Consumers Are Not Preparing for Retirement

Consumers are more confident that they will have a comfortable retirement than they were during the recession, but they have not done much to plan for retirement, according to a survey by the Employee Benefit Research Institute (EBRI) and Greenwald & Associates. The survey reveals the following about workers in 2016:

  • 21% are very confident about having enough money for a comfortable retirement compared to 22% in 2015 and 13% in 2013.
  • 42% are somewhat confident compared to 36% in 2015.
  • 19% are not confident compared to 24% in 2015.
  • 11% with a plan are not confident about their financial security in retirement compared to 38% of workers without a plan.
  • 83% without a plan have less than $10,000 in their household’s savings and investments, excluding the value of their primary home and any defined benefit plans. In contrast, 35% of workers with a retirement plan have $100,000 or more in savings and investments.

CEO offers tips on creating a financial wellness program

SUM180 CEO Carla Dearing says companies developing a financial wellness program should address financial concerns using emotional cues, such as security, stability and protection. Financial wellness programs should have a holistic approach and make it easy for employees to participate regardless of their financial situation, Dearing says. Employee Benefit News (2/16)

Americans’ Financial Security Increasingly Tied to Employee Benefits

Nearly two in three workers strongly believe that employers have a responsibility to offer insurance and retirement benefits. In stark contrast, only 16% of employers strongly believe they are responsible for providing benefits. Yet, employers acknowledge that workplace benefits help employees and their families achieve financial security, according to a survey by Guardian.

Forty-two percent of employees get most or almost all of their insurance products through the workplace while 68% rely on their benefits for at least half of their financial preparedness. Even when employers offer these benefits, many workers do not take advantage because of poor decision-making, ineffective communication, or education efforts. Employers can improve enrollment and the perceived value of these benefits by increasing communication and transparency.

Workers who get a total compensation statement from their employer place a greater value on their benefits and consider their company’s benefits communications effective; 87% report feeling more confident in their own benefit decisions. Nearly three in four employees who get a total compensation statement say that seeing information about the monetary worth of their benefits caused them to place greater value on them. Unfortunately, just one-third of employers report providing their employees with a total compensation statement.

Millennial Workers Not Saving Enough to Get Company Matching Contributions

Participation in 401(k) plans is strong among workers in their 20s and 30s, but many are not saving enough to take full advantage of their employer’s 401(k) match – potentially leaving thousands of dollars on the table and hurting their long-term financial health, according to a study by Aon Hewitt. While the average participation rate of young Millennial workers (age 20 to 29) is 73%- and 77% for older Millennials (age 30-39), many are saving at a low rate. Nearly 40% of 20 to 29 year olds and 31% of 30 to 39 year olds are saving at a level that is below the company match threshold.

Rob Austin, director of Retirement Research at Aon Hewitt said, “Automatic enrollment has significantly improved participation in 401(k) plans for all employees over the past 10 years—but even more so for young workers. However, once they’re in the plan, young workers seem to fall victim to inertia with many continuing to save only at the default rate, or slightly above, and risking their long-term savings by not receiving the full employer matching contributions that are offered.”

Leaving matching contributions on the table can cost young workers a significant amount of long-term savings. Consider a 25-year old worker who makes $30,000 annually and works for an employer that provides the typically company match – $1-for-$1 up to 6 percent. If that 25-year old starts saving the full match amount of 6% immediately upon employment and continues to do so until she reaches age 65, she’ll have more than $950,000 saved in her 401(k).  If that same worker waits until age 30 to begin saving 6%, she will have less than $715,000 saved at age 65. Five years of missed 401(K) contributions will cost the employee her $225,000 over her career. In order to make up the gap, she would need to increase her savings by 4% percent and start saving 10% of pay each year for the next 35 years.

“For young workers, it may seem insignificant to increase 401(k) contributions by a few percentage points, particularly at a point in their career and life when they’re likely earning a smaller salary, but the long-term effects can be remarkable,” explained Austin. “Employers can help Millennials improve their financial outlook by encouraging them to save at least at the match threshold through targeted communications and online tools and resources. To take it a step further, they can also increase the default contributions so that workers are saving at the match threshold immediately upon enrollment into the plan, or by offering automatic contribution escalation, which increases a workers’ contribution rate over time. The bottom line is young workers need to save more, starting now.” For more information, visit

Most Employers Say Retirement Readiness Is a Big Issue

Retirement readiness has become a major issue for 78% of large and midsize U.S. employers that sponsor 401(k) and 403(b) defined contribution (DC) plans, according to a survey by Towers Watson. Additionally, 82% say retirement security will become a more important issue for employees in the next three years.

A vast majority of plan sponsors have taken steps to meet this growing challenge by boosting their savings and investment education programs and embracing automatic features and target-date funds for their DC plans. However, employers understand that more education is necessary. Only 12% say employees know how much they need for a secure retirement while only 20% say their employees feel comfortable making investment decisions.

Fifty-three percent are concerned about older workers delaying retirement. Robyn Credico of Towers Watson said, “With concern over retirement readiness at such high levels, many employers face the risk of having older workers delay retirement. These delayed retirements can weaken productivity, since employees who stay on the job because they cannot afford to retire are more likely to be less engaged and productive than other workers. To minimize this possibility, employers should measure the effectiveness of their plans in meeting retirement goals and, if necessary, determine opportunities where various design, investment and communication features can be used more effectively to optimize the overall program. These efforts will need to be balanced with the benefit plan cost constraints most employers have. Getting employees to understand their savings needs and feel comfortable about retirement remains a significant challenge. New plan features, alone, are not the answer. If employers are to make progress, they must also rely heavily on education and communication so their employees know their options and make informed savings decisions.”

The most common plan features include simple, but diverse investment lineups as well as automated enrollment and deferral features with flexibility for pre-tax and after-tax contributions. Fifty-four percent offer an automatic increase feature for participants’ contributions annually, but only 28% mandate it. Fifty-four percent offer an option to make Roth contributions, but less than 11% of their employees take advantage of these features.

The Health savings account (HSA) is another tax-efficient vehicle for retirement savings. Virtually all companies that offer HSAs and DC plans allocate the contributions separately. Of those that offer HSAs, only 19% educate their workers on the wealth accumulation benefits of a DC plan versus an HSA.

In support of more effective solutions, sponsors continue to simplify the investment offerings to align with participant needs. Sixty-six percent offer 10 to 19 investment options, and 86% use target-date funds as their default option. Sixty-one percent of employers focus their retirement education programs on traditional, passive methods, including account statements, newsletters, group meetings and online webcasts. Less than 10% use mobile apps extensively or have tried gamification, which uses game design to motivate employees to achieve savings goals

Why Brokers Must Get Up to Speed on HIPPA Rules Now

HIPAALogoIf you are not protecting your clients’ health information according to HIPPA privacy rules, you could be in deep trouble. The Dept. of Health and Human Services (HHS) issued a rule to expand many HIPPA requirements to business associates that receive protected health information, such as contractors and subcontractors. Some of the largest breaches reported to HHS have involved business associates. HIPPA penalties for non-compliance are no laughing matter. Under this rule, they have been increased based on the level of negligence with a maximum penalty of $1.5 million per violation.

Another interesting provision is that, a patient who pays by cash can instruct their provider not to share information about their treatment with their health plan.

The changes also strengthen the Health Information Technology for Economic and Clinical Health (HITECH) Breach Notification requirements by clarifying when breaches of unsecured health information must be reported to HHS.

“This final omnibus rule marks the most sweeping changes to the HIPAA Privacy and Security Rules since they were first implemented. These changes not only greatly enhance a patient’s privacy rights and protections, but also strengthen the ability of my office to vigorously enforce the HIPAA privacy and security protections, regardless of whether the information is being held by a health plan, a health care provider, or one of their business associates,” said HHS Office for Civil Rights Director Leon Rodriguez.

In addition, patients can ask for a copy of their electronic medical record in an electronic form. The final omnibus rule sets new limits on how information is used and disclosed for marketing and fundraising purposes and prohibits the sale of an individual’s health information without their permission.

The final rule also streamlines individuals’ ability to authorize the use of their health information for research purposes. The rule makes it easier for parents and others to give permission to share proof of a child’s immunization with a school and gives covered entities and business associates up to one year after the 180-day compliance date to modify contracts to comply with the rule.

The final omnibus rule is based on statutory changes under the HITECH Act, enacted as part of the American Recovery and Reinvestment Act of 2009, and the Genetic Information Nondiscrimination Act of 2008 (GINA) which clarifies that genetic information is protected under the HIPAA Privacy Rule and prohibits most health plans from using or disclosing genetic information for underwriting purposes.

The Rulemaking is in the Federal Register at

Last Updated 05/25/2022

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