Consumers Are More Satisfied With Retirement Than Health Care Benefits

By Cyril Tuohy InsuranceNewsNet

By Cyril Tuohy

The latest tale of employer-sponsored benefits paints a divergent picture of retirement and health care benefits. For those of us keeping score, retirement benefits are way ahead of health care benefits when it comes to employee satisfaction.

In a nationwide survey of 5,070 full-time employees, 67 percent said they were satisfied with employer-sponsored retirement plans in 2013, including defined benefit and 401(k) plans. This is up 13 percentage points from 2009, according to the consulting firm Towers Watson.

Conversely, the number of employees satisfied with health care benefits was 59 percent last year, down 10 percentage points from 2007. Older workers in particular are dissatisfied with employer-sponsored benefits, the survey found.

The findings, included in a white paper by Jonathan Gardner and Steve Nyce of Towers Watson, unearth opposing trends at work simultaneously.

“Workers express increasing satisfaction with their retirement plans but still worry that their retirement income will come up short,” the authors wrote. “While employees rely on and value their health care plans, they are not happy about their higher health care costs, especially when the costs are consuming a significant share of their household budget.”

Slow economic growth and continuing corporate cutbacks “have given employees a reason to evaluate their finances and retirement plans,” Kevin Wagner, senior consultant at Towers Watson, said in a news release accompanying the survey.

“While more workers are happy with their retirement benefits, they are increasingly concerned that their retirement income will come up short when they exit the workforce,” Wagner said.

Retirement security has become a more important issue for employees over the past two or three years. There is little doubt that the stock market’s strong performance in 2013 is another reason employees look upon retirement plans more favorably than they do health care benefits.

The convenience of the payroll deduction as a means to pay for future needs also shows how easily a retirement benefit can be administered.

Even if advisor and management fees are higher than anyone cares to admit, there’s no denying the defined contribution model has been well-received by employees—no matter how much they elect to put away.

By contrast, the administration of employer-sponsored health coverage seems downright antiquated.

The survey also raises questions about how long companies can keep shifting the burden of paying for health benefits onto employees before eroding the value of sponsored benefits.

From copayments to deductibles, from coverage exclusions to a panoply of in-network and out-of-network choices, health benefits aren’t exactly user-friendly.

“Rising medical costs have prompted employers to shift a larger share of health care costs to workers, many of whom are already feeling financially stressed from the recession and benefit cutbacks,” said David Speier, a senior consultant with Towers Watson.

Add to that the upheavals in health reform, and there’s no question that it has been a tough slog for health benefits satisfaction. It’s no wonder that measures of satisfaction with employer-sponsored health benefits are in freefall.

The survey revealed another sharp division among employees with regard to retirement and health care benefits — this time over the amount of take-home pay employees said they are willing to give up in exchange for their respective benefit.

Employees — 62 percent — said they would give up some pay for a guaranteed retirement benefit, up 16 percentage points from 2009, and 58 percent of respondents also said they would sacrifice pay for more generous retirement benefits, the survey found.

But once again, it was the opposite story for health care benefits. Only 34 percent of employees said they would give up some pay for “more predictable” health benefits, down 8 percentage points from 2010, according to the survey.

Only 27 percent of respondents were willing to take lower pay in exchange for more generous health benefits.

“At a time when costs are consuming a significant share of their household budget, it’s no surprise that employees are less willing to trade some pay for either more generous health benefits or more predictable costs,” Speier said.

The percentage point change in satisfaction with retirement plans from 2009 to 2013 among employees segmented by age band and retirement plan type, which ranged from 7 to 17 percent, was consistently positive, the survey found.

Contrast that with the percentage point change in satisfaction with health care plans from 2007 to 2013 among employees segmented by age band, health status and plan eligibility. Percentage point changes, ranging from minus 3 percent to minus 23 percent, were consistently negative, the survey also found.

Cyril Tuohy is a writer based in Pennsylvania. He has covered the financial services industry for more than 15 years. Cyril may be reached at [email protected].