Many employers are reconsidering every aspect of their business, including employee benefits, to deal with unprecedented economic challenges. Fortunately, marketplace innovation and new regulations have altered the benefits landscape, making it easier for organizations to provide better employee benefits at a lower cost.
Employee benefits are at a critical inflection point. The economic uncertainty means that HR leaders who embrace change can take advantage of opportunities to manage their programs more effectively and set themselves apart from the crowd.
The time for organizations to rethink their benefits programs is now. Here are three actions employers can take to transform their benefits.
1. Digitize Healthcare Delivery to Drive Savings
Employers should use various on-demand and mobile services to meet the unique healthcare needs of their workforce.
- Digital benefits administration is one of the most cost-effective healthcare innovations for employers. Administrative platforms can automate work to free up HR departments to focus on more strategic initiatives. On-demand access gives employees and their families the ability to electronically enroll and manage their benefits at a convenient time, which can lead to better decisions. Many employers still use paper to enroll in or adjust their benefits. This lack of digital benefits administration leads to delayed access to benefit programs, errors, and a paper system is administratively complex and costly to maintain.
- Fast-growing mobile solutions and app-based care help employers drive down healthcare costs while still providing tailored solutions to their employees. Workers are demanding to complete tasks on-the-go and have access to real-time information, which will enhance healthcare decisions. Well-designed mobile apps can improve employee engagement and help employers with wellbeing initiatives that reduce overall healthcare costs.
- Virtual care has revolutionized how healthcare is delivered during the coronavirus pandemic. However, employers should communicate the advantages of telehealth to employees to continue to boost the use of this cost-saving option. Workers are more open to telemedicine, and that trend will continue after the pandemic ends. Video conferencing, smartphone apps, and online health management systems will increase employee engagement and virtual care savings for both employers and employees.
2. Recast Retirement Benefits to Reflect New Economic Realities
Retirement trends in the United States show that workers are no longer going from full-time work to full retirement. Instead, employees are taking a phased approach to retirement, and employers should adjust their benefits programs to fit these lifestyle preferences.
While the retirement plan participants' lifestyles are changing, the retirement plans themselves may soon undergo significant changes. The Setting Every Community Up for Retirement Enhancement Act of 2019 (SECURE Act) may reshape the retirement landscape as much as 401(k) plans did in the 1980s. The law creates significant new opportunities for workplace retirement plans:
- Pooled employer plans (PEPs) allow employers to come together to provide a retirement plan that improves benefit offerings and lower fiduciary risk to plan sponsors. Innovative retirement solutions, such as PEPs, can reduce risk while lowering employers' costs and giving employees access to better investment choices and plan features.
- More lifetime income options will be appearing on the investment menus of retirement plans. The SECURE Act makes it easier for plan sponsors to offer annuities by changing the rules to make them more portable for employees. Plan sponsors will be required to illustrate how lifetime income options can help plan participants translate their contributions into retirement income.
- Incentives to expand plan access are provided in the SECURE Act. For small employers, the tax credit to start a retirement plan is increased. Part-time employees who work at least 500 hours for three consecutive years are required to have access to salary deferrals for workplace retirement plans, but not matching employer contributions. And PEPs will be attractive to employers of all sizes and will particularly improve access to quality retirement plans for employees of smaller organizations.
New developments are not only happening for defined contribution plan sponsors. Employers that offer defined benefit plans continue to evolve their approaches to overall plan liabilities. Some plan sponsors are funding pensions more to lower the cost of Pension Benefit Guaranty Corporation insurance. Other employers are shifting the risk of managing pension plans to insurance companies.
3. Coordinate Health and Wealth Benefits to Maximize Cost Savings
Employee benefits provide uneven protection for many workers. People are often over-insured for their healthcare and under-invested for their retirement. Employers can look at the overall benefits picture and make adjustments that improve their workforce's physical and financial wellbeing.
Health savings accounts (HSAs) can help employees understand the connection between their wellbeing and retirement readiness. HSAs are growing in popularity as a way for employers to promote consumer-driven health and provide investment vehicles for retiree health. The costs of HSA-compatible health plans are substantially lower than traditional health coverage and allow participants to have more control over their healthcare decisions. More retirement plan sponsors are looking for new tools and ways to communicate with employees on how HSAs can address overall retirement health and readiness.
Many employers also have turned to voluntary benefits to fill in the health and wealth gaps and tailor their perks to specific employee populations. Meditation apps, pet insurance, and critical illness coverage are popular voluntary benefits that improve engagement while avoiding additional costs for employers.
Given the amount of disruption faced in the marketplace, employers will need to revise their benefits strategy. Organizations will need to take action to stay competitive in this new benefits environment. Is your organization ready?
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