enroll new hires in its defined benefit pension plan as well.
Kathy Dupree, benefit manager for Core Laboratories in Houston, said her company added more benefits too, enhancing its wellness program and adding a smoking cessation program. She said the organization was able to take such actions without increasing employees' rates. Mr. Towarnicky and Ms. Dupree acknowledged many other companies and benefits departments were unable to do the same as a result of the poor economy.
Thomas Grass, a Los Angeles-based Watson Wyatt Worldwide managing consultant for southern California said the lagging economy probably will have more of an effect on human resources departments overall than benefits departments specifically, but he said it could affect benefits departments' operations via staffing reductions.
``People are tightening their belts when it comes to staffing,'' Mr. Grass said. ``Everybody is asking everybody to do more with less, and human resources is certainly being asked to do the same thing.''
Just as benefits managers are waiting to see how their benefits departments will be affected by the economic downturn, they are pondering if and when health care reform will occur and how their organizations will be affected, said Chantel Sheaks, a principal with Buck Consultants L.L.C. in Washington.
``I think for employers, when they're doing their planning and looking forward, it's very difficult in this political climate to really plan on the health care side for next year,'' Ms. Sheaks said. ``Many employers have to plan as if nothing is going to happen.''
Chris Cannova, director of compensation and benefits for the Archdiocese of Chicago, said while he is interested to see how President-elect Barack Obama's health care strategy plays out, he isn't counting on any immediate drastic changes and he planned for the year ahead accordingly.
``I'm taking a wait-and-see approach,'' he said. ``I don't know how that strategy will evolve, but I think it would be great if we achieved some level of health care reform.''
Ms. Dupree also said she does not expect immediate health care reform. She said during the next year, however, she expects insurance companies to start losing money if the marketplace doesn't correct itself, thereby affecting employers' health insurance plans.
She said insurance companies likely won't be able to subsidize some of the ancillary services like wellness programs or smoking cessation programs, ultimately changing their product offerings. Additionally, they might have to increase costs for their medical plans, causing companies to drop their plans, make them more restrictive or increase employees' premiums. As a result, she said many employees will forgo their insurance, further increasing the uninsured population.
``From a health care standpoint (the trend in 2009) is not going to be the advent of a new product or the increase of health reimbursement arrangements, it's going to be this tremendous trickle-down effect that's going to hit employees who are already so strapped they can't afford (coverage), adding to the uninsured problem we already face.''
The economy isn't only affecting health care plans, benefit managers said. Mr. Towarnicky said he is worried the state of the economy is going to hit employees' plans for retirement and their savings habits.
``I'm worried fewer people will be prepared or on track for retirement, and I'm afraid they'll get discouraged,'' he said. ``It will change their behavior and they'll reduce their savings. They'll conclude a financially secure retirement is not obtainable or achievable.''
Mr. Towarnicky said he is particularly concerned about possible support from elected officials to waive the 10% early distribution tax penalty on 401(k) plans, therefore encouraging withdrawals from retirement accounts. He said a modest 401(k) loan program would be preferable, enabling employees to access money for short-term needs while requiring repayment of the loan in the long term.
``I'd like to see more focus on improving loan provisions so they foster repayment vs. making it easier to take a distribution,'' he said.
To help mitigate employees' potential ``knee-jerk reactions'' to the economy, such as pulling money out of their retirement plans or reducing their contributions, Mr. Cannova said the Archdiocese of Chicago is implementing communications plans and offering education seminars during 2009 to help settle employees' concerns.
Guaranteeing employees' retirement accounts are transparent is another way to ensure they are getting the best return on their investments. Benefits experts said fee disclosure legislation is likely or will be a priority in 2009. Ms. Sheaks said employers and employees want clarity on the fees associated with their investment vehicles.
``I don't think there is any employer who disagrees there should be transparency, and that you should know what the fees are,'' Ms. Sheaks said.
Mr. Cannova also said getting fee disclosure issues to the forefront is a step in the right direction. He said vendors need to clearly disclose how much employees or companies are paying for the services they provide.
Ms. Dupree said she would like to see more transparency regarding fees from service providers and mutual funds to plan sponsors and from plan sponsors to participants.
``I'd like to know more as a plan sponsor,'' she said. ``I have no reason to believe that my participants should not have this information readily available to them. They should know everything that goes on with their 401(k).''
Despite the myriad concerns benefit managers face, they acknowledge that the economic downturn and having a new Congress at the helm means reform or any meaningful action in the benefits arena during 2009 is probably unlikely.
``I think what we're going to see the new Congress paying attention to right away,'' Mr. Grass said, ``has a lot more to do with the economy than with employee benefits.''
January 9, 2009
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