Industry News:

Group Life and Health
Importance of Voluntary Benefits to Surge

As the United States prepares for healthcare reform, almost half of American employers anticipate that voluntary benefits and services (VBS) will become a more crucial part of their rewards strategy in the coming years.

A 2013 Towers Watson survey reveals that the percentage of employers that expect VBS to be a very important aspect of their total rewards package will more than double over the next five years, jumping to 48% in 2018 from the current 21%.

The main reasons companies implement voluntary offerings are to provide customized benefits that fit employees’ needs (83%) and to enrich their total rewards offerings (74%).

The most common voluntary benefits employers currently offer include life (94%), vision (84%), disability (80%), dental (80%) and accident (68%) insurance, according to the study.

Employers are also thinking of adding other voluntary benefits by 2015. The top offerings being considered are critical illness, identity theft and financial counselling.

“VBS can be attractive to employers seeking an affordable way to reduce employee out-of-pocket costs while providing clear value to their employees,” says Mark Bilderback, senior healthcare consultant with Towers Watson.

Voluntary benefits also offer advantages for employees, such as choice, convenience and affordability. Workers can select from a group of options to customize their benefits package so it fits their lifestyles.

They can choose voluntary products at open enrollment or throughout the year and then fund them through payroll deductions. Employees usually have a price and underwriting advantage because they buy products at the group plan rate.

When designing plans that match the needs of staff members, employers focus on workforce demographics, the way products fit within their total rewards and wellness strategies, according to Towers Watson.

When it comes to employee demographic groups, employers think their current voluntary benefits best meet the needs of baby boomers but offer least satisfaction for generation Y.

“In contrast to older generations, generation Y employees are interested in benefits plans that are customized to their needs,” says Beth Grellner, group health and benefit practice leader with Towers Watson. “Companies that are reliant on these younger employees can evaluate new voluntary benefit and service models to fit these needs.”

The Towers Watson survey polled more than 320 U.S. employee benefits professionals from mid-size to big companies across a variety of industries.

*Benefits Canada 2013


Group Retirement Savings 

As longevity Increases, retirement savings fall short
Yaldaz Sadakova | July 31, 2013
Benefits Canada Magazine

As longevity increases and workplace pension plans decline, an alarming number of Canadians believe they are better equipped for a long retirement than they actually are—and few know how much money they will need to put aside.

A survey by BlackRock Canada reveals that 62% of non-retired respondents are generally confident that they have planned well for retirement. But only 59% of these people actually have a plan. And fewer than half of Canadians who have saved less than $100,000 for retirement have a plan—even though they are, arguably, the group that needs it most.

Only 15% of future retirees are very knowledgeable about how much they will need to save each year to meet their retirement goals.

The study also shows that 18% of Canadians don’t put any retirement money aside on a monthly basis, and 11% don’t know what they save. The biggest barrier to saving more is living paycheque to paycheque, a decrease in salary and the cost of education, according to BlackRock.

“There tends to be a false sense of security when it comes to planning for retirement,” says Noel Archard, head of BlackRock Canada. “We hope that the money will somehow be there when we need it, but we’re not taking the action required to ensure it is.”

Underscoring the inaction of future retirees is the fact that a number of them are not fully engaged in their retirement plans.

Sixty-one percent of respondents with a DC plan or group RRSP take an active role in understanding their workplace retirement plans, according to BlackRock’s findings. Fifty-nine percent make the maximum contribution every month.

But as many as 70% hardly ever, or never, adjust their allocations—although most know that they should do so annually.

As a result of this inaction, almost half of non-retired Canadians have chosen to invest less in the stock market over the past few years. And one-third admit they missed out on the post-2009 market rally.

Workplace pension decline
All of these bleak numbers coincide with the well-documented drop in workplace pension plans. Nearly two in five future retirees have no access to a company plan, including a full quarter of currently employed investors. Overall, barely a third of respondents participate in a DB plan, 18% are in a DC plan, and only 15% are in a group RRSP.

At the same time, Canadians are living longer than ever before. In 1950, a 35-year-old Canadian had a remaining life expectancy of 38.6 years, but in 2010, this jumped to 46.8 years, according to the C.D. Howe Institute.

So how can Canada tackle this problem of inadequate retirement savings against the backdrop of increased longevity?

Employer engagement 
One important step employers need to take is to make enrollment in their pension plans mandatory, says Archer.

He also recommends that employers should pay closer attention to whether their workers are making the most of their plans—otherwise, even the best plan would be useless. “The company is not necessarily hyper-focused on the outcome,” Archer explains, adding that right now the onus is often on the employee to get good results.

Financial education
Ironically, achieving good results requires the kind of financial knowledge that is woefully inadequate among many future retirees.

That is why employers—along with the financial industry—need to find ways to educate workers. “You’ve got to be relentless about it,” Archer says.

He adds that the government should also play a role in that process by introducing financial literacy in school curricula early on. “Financial acumen needs to be part of your basic skill set,” he explains. “[Now] for the most part, it’s what you’re going to pick up on your own—and I don’t think that’s a good solution.”

Professional advice
Employees can also empower themselves by hiring a financial advisor, which will also help them be more disciplined, according to BlackRock.

The BlackRock survey polled 1,720 future retirees in May.