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WELLNESS STRATEGIES
formula-for example, a percentage of
employees' salaries or a percentage of
company profits. The latter, Patterson
says, is like an employee stock ownership
plan (ESOP) in that employees can feel
they share in the company's success.
" Most employers want employees
to feel appreciated, and giving a discretionary
contribution to their retirement
account when a milestone is met or when
it can be afforded will show them appreciation, "
he says.
Plan sponsors may also choose to
make a discretionary contribution to
ensure all employees have the minimum
contribution, says Credico. They know not
everyone will be able to save on their own.
She says discretionary contributions
are more prevalent among employers
with a frozen defined benefit (DB) plan.
" Plan sponsors that have a commitment to
overall retirement benefits may replace the
DB benefit with a discretionary contribution
to a DC plan. Sometimes it is designed
to replicate the DB plan, and sometimes it
is totally different, " Credico says.
She adds that the decision to offer
a discretionary contribution depends on
the corporate culture: Some plan sponsors
just want to help employees, others
will do so if employees show initiative.
If sponsors choose a safe harbor
plan design, they must make a qualified
nonelective contribution (QNEC) equal
to at least 3% of each eligible non-highly
compensated employee's total compensation;
this is regardless of whether they
made any elective deferrals to avoid
nondiscrimination testing.
The Hebrew Home at Riverdale, for
example, makes a 3% nonelective safe
harbor contribution, plus an additional
employer contribution of 1% to 4% based
on years of service. Alternatively, an
employer might provide a 100% match
on employees' contributions up to 3% of
compensation, plus a 50%-minimum
match on employee elective contributions
up to the next 2% of compensation.
Willis Towers Watson sometimes
suggests that sponsors add a cash balance
plan instead of offering a discretionary
contribution or lowering the employer
match, says Credico. Most plan sponsors
decide against this because they feel DB
plan requirements are challenging, she
says, but it is an option sponsors can use
to improve employees' financial security.
According to the 2018 National Cash
Balance Research Report by Kravitz,
companies with cash balance plans
increase their contributions to employee
retirement savings 50% or more: The
average employer contribution to staff
retirement accounts is 6.9% of pay in
companies with both cash balance and
401(k) plans, vs. 4.7% of pay in firms with
a 401(k) alone.
HSA Contributions
A health savings account (HSA) offered
with a high-deductible health plan
(HDHP) can help employees manage
current health care expenses, but the
accounts are also increasingly seen as a
way to save for health care in retirement.
These additional retirement savings can
help employees avoid tapping into their
retirement plan to pay for health costs. By
the end of 2018, the number of HSAs had
grown to 25 million, holding an estimated
$53.8 billion in assets, reports Devenir, a
provider of investment solutions for HSAs.
For employers that contributed to HSAs
that year, the average amount was $839, up
from $604 in 2017.
Employers contributing to their
workers' HSAs not only inspires
more workers to contribute, but could
encourage them to fund their HSA in the
first place. According to Devenir, 20% of
HSAs were unfunded at the end of 2017.
Credico says employers need to exert
more effort to coordinate retirement plan
contributions and HSA contributions.
" Employers have a budget, and they have
to figure out how much to spend on retirement
and how much to spend on health
care. Sometimes it's the same people at
a company deciding each, but often it is
different people, " she observes. " They
may only be focused on one or the other. "
Once sponsors choose strategies to
help their workers manage their finances,
they can turn to fostering their workers'
financial confidence and wellness overall,
Patterson says. -Rebecca Moore
Plans Target Student Debt
WHEN it comes to financial wellness, says Robyn Credico of Willis Towers Watson,
employers are increasingly interested in helping their workers' pay down student debt
via the company defined contribution (DC) plan. A TIAA-MIT AgeLab study found 73%
of student loan borrowers delay maximizing retirement savings to pay off their debt.
In 2018, the IRS released a private letter ruling, approving student loan repayment
(SLR) nonelective contributions by employers. It said sponsor Abbott could amend its
401(k) plan to offer a student loan benefit program in which the employer would add a
nonelective contribution on behalf of an employee, as long as the employee also contributes
to the SLR. While the ruling was directed only to Abbott, sponsors were given a
hint of where the IRS stands and what could be permitted for their own workforce.
Natixis employees with either federal or private student loan debt can receive
company contributions of $83.33 each, monthly-$1,000 annually-up to a total lifetime
benefit of $10,000, says company Senior Vice President of Human Resources
(HR) Maureen O'Neill.
Still, says Credico, employers are slow to adopt such benefits, as they are awaiting
more guidance. Pending legislation such as the Employer Participation in Repayment Act
bill is targeting the issue. That bill would permit employers to contribute up to $5,250 taxfree
to an employee's student loans. -RM
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