Prudential: Companies Eye Healthcare Costs, Pensions as Top Corporate Priorities
Proquest LLC |
An improving economy and stable financial markets have given financial executives confidence to explore a range of options to help their companies better manage the costs and risks of their healthcare, pension and other benefit programs, according to new research released by
In a release, the companies said the research report, "Managing Financial Risk in Retirement and Benefits Programs," found financial executives believe improvements in funding defined benefit plans will make it easier to reduce or completely eliminate risks associated with those plans.
The report also found that financial executives continue to believe controlling the cost of healthcare benefits is their top priority in managing benefits. Companies are also looking to outsource some or all of their benefits administration and management of Family and Medical Leave Act tasks. Although employers are looking at private health insurance exchanges, few are likely to switch employees out of company-provided healthcare into the public insurance exchanges established under the Affordable Care Act.
"Everyone is looking at how to better control benefit costs and healthcare is still the No. 1 issue," said
The survey targeted senior financial executives at companies with defined benefit retirement plans holding
The survey found 35 percent of the responding companies have already closed their pension plans to new entrants and another 25 percent have frozen them. These executives cited concerns about the impact of defined benefit plans on earnings, balance sheets and their companies' ability to invest in growth opportunities. Another concern is the possibility of new mortality standards, with 50 percent of responding executives saying they believe new standards are likely to affect their company's defined benefit liabilities. In addition, 53 percent of finance executives report that their companies either have transferred defined benefit liabilities to a third party insurer or are likely to within two years, an increase of 18 percent compared to the 2010 survey.
"The rebound in financial markets has not only restored the value of 401(k) plans but helped improve the funding levels of defined benefit plans as well, though market volatility and other risk factors remain a concern," said
Other key findings included:
-More than half of the financial executives surveyed said they are likely to offer lump sum distributions to DB plan participants over the next two years
-More than half of the respondents believe a significant portion of their workforce will have to delay retirement because of inadequate savings. And, 59 percent say they have seen the average retirement age increase over the past five years and 61 percent believe it will continue to creep up. Finance executives are showing a growing interest in defined contribution plan options that enhance the security and stability of workers' retirement funds. These options include automatic enrollment and developing matching contribution formulas that encourage higher savings rates.
-More than half (53 percent) of the financial executives believe providing downside risk protection through a guaranteed income feature would help plan participants make better investment decisions. Half of the respondents are likely to add a guaranteed income feature to their defined contribution plan and another 5 percent already offer the feature.
-Nearly 50 percent of the financial executives said they are likely to outsource some or all of their benefits administration on top of the 27 percent that already do so. In addition, 20 percent outsource their absence management and Family and Medical Leave Act duties with another 45 percent considering it.
-Some 70 percent of the respondents believe offering voluntary benefits is a way to increase employee satisfaction and 58 percent are likely to expand voluntary benefit offerings.
-Companies are still shifting healthcare costs to employees, with 80 percent either transitioning more cost to employees or are likely to do so. Only 38 percent say they are willing to end employer-paid healthcare and direct employees to public health insurance exchanges, with 57 percent saying they wouldn't consider the idea. But, 41 percent would be willing to provide subsidies to employees for use on private health insurance exchanges.
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