PLANSPONSOR - October 2017 - 16

Upfront
Cost of Benefits for an Employer
CONSIDERING skyrocketing health
care costs, it is not surprising that most
employees value quality health care as a
benefit. A survey by Namely, a human
resources (HR) platform focusing on
midsize employers, found that employees
would even sacrifice perks many companies
thought were " must-haves " to receive
better health care benefits.
The perks employees are most willing
to sacrifice to receive these better benefits
are the company holiday party (47%),
happy hours (47%) and free breakfasts,
lunches and snacks (45%). However, the
perks they are least willing to part with
are vacation days (7%) and their company's
401(k) match (5%). This information
can be useful to employers when deciding
on priorities, which, as respondents indicated,
appear to be maintaining physical
Employees Underestimate Employers Benefits Spend
Not including your salary how much do you think your employer
spends on your benefits annually?
$0-$100
>$100-$500
>$500-$1,000
>$1,000-$5,000
>$5,000-$10,000
>$10,000
Source: Namely, Open Enrollment:
What Employees Really Want survey
6%
4%
11%
32%
26%
21%
and financial wellness.
Providing even modest benefits can
be expensive. On average, employers
shoulder nearly 75% of employee
premiums, amounting to $8,669 per
employee annually. When coverage for
dependents is added, that amount can
quickly surpass $12,000, Namely reports.
Yet, many employees apparently fail
to realize just how much their employers
contribute. It was found that 79% of U.S.
workers think their employer spends
under $10,000 on their benefits annually;
53% think they spend less than half that.
Namely recommends furnishing
employees with an annual total rewards
statement to remind them what their
company has to offer them. Besides
listing wages, the document can
show what was paid out in health care
premiums, bonuses and stock options, if
applicable. " Incorporating total rewards
statements into your compensation
discussions can help bridge the divide
between employee perceptions and
reality, " Namely says. -PS
Public Sector
Employees
Choose
DB Over DC
PUBLIC sector employees given a choice
of either a defined benefit (DB) plan or
a 401(k) plan overwhelmingly would opt
for the pension, the National Institute on
Retirement Security (NIRS) found in a
study of eight states that offer employees
such a choice. In 2015, the take-up rate in
six of those states was 80% or higher.
16 PLANSPONSOR.com October 2017
In North Dakota and Ohio, the
take-up rate exceeded 95%, with 98%
of North Dakota's public employees
wanting the state's DB plan. In Florida
and Michigan, rates were 76% and 75%,
respectively. Conversely, the percentage
of new employees electing defined
contribution (DC) plans ranged from 2%
in North Dakota to 25% in Michigan.
The research also indicates that
employees directing their own investments
in a defined contribution plan typically
tend to earn lower returns than participants
with state pensions. The NIRS attributes
this to four factors: lower expenses,
professional management, an optimal
investment allocation used by the DB plan
and the benefit of longevity risk pooling.
Further, the institute found that,
rather than lowering costs by moving
from a DB to a DC plan, states actually
experienced increased retirement costs for
themselves and taxpayers. Thus, the NIRS
says in its report, " Changing from DB to
DC does not solve the underlying funding
problems a state may be experiencing. "
Additionally, the NIRS notes, " A
comparison of a 2008 report from the
Bureau of Labor Statistics with the 2016
National Compensation Study shows that
private sector participation in DB plans
dropped substantially from 76% of fulltime
employees in 1986 to 15% in 2016,
yet public employee participation in DB
plans dropped only from 93% of full-time
employees in 1986 to 75% in 2016. " -PS
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PLANSPONSOR - October 2017

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