Retirement Savings Is Important Yet Confusing for Most Employees

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Total Compensation Statements Can Help

A recent survey from BlackRock, a national asset management firm, has confirmed something many Americans already know. According to the Survey of 401(k) Participant Attitudes and Behaviors, the vast majority of those who put money into 401(k) plans feel that their retirement savings are more important to them since the financial downturn felt in 2008.

For the survey, 1,000 participants were asked to indicate priorities and concerns that revolve around their 401(k) retirement savings plans. Data from the survey suggests that saving money is the top priority for the bulk of Americans, but the survey also reported that many workers are confused by 401(k) plans and may not be saving properly.

The survey also showed that although Americans are saving money, many feel that the amount they are putting aside will not be sufficient enough to fund their retirement. BlackRock hopes that more effective communication of savings strategies from employers can help turn the tide for the nation's workforce.

What Employers Can Do to Help

Over 70% of those surveyed indicated saving for retirement as their top priority, yet further responses on the survey conversely showed despite the employees' emphasis on savings, many are unsure how much to save. These statistics include:

• Nearly one out of every four participants did not know the rate their employer matched contributions to 401(k) plans.

• 83% of 401(k) contributors only invested the minimum amount to receive a full-match from their employer.

• Less than half of those polled designated their employer's matching rate as their top influence on how much they contribute.

• 33% of survey participants feel automatic escalation features used to increase 401(k) contributions are "very important” savings incentives.

According to BlackRock, employers should be doing more to educate their staff on how to use automatic escalation and company matches to their advantage, otherwise employees will continue to blindly pump money into 401(k) plans, hoping for the best.

Retirement is a Gray Area for Many Employees

Responses to the survey show a general lack of understanding when it comes to the realities of retirement and how to budget retirement savings. Individuals intend to retire by a certain age, yet their savings disagree and put the hopes of a self-funded retirement in jeopardy. The survey found:

• 62% of participants reported beliefs that they will live longer than their retirement savings can fund.

• Nearly 60% of those surveyed would prefer receiving steady retirement income rather than a single lump-sum payment.

• 82% of participants reported having little to no experience managing sums of money greater than $100,000.

BlackRock hopes that these statistics will be a wake-up call to employers who expect their workers to understand complicated financial issues, like longevity risks and the effects of inflation. Otherwise, according to BlackRock, employees will be left to manage their life savings on their own.

Employees are not averse to the thought of receiving professional financial guidance either. About 72% of respondents showed an interest in having their employers suggest well-diversified managed accounts for retirement funding.

What Tomorrow Brings

Thirty years ago, employers devised defined contribution plans as a way for workers to supplement their retirement savings, but as 401(k) and similar defined contribution plans became the principle form of retirement savings, employers have tried their best to meet the needs of America's aging workers.

As the country works to emerge from its economic troubles, employers must take a second look at their defined contribution plans. BlackRock suggests that employers work to increase savings rates now and begin to educate their employees on how to make their money work for them, ensuring the savings necessary to fund happy and long retirements.

Total Compensation Statements can Help Reduce the Confusion…

Total compensation statements are a great way to communicate with your employees. Why not give us a call and see how we can help you enhance communications with your employees.

When Management and Employees Work Together, Benefits Costs Go Down

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A commonality in many workplaces is the rift between the employees and management when it comes to health care benefits. Employees usually accuse the company of being too frugal, and management is unable to find a compromise that makes everyone happy. In the end, employees of the company are left feeling like their hands are tied.

Luckily, a recent session at the Society for Human Resource Management's 2010 Annual Conference explained how one company, with less than 150 employees, saved around $2 million by simply creating a partnership between the employees and management staff. Together, the company was able cut the soaring costs of medical coverage while still providing excellent benefits to employees and their families.

SHRM recommends an ongoing four-stage method to help control health care costs. Through evaluation, education, communication, and motivation, management and employees can work together to keep the costs of health care down.

Evaluation

Health insurance claims are processed by the provider or a third-party administrator, and in most cases, employers do not see the complete picture of how the benefits are being used. By requesting summative claims data, employers are able to see how money is being spent and who it's going to.

An evaluation of claims data can reveal unnecessary expenses, like miscoded treatments, erroneous charges, and misuse of the system. Employers will also notice ways to cut costs without reducing the benefits, such as when employees are prescribed medicines that are either available over-the-counter or in the formulary. The data will provide insight into the amount of out-of-network care that is being used.

A thorough evaluation gives employers the information needed to better educate their employees on how to efficiently use their health benefits and eliminate unnecessary spending at the same time.

Education

Just as people tend to breeze through owner's manuals and other instructions, the Explanation of Benefits statements from the insurance provider usually gets the same treatment. Without a total understanding of how costs are determined and why rates go up, many employees operate under the guise that "if it's covered, then just tack it on my bill.”

Meeting with small groups of employees is a great way to educate the staff on how the prices of their insurance premiums are directly related to how the employees, as a staff, use the insurance. Higher annual costs equal increased premiums for the following year and lower annual costs result in cheaper rates.

Give cost efficient suggestions to the staff, letting them know how they can help reduce the amount they spend each year. Recommend using only in-network physicians and clinics, and explain how doctors can provide samples of medication before writing expensive prescriptions for drugs that may not work. Since health care plans often cover the families' of employees, make sure to host educational sessions where spouses can attend, as well.

Communication

Communicating the positives of cost effective health care coverage should begin at new employee orientation and continue throughout employment. Dedicating a wall or bulletin board to display current usage data and dollar figures is a key component to keeping employees up to speed on the state of their insurance programs. By making this general data known, employees are able to hold themselves accountable and see how the improvements they have made are affecting the system.

Motivation

With a little motivation from management, employees can see that their bosses are serious about reducing the amount they have to pay for insurance. Rewarding the employees when quarterly costs go down with picnics or even a one-month reprieve of premium charges can motivate the staff to continue to work towards more efficient health care usage.

Employees Value Benefits and Job Security the Most

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According to a recent report from the Society for Human Resource Management (SHRM), employees consider benefits and job security as the two most important factors that contribute to their overall job satisfaction. This marks the fourth time in as many years that these two factors topped the SHRM's annual Employee Job Satisfaction survey.

Employers who want to see their employees’ job satisfaction increase should consider providing informative communication regarding the benefits package they offer and the personalized cost value of those benefits. Employee benefit statements often include a personalized letter from top management which may be used to communicate a sense of security regarding the stability of the company and employees’ jobs.

The survey also polled HR professionals on their thoughts about job satisfaction, and found similar results. HR professionals agreed with the employee population on the value of job security, positioning it as their second most important factor. An astonishing 72% of the HR population polled, selected the employee-supervisor relationship as the most important factor effecting job satisfaction, ranking number one in the survey for the seventh time in the last eight years. In comparison, only 48% of employees polled selected "relationship with supervisor” as an important factor, ranking it seventh on the list.

The 2010 survey was made up of 25 elements spread across four categories, and included factors regarding wages, benefits, work environment, and advancement opportunities, among others. To ensure the validity of the survey's results, the SHRM polled a wide sample of over 600 employees and 589 HR professionals, all from the United States.

This year's survey had other interesting results. Employee compensation fell to its lowest rank ever this year, coming in at fifth on the employees' poll. Last year, compensation fell out of the top five rankings for HR professionals, and this year it was listed as the ninth biggest contributor to job satisfaction.

Besides job security, employees and HR professionals appear to agree that having opportunities to utilize skills/abilities while at work contributes to overall satisfaction. It is the third consecutive year this factor has ranked in the top five in both surveys, with employees placing more emphasis on this choice in 2010 than in previous years.

SHRM included a new choice in this year's survey that received a lot of attention from both sides of the table. For the first time in the survey's history, participants could select "organization's financial stability” as a key contributor to job satisfaction, receiving enough selections to rank fourth on both surveys.

As for employee benefits, a secondary survey revealed that health care coverage was the most important benefit, followed closely by paid time off. Despite the amount of significance employees' place on benefits, only 38% of employees polled felt "very satisfied” with their current medical benefits. Conversely, the majority of employees were very satisfied by the amount of paid time off being received.

Some employers are concerned about how health care reform could affect the benefits they offer, which could also affect job satisfaction. On the brighter side, this year's employee survey showed that "the work itself” was selected enough to tie for fourth, pointing out that satisfaction does not only come in the form of paychecks and paid vacations.