'Employer and Employee Reactions to Health Reform: Findings From the 2010 EBRI/MGA Consumer Engagement in Health Care Survey and the 2010 SHRM Organizations’ Response to Health Care Reform Poll'; and 'Self-Reported Benefit Accrual Rates of Defined Be ..

Reactions to Health Reform: New findings by the Employee Benefit Research Institute (EBRI) show that both employers and workers say they are not very knowledgeable about health reform, but that employers say they are likely to pass along any health benefit cost increases to workers—and, mostly, workers are expecting such cost increases. <A href="http://www.ebri.org/pdf/PR911.24Jan11.HltRfm-React1.pdf">Press release.</A>  Self-Reported DB Accrual Rates: Data comparisons suggest respondents overestimated their expected pension benefits at retirement. Despite the likely measurement error, young DB plan participants reported having less generous benefit formulas than older participants.

REACTIONS TO HEALTH REFORM

SURVEY DATA: This paper presents data from the 2010 EBRI/MGA Consumer Engagement in Health Care Survey and the Society for Human Resource Management’s 2010 SHRM Organizations’ Response to Health Care Reform Poll to examine how employers might respond to health reform and employees expectations of changes to health coverage.

RESPONSE TO EXPECTED COST INCREASES: Employers are uncertain regarding changing benefits in response to health reform, but they are likely to pass along any cost increases to workers. Workers are mostly expecting such cost increases.

FUTURE OF COVERAGE: Employers are evenly split as to whether they will change health coverage as a result of health reform while workers are split between thinking their benefits will remain the same or erode. While few workers expect employers to drop coverage after 2014, and very few employers plan to drop coverage, employers are evenly split between having decided to continue to offer coverage and being undecided about the future of employment-based health coverage.

SELF-REPORTED DB ACCRUAL RATES

PENSION ACCRUAL RATES AND THE SCF: The Survey of Consumer Finances (SCF) measures respondents’ self-reported expected benefits from defined benefit (DB) pension plans. As a percentage of final pay, the mean annual benefit accrual rates in 2004 and 2007 are estimated to have been 2.06 percent and 2.48 percent, respectively. These rates are higher than the average annual accrual rate of 1.59 percent reported by the U.S. Department of Labor’s 2005 National Compensation Survey (NCS), which is based on official plan documents. This suggests that the 2004 and 2007 SCF respondents overestimated their expected pension benefits at retirement, unless they had more generous accrual formulas than plan participants in the 2005 NCS.

YOUNG PARTICIPANTS EXPECTING LESS GENEROUS BENEFITS: Despite the likely measurement error in self-reported expected benefits, young DB plan participants reported having less generous benefit formulas than older participants, the SCF finds. Respondents to the 2007 SCF who expected to work 25 or more years before retirement estimate their mean annual benefit accrual rate to be 1.68 percent, compared with 2.60 percent for those who expected to work less than five years before retirement.

distributio accrual rat that they While 13 per are nes for young pa s si cvery knowl ent of milarly in work dicat eers think dgeable rticipants ar e that their 54 perc (Figure e e fo m und for t 1). ent of the res ployer Most repo is not wo di likel p ffer rt ondents are that t e ynt ty to provid hey ar pes of the estimated to e somewhat k e health expe ben cte have ha ed n fits a owledgeabl bene fter fits, alt d less than a 201e 4 h, very (35 percent) o oughn some v fe annual accrual w emariation ployers r not Expected Benefits As a Percentage of Final Pay Employer and Employee Reactions to Health Reform: Self-Reported Benefit Accrual Rates of Defined Benefit Figure 2 Figure 6 Figure 4 Figure 1 Figure 1 very knowl have in th rate of e accr deci 1.5 de ual e per d dgeable to drop rates exists cent, whil (37 perc hee a alth be b care out 2 tween ent) coverag .1–2 the Nearly 5 two pe 1 in e. Less rcent ar types 5 (18 tha e estim (colum perc n 1 p ns (1 ated to ent) report th ercent ) and have had a hav (2 e)). con at th dey ucte rate gr are d a no n analys ea t at all ter than or kno is and wequal to ledgea decidebd to le 2.25 a dr bout percent. op the Expected Impact Based of Health Ref on the New Health orm on P Care ers Ref onal orm Health Care Costs, Law's Using the self-reported Expected Impact 2004 and 2007 SCF data, of Health Ref an annuo al bene rm on P fit acc ersronal ual rat Health Co e is calculated by verage divi , ding the percentage Findings From the 2010 EBRI/M Plans: An Analysis of the 2004 and 2007 Survey of Consumer GA Consumer Engagement in I Indi ndivi vidual dual and and Empl Employer Know oyer Knowl ledge edge About About Heal Healt th Ref h Reform, orm, 2010 2010 health coverage, reform and less than law. When 1 percent employers "Grandfathered" Among Adults dec were asked ided to drop coverage with With Priv if t Status, hey we ate Insurance W re comforta hich One of the Follo out coble with what nducti , August ng an analysis (Figur 2010 wing they knew abe 8 out the la ). Almost one-h w, 45 per- alf Among Adults With Private Insurance, August 2010 of final pay by the expected service years before retirement. Annual accrual rates are assumed to remain unchanged Column (2) of Figure 3 shows the annual benefit accrual rates in the 2004 and 2007 SCF for those expecting a benefit Health Care Survey and the 2010 SHRM Organizations The Finances results presented in Figure 4A and 4B indicate that young DB plan participants (with more years before r ' etirement) 9 Statements Best Describes Your Organization's Position? (46 percent) say they cent agreed that they will no were ct drop coverage, wit omfortable, 41 percent h 12 dis per agree cent d, a basing that deci nd 11 percent s sion on an trongly dis ana agre lysis, and ed. 34 percent not and not vary in the expected remaining working years. 60% 40% Fi Figur gure 1 e 1 Janu as a percenta ary 2011 • Vol. 32, No. 1 ge of final pay. Since columns (1) and (2) of Figure 2 indicates that 43–49 percent of the respondents tend to believe they have less generous benefit formulas than older participants (those closer to retirement). having con Response to Health Care Reform Poll ducted any analysis. About one-half of employers have not made a decision, 22 percent have already by Youngkyun Park, Employee Benefit Research Institute Individual Knowledge Individual Knowledge About About Health Reform, August Health Reform, August 2010 2010 had an annuaD D l be if iff fnef erent erent it accr R R uesponses esponses al rate of greaof of ter than Expect Expect or equal to ed ed B Be e2.2 nef nef 5 it it pe s srcent, th at at R Re et te irement irement distribution b b is y y t t ext h he e ended to include To find the re We sponde are or will nts’ an be conduct nual ing analyses and explor benefit accrual rat ing es as different a percentage of final pay, a sample was constructed as follows: started an analysis, and another 15 percent plan to conduct one. 21% 34% 35% health care options to decide whether to keep the … by Paul Fronstin, Employee Bene 50% fit Research Institute higher accrual rates. Ab Respondents Who Respondents Who out 18–20 percent are estimated to Have Have De Dehave fined Benefit fined Benefit a high accruaPlans* Plans* l rate of 3.0 percent or greater from 50% 50% First, the Impact on Health Care Costs sample includes respondents and their spouse/partner who reported a DB plan as their most important 50% Conc lusion We will maintain grandfathered status to avoid additional costs 31% both surveys. The 2007 SCF respondents who reported a benefit based on a percentage of final pay are estimated to retirement plan. Second, they report their expected benefits as a percentage of final pay. Third, 21% they currently work About one-half of individuals expect their health care costs to increase as a result of the health reform law (Figure 2). to the organization and/or employees This article examined whether the SCF respondents accurately estimated their expected benefits of DB plans, by Conclusio 30% n Introduction have had higher annual benefit accrual rates than those who reported the expected benefit in the form of regular for an Employer and Employee React employer and are not self-employed. Last, they state their starti ions to Health Reform: ng age in the plan and expected retirement age Similarly, many employers expect to pass along any increases in costs, whether directly or indirectly related to health We have not yet begun to consider the issue around comparing the distributions of annual benefit accrual rates of the 2004 and 2007 SCF respondents who reported their 40% 40% 37% 37% 10 17% Many surveys have been conducted to understand public opinion related to health reform. Few have tried to The payments Federa . l Reserve Board’s Survey of Consumer Finances (SCF) provides valuable information on defined benefit (DB) 40% so that expected remaining service years grandfathered stcan be ca atus lculated. 35% 35% reform. Slightly more than 40 percent of employers report that they are likely to pass along cost increases, and Findings From the 2010 EBRI/MGA Consumer 25% Introduction expected benefits as a percentage of final pay with the distribution of flat percent per year of service reported by the 2004 Su 2004 Survey rvey o of f Co Con nsu sum mer er F Fi in nan ance ce 25% understand employer and worker views and how they are related. Data from the 2010 EBRI/MGA Consumer pension plans, such as participants’ self-reported expected benefits as a percentage of pay at retirement, or as regular another 23 percent are highly likely to pass the cost increases along to workers (Figure 3). Few are unlikely (10 per- Not sure what grandfathered status means 10% 200 Whe 5 n com NCS. bTh ining t e results wo tyind pes icof the ate that ex the pecte 2004 d bene and fits 200 (col 7 SCF r umn (3 espon )), the dents appear to weighted me aoverestimate t n of annual be hnefit eir expected accrual rates Engagement in Health Care Survey and the 2010 SHRM Columns (1) and (2) of Figure 2 present the distributions of annual benefit accrual rates for those who report the This report presents data from the 2010 EBRI/MGA Consumer Engagement in Health Care Survey and the Society for Engagement in Health Care Survey and the 2010 SHRM Organizations’ Response to Health Care Reform Poll, found a dollar amounts. The information is usually used when computing the expected present value of DB benefits in research EBRI Employee Benefit Research Institute Notes (ISSN 1085 ?4452) is published monthly by the Employee Benefit Research cent) or highly unlikely (2 percent) to pass along cost increases. Almost one-quarter (23 percent) were unsure at the 30% 30% are estimated to be 2. th 37 percent in the 2004 SCF and 2.07 percent in the 2007 SCF. Both the weighted means are benefits of their pension plans (unless they had more ge 1 nerous formulas of annual benefit accrual rates than the plan expected b 30% enefit as a percentage of final salary from the 2004 and 2007 SCF, respectively. The weighted mean of the Human Re 20% source Management’s (SHRM) 2010 SHRM Organizations’ Response to Health Care Reform Poll to examine strong aligWe nm will ent maint betw ain gr een andf e atm her ployer a ed status nd to avoid having employee views toward hea to comply lth reform. Organizations’ Response to He Institute, 1100 13 St. NW, Suite 878, Washington, DC 20005-4051, at $ alth Care Reform Poll, 300 per year or is included as part of a membership p. 2 literature (e.g., Gale and Pence, 2006; Wolff, 2007). 9% time of the study whether cost increases would be passed along to workers. with specific elements of the new law P Perc ercent entage of age of f fiinal nal high partici s eu r tha p bants reported by scription. Periodic n the average ann a th ls po e s u 200 tal age rate paid in ben 5 NCS efit ) acc .This rual rat indicat Washe of 1. ington, DC es tha59 t the , and additional mailing offic perc 20 ent r 04 an eported d 2007 by SC the F da 200 ta about es. PO 5 NCS. STMASTER the Th eerefore, xpect : Send addres ed the pensi SC oF n s annual benefit accrual rate of the 2007 SCF (2.48 percent) is greater than that of the 2004 SCF (2.06 percent). In how employers might respond to health reform and employees’ expectations of changes to health coverage. It was th 24% 24% changes to: EBRI Notes, 1100 13 St. NW, Suite 878, Washington, DC 20005-4051. Co pay pay pyright 2011 by Employee Benefit However, as respondents several stu were likely to dies ov have erestimate th documene e ted, xpect workers o ed benefits o ften are f th not eir w DB ell i plans nforme (ud nle ass they ha bout their d m peno sion be re genero nefius ts. For benefits h Both admit a ave sizeable some measurement errors lack of knowledge o due to f healt the h re self form -reportin . Employ g o ers plan to f the respopass alo ndents. This is co ng cost increa nsistent wit ses to workers h the , and addition, about 43–49 percent of the SCF respondents are estimated to have a high annual accrual rate of 2.25 percent found that 15% there is still a large lack of understanding of the health reform legislation among both workers and 18% We do not qualify for grandfathered status 6% 18% 29. 29.2% 2% Research Institute. All rights reserved, Vol. 32, no.1. Self-reported Benefit Accrual It is also 20% 20% worth noting that employers are more li19% kely to pass alon Rates of Defined Benefit g cost increases than cost decreases. While 41 per- 20% exampl accrual findings o workers are e, usin formul f t e hex g as than fina pecti the ncial n 1g such cost increases 99 plan liter 2 H participants ea alth cy literatur and Retir in t e (e.g., e . Employ h ment Study, e 2005 Gustman ers a NCS Gustman and Steinmei )re ev . and Steinmei enly split er, 1 as to wh 989er (1 an ether d 989 200 they w 4; En and 200 ill c gelh h 4) an ardt, 2 and ge health Engelhar 001). cove dt rage or greater. employers. Despite employers’ uncertainty regarding how they will change benefits in response to health reform, they 11% cent were likely to pass along cost increases, only 30 percent were likely to pass along any cost decreases that were We have already decided not to maintain our grandfathered 2 Plans: An Analysis of the 2004 and 2007 Survey of (2001) documented significant discrepancies between self- and firm-re 6% ported pension information. In particular, as a result of health reform, and workers are evenly split concerning whether their benefits will remain the same or will are likely to pass along status as it will any cost m cost increases ore to keep it than t to work o change healt ers—an h … d, mostly, workers are expecting such cost increases. 10% directly or indirectly related to health reform. And while 23 percent were highly likely to pass along cost increases, only The Employee Benefit Research Institute (EBRI) was founded in 1978. Its mission is to To determine if measurement error in self-reported benefits exists in the annual accrual rates in the 2004 and 2007 Also, despite the potential measurement errors in the self-reported expected benefits of the SCF respondents, this Kennicke Consumer Finances, erode. An ll d (2w 009) po hile few inte worke d ours expect t that the SC employers to dro F res p. 9 ponses wp e re l coverage ikely to aft ha eve a r r 2014, elative and ver ly high y few em degree ploye of unc rs say they ertainty about plan to 10% 10% 7% 7% Employers are evenly split as to whether they will change health coverage as a result of health reform while workers Less Gene We rous Bene have already decided fit Formulas for Young DB Plan Participants not to maintain our grandfathered contribute to, to encourage, and to enhance the development of sound employee benefit 10 percent were highly likely to pass along cost decreases. 10% 5% 3 SCF, t analysis fin he twd o s dis that youn tributions g DB ar pla e compa n partici redp with t ants wer hat o e lik f “fl ely at per to have cent less generous per year of servic benef e” r it formul eportedas tha by all n older o private-n se es—a ctor 7% status because we want to modify benefits to provide the … pension benefits. drop coverage Who we are , employers are evenly split between having decided to continue to offer coverage and being undecided. programs and sound public policy through objective research and education. EBRI is the only are split between thinking their benefits will remain the same or will erode. And while few workers expect employers to 5% Using two different ty 2% 2%pes of self-reported benefits, this analysis also examines whether young DB plan participants had workers in the 2005 NCS. Data for the 2005 NCS were collected from June 2004 to December 2005. finding that is consistent with the 2004 and 2007 SCF. Lower benefit accrual rates for young participants were also private, nonprofit, nonpartisan, Washington, DC-based organization committed exclusively to drop coverage after 2014, and ve ry few employers say they plan to drop coverage, employers are evenly split between Other 6% less generous benefit formulas than older participants. This article examines whether selfEXEC -reported SCUTIV F respondents accurat E SUMMAR ely estimated thYeir e xpected benefits from DB public policy research and education on economic security and employee benefit issues. found amon 0% g those who reported retirement benefits as a percentage of final pay or regular payments. 0% having decide 0% d to continue to offer coverage and being undecided about the future of employment-based health Impact on Health Coverage 0% Figure 8 The results in column (3) of Figure 2 show lower actual annual benefit accrual rates in the NCS than the distributions of EBRI’s membership includes a cross-section of pension funds; businesses; trade associations; plans in comparison with the 2005 National Compensation Survey (NCS). To do this, the distribution of annual benefit 0% 10% 20% 30% Ex ExEx tr trpec emely emely t Costs to Increase Ver Ver Expec y y t Costs to Stay the Same Somewhat Somewhat Expect Costs to DecNot V Not V rease e ery ry Unable to Say N No ot At t At All All Expect Costs to Increase Expect Costs to Stay the Same Expect Costs to Decrease Unable to Say Employer and Empl Figure 4A shows annual benoyee Reactions to efit accrual rates with respec Health Reform: Findings From the 2010 t to expected remaining years until retirement, and different Is Your Organization Engaging in an Analysis to Determine the Impact of the coverage. labor unions; health care providers and insurers; government organizations; and service firms. self-reported benefits in the 2004 and 2007 SCF. For example, the average annual accrual rate of the 2005 NCS was Much like the findings on health care costs, more individuals expect their health care benefits to decrease than to stay accrual rates of the 2004 and 2007 SCF respondents who reported their expected benefits as a percentage of final pay Knowledgeable Knowledgeable Knowledgeable Knowledgeable Knowledgeable Knowledgeable Knowledgeable Knowledgeable Knowledgeable Knowledgeable types EBRI/MGA Consumer Engagement in He of expected benefits (i.e., regular payments and a palth Care Survey and the 2010 SHRM ercentage of final pay) among the 2004 and 2007 SCF New Health Care Reform Law on Your Health Care Plan? Endnotes Source: SHRM Organizations’ Response to Health Care Reform Poll, 2010. 1.59 percent, whereas the weighted mean annual accrual rates of the 2004 and 2007 SCF (self-reported) benefits are the same or i Sour n Sour crease as a ce: ce: EBRI/MG EBRI/MG A result of Cons A Cons umer umer Engagement Engagement health re in Health in Health form Car . Car T e Sur e Sur hre vey e vey , 2010. o , 2010. ut of 10 (31 percent) adults with private insurance expect are compared with the distri Regul Regulbution ar pay ar paym m of “flat ent ents s percent per year of service” reported by the 2005 NCS (the most recent 1 EBRI’s work advances knowledge and understanding of employee benefits and their Organizations’ Response to Health Care Reform Poll respondents. The distributions indicate that those who have more years before retirement (younger workers) reported See Gale, William G., and Karen M. Pence. “Are successive generations getting wealthier, and if so, why? Evidence from the 1990s.” estimated to be 2.06 and 2.48 percent, 70. 70.8% 8% respectively. These results indicate that the 2004 and 2007 SCF respondents their health coverage to decline as a result of the health reform law, and one-third (34 percent) expect their benefits to About the Surveys available information on flat percentage per year of service). Will not conduct an analysis and already decided we will not drop health importance to the nation’s economy among policymakers, the news media, and the public. It 34% having lower annual benefit accrual rates than those with less time (older workers). Brookings Papers on Economic Activity, 2006, pp. 155–234. care coverage were likely to have overestimated the benefits of their pension plans. If not, the SCF respondents would have to have be unchanged (Figure 4). SURVEY DATA: This paper presents data from the 2010 EBRI/MGA Consumer Engagement in Health Care Survey and the does this by conducting and publishing policy research, analysis, and special reports on What we do 2010 EBRI/MGA Consumer Engagement in Health Care Survey In contrast to the SCF, the NCS provides DB pension benefit information based on actual plan documents. The NCS 2 more generous annual benefit accremplo ual for yee benef mulas than its issues; holding educational br the plan participants report iefings for EBRI memb ed by the 2005 NCS, w ers, congressional and ho had a benefit So See Gustman, ciety for Human Reso Alan, and Thoma urce Managem s Steinmeier. “An ent’s 2010 SHRM Or Analysis of Pens ganizations’ Re ion Benefit Form sponse to Health Care Reform Poll ulas, Pension Wealth, and Incentives from Pensio to examine how ns.” Column (1) presents the weighted mean and median annual accrual rates of the respondents who expect benefits as The 2010 EBRI/MGA Consumer Engagement in Health Care Survey is an online survey of 4,508 privately insured adults Emp Empllo oyer Ag yer Agreemen reement t Wit With h t th he e F Fo ollo llow wiin ng g St Stat atemen ement t: : federal agency staff, and the news media; and sponsoring public opinion surveys on employee Many employers are considering changing their health plans as a result of health reform. There is a fairly even split data are collected by the U.S. Department Currently c of Labor onducting ’an s Bur alysiseau of Labor Statistics (BLS) field eco 22% nomists who visit formula of “flat percent per year of service.” Research in Lab employers might respond to health reform a or Economics, Vol. 10, 1989, pp. n 53–106; d employees Gustma expectations of n, Alan, and Thom changes to he as Steinmeier. “What Peopl alth coverage. e Don’t Know about Their regular payments, by different expected retirement years. Those with 25 or more years before retirement are ages 21 -64 fielded " "IIin A a am c m c ugu o os mfor mfor t 201 ta ta 0. benefit issues. ble ble Th with with e survey was wha wha EBRI’s Ed t t I I k k co now now nducte uca a ation and Re bout bout d tothe the provide ne ne sew w arc national he he h F a aund llth c th c 4 l(EBRI-ERF) performs ya a repr r re e r res e efor for entati m la m la ve data w." w." the char regard itable ing t , he between sampled establishments or those that are conc sontact them idering changing t by phone to heir plans (34 collect data percent for t ), those he survey. that are For DB not pe consi nsions, dering (30 perc in particular, en B t), LS and Pensions and Social Security,” in Private Pensions and Public Policies, edited by William G. Gale, John B. Shoven, and Mark J. Warshawsky. educational, and scientific functions of the Institute. EBRI-ERF is a tax-exempt organization estimated to have less generous benefit accrual rates than those with less than five years before retirement. For Figure 5 growth of consumer-driven health plans (CDHPs) and high-deductible health plans (HDHPs), and the impact of these Figure 7 Figure 3 RESPONSE TO EXPECTED COST INCREASES: Employers are uncertain regarding changing benefits in response to health those that have not yet decided (36 percent) (Figure 5). The changes that employers are considering may reduce the Expected Benefits With Regular Payments field economists also asked respondents to provide Summary Plan Provision documents. Therefore, compared with the supported by contributions and grants. Brookings Institution (2004); Engelhardt, PlaGar n to co y V. “ nduc Have 401(k) Ra t such an analys ise is d Household Saving? Evidence fr 15% om the Health and Retirement Study.” example, the weighteIs d me Your Or an anganization d median annual Considering accrual rates of Alternative the 2007 Health Care Plans (e SCF respondents who .g., ex pected to have 25 Likelihood That Employer Will Continue to Provide Will Your Organization Pass on to Employees Any Increased or Decreased plans and consumer engagement more 2007 Su 2007 Su generally o rvey rvey o on f f th Co Coe n nbehavior su sum mer er F F an i in nan an d attitudes o ces ces f adults with private health insurance reform, but they are likely to pass along any cost increases to workers. Workers are mostly expecting such cost increases. 50% compreh self-reporte ensiv d bene eness of cover fits of the SCF age res for workers. pondents, the NCS data based on plan documents are much less likely to have Since about 66–71 percent of the SCF respondents reported the expected benefits as regular payments, their annual Syracuse University, Center for Policy Resea rch Aging Studies Program Paper No. 24, 2001. Less Expensive Coverage Plans, Health Savings Accounts, Self- Health Benefits After 2014, August 2010 or more working ye Health ars befor Care e retir Coverage Costs ement were 1.10 (e.g., percent a Premiums, Co-pays, etc.) in nd 1.11 percent, respectively, w 2011 hile That the annual accrual 45% coverage. The sample was randomly drawn from Synovate’s online panel of more than 2 million Internet users who benefit accrua measurement error l rates were concerni exam ng ben ined EBRI Issue B efit by as form suming t ulas. riefs h are period at their salary icals providing exp would grow at 3. ert evaluati 8 percent ons of emplo per y yee benefit issues and ear, and inflation Already conducted an analysis and decided not to drop health care FUTURE OF COVERAGE: funding, Employers are evenly split as t etc.) as a Result of the Ne o whether they will w Health change he Care Ref alth coverage a orm Law? s a result of health 3 May Be Directly or Indirectly Related to the Health 12% Care Reform Law? rates of the respondents who expected to have less than five working years were 2.12 percent and 1.62 percent, See Kennickell, Arthur B. “Ponds and Streams: Wealth and Income in the U.S., 1989 to 2007.” Finance and Economics Discussion Series, have a Many em greed t ployeors are also participate i con n researc sidering h sur whet vher th eys. Th ey is sur will tr vy to ey used a keep th ba eir se sample grandfat of hered status. 2,007 and aGra random oversa ndfathered pla mple o ns do f coveragtrends, as well e as cr 41% itical analyses of employee benefit policies and proposals. EBRI Notes is a 35% Our would be 2.7 percent. These are based on the long-term intermediate-cost assumptions of the 2009 OASDI Trustees 50% reform while workers are split between thinking their benefits will remain the same or erode. While few workers expect respectively. monthly periodical providing current information on a variety of employee benefit topics. 2009-13 (Washington, The SCF respondents DC: Fede report ra their l Reserve Board) expected benefits in . Available at ter www m.fs of ederalr regular eserve. payments or gov/pubs/feds/20 as09/200913/2 a percenta 009 ge of 13pap.pdf final pay. This individuals with CDHPs and HDHPs. High deductibles were defined as individual deductibles of at least $1,000 and not need to co 40% mply with certain aspects of health reform, such as t 32% he provision of preventive services with no cost 40% Percentage Report. 31% employers to drop coverage after 2014, and very few employers plan to drop coverage, employers are evenly split between Already conducted an analysis and d EBRI’s ecide P d t eo nsion Inv drop healteh c stme arent Re port provides detailed financial information on the universe of publications of final pay article compares benefit formulas of two different types of self-r 1%eported benefits: family 4sharing. deducti Overb all, 30 les of at perc leas entt $2, of employers 000. Thosreport t e with a hat th high deducti ey will att ble an empt to mainta d either a hin t ealh th reim eir gran bursem dfatheent arra red status, ei ngement ther to 36% coverage For more details on survey methodology, see Appendix of National Compensation Survey: Employee Benefits in Private Industry in the Lower benefit accrual rates for younger defined b woerkers (farther nefit, defined contri from retir bution, eme and 401( nt) ark) plans. EBRI e also found among those who Fundamentals of Employee reported 30% having decided to continue to offer coverage and being undecided about the future o 33. f e 9% mployment-based health coverage. 41% 34% ( For this HRA) or analys a heais, a sampl lth savings ac e wc as constructed as follo ou nt (HSA) comprise th ws: e CDHP sample, First, the sample and those includes o witnly h deduct respondents o ibles that are r their gener ally high avoid additional costs (21 percent) or to avoid complying with specific elements of health reform (9 percent) (Figure 6). Benefit Programs offers a straightforward, basic explanation of employee benefit programs in United States, 2005, www.bls.gov/ncs/ebs/sp/ebbl0022.pdf ? By benefit formulas, which are estimated based on the 2004 and 2007 SCF. their expected benefits as a percentage of final pay (column (2)). For example, the weighted mean and median annual 40% Will not conduct an analysis and already decided to drop health care spouse/partner who report earnings the priv inform ate and ation, mea public s nineg ctors salary, . The norm EBRI Data al overtime, book on Emplo bonuses, an yee Benefits d tips. S is a econd, statistic al enoug Only 1h to in 1 me 0 (11 et the perc qent) ualify re ing t port that hreshol they d to have make ta decix- de pr d eferr not to maintain gra ed contributions to ndfather an HSA but ed status wit either because the costs hout an account 30% 1% 30% 5accrual rates of the 2007 SCF respondents who expected to work 25 or more years before retirement were 2.14 Self-Reported Benefit Accrual coverage Rates of Defined Benefit Plans: An Analysis of the Increased costs Decreased costs This Notes 25% article focuses on private defined ben reference work o efit plans. As a proxy fo n employee benr this control, the efit programs and SCF resp work force-related issues. ondents who worked in the industry of 30% ? By expected years to retirement and age of the respondents, to see whether young DB plan participants expect to comprise th respondents o e HDHP sampl r their spouse e. More /partner in have formation a only one bout t DBh pl e 2 an, 01so as to 0 EBRI/MGA Consum estimate the fina er Enga l salary geme based nt in H on the curr ealth Care ent Surv ey would be higher (6 percent) or in order to modify benefits (5 percent). Many employ 23% ers are either conducting analyses 2004 and 2007 Survey of Consumer Fi percent, respectively, while the annual accrual rates of the res nances pondents who expected to work less than five years were public administra tion are dropped from the samples. have less generous benefit formulas than older participants. earnings (since the SCF had no information on final earnings at previous jobs). Third, only those working for an can be or about foun to co d induct n (Fronstin them 2 to 0 dec 10). ide whether to keep grandfathered status (21 percent) or have not yet begun to think 30% 3.21 percent and 2.27 percent, respectively U . A similar nsure at this ti p mattern e in annual benefit acc16% rual rates is also observed from the Contact EBRI Publications, (202) 659-0670; fax publication orders to (202) 775-6312. 30% 6 PENSION AC 20% CRUAL RATES AND THE SCF: The Survey of Consumer Finances (SCF) measures respondents’ self-reported employer are included (not the self-employed). Last, the sample includes respondents who expected to get monthly or about gran Very20% few respo dfandents (about thered status (17 0.5 percent of th percent). e r espondents) reported their expected benefits at retirement as lump- sum payments. This Subscriptions to EBRI Issue Briefs are included as part of EBRI membership, or as part of a Source: EBRI/MGA Consumer Engagement in Health Care Survey, 2010.; and SHRM Organizations’ Response to 2004 SCF respondents. Orders/ 2010 SHRM Organizations’ Response to Heal 25% th Care Reform Poll expected benefits from defined benefit (DB) pension plans. As a percentage of final pay, the mean annual benefit accrual yearly benefits at retirement and who provided starting and expected retirement ages. article does not include those respondents in the a $199 annual sub nalysis. scription to EBRI Notes and EBRI Issue Briefs. Individual copies are available Different Types of Expected Benefits From DB Plans 0% 10% 20% 30% 40% Health Care Reform Poll, 2010. 23% 23% 20% The 2010 SHRM Organizations’ Res with prepa ponse toy Health ment for $25 each Care Reform (for printed Poll is a survey of copies). Change of Address: 1,095 randomly EBRI, 1100 13th St. selected human rates in 2004 and 2007 are 11% estimated to have been 2.06 percent and 2.48 percent, respectively. These rates are higher than When combining two types of respondents (column (3)), the weighted mean and median of the annual benefit accrual 7 15% 15% Regular Subscriptions For DB participants, the SCF asks families when they expect to start receiving benefits and how much they expect to 20% 20% The SCF allows respondents and their spouse/partner to report up to three pension plans, respectively. If a respondent had more than on An annual benefit accrual rate for thos NW, Suite 878 e expectin , Washington, DC g regular payme , 20005-4051 nts was calculat , (202) 659-0670; f ed by dividi ax number, (202 ng the expect) 775-6312; ed benefit resource (20% HR) professionals with the job title of manager and above, as well as HR professionals in the compensation Impact on Employment-Based Coverage Source: SHRM Organizations pay ’ Re ment spos n se to Health Care Reform Poll, 2010. the average annual accrual rate of 1.59 percent reported by the U.S. Department of Labor’s 2005 National Compensation 5 rates wer 10%e 1.68 percent and 1.71 percent, respectively, for the 2007 SCF respondents who expected to work 25 or receive. Respondents report their e-m expecte ail: subscri d benef ptions@ebri.o its as a perce rg ntage Membe of rship Information: final pay or regular payme Inquiries reg nts (e.arding EBRI g., monthly or plan, he/she was asked to list a plan considered the most important one first. 66.1% amounts by estimated final salary times expected service years before retirement. Final salary was estimated by and benefits area. All analyses were based on respondents working at organizations with 50 or more employees. The 15% Survey (NCS), which is based on official plan documents. This suggests that the 2004 and 2007 SCF respondents When it more years 6 comes to the fut before retiremen ure of t. In employ contrast, ment-base the weight d coved erage, mean a few i nd median ndividuals th of tink t he an heir nual employe benefitr a will ccrual rat not contin es were ue to membership and/or contributions to EBRI-ERF should be directed to EBRI President/ASEC yearly). 3% 10% 9% 8 assuming a wage growth rate of 3.8 percent and an inflation rate of 2.7 percent. However, the estimated annual survey was fielded July 22–August 3, 2010, and had a response rate of 15 percent and a margin of error of +/- 3 per- The distribution of different types of the expected benefits is weighted by using the sample weights. When either respondents or their overestimated their expected pension benefit Chairman Dallas s at retirement, Salisbury at the unless they h above addr ad mo ess, (re gener 202) 659-0670; ous accrual fo e-mail: salisbur rmulas than y@ebri.org plan provide health benefits after 2014. Four percent think their employer is not at all likely to continue providing health 2.60 percent and 2.07 percent, respectively, for the 2007 respondents who expected to work less than five years. The 10% 10% 10% benefit accrual rates could be underestimated, because the earnings calculation includes normal overtime, bonuses, spouse/partner cent. More informat reported iDB plan on about the s, a full sample weight is us 2010 SHRM Organi ed. How zations’ ever, if both r Response to Health espondents and th Care R eir spouse/partn eform Poll can er repo be fo rted DB plans, half und at 10% participants in the 2005 NCS. bene References lowerfits, annu 0% and al accrual rat another 9 es per of those with cent think th ei more years r employer is before r not ve etiremen ry likely t are to provide t also fouh ne dm amon (Figure g th7 e ). 2004 SC Thirty-t F wo percent Figure 1 shows different responses of expected benefits at retirement by 2004 and 2007 SCF respondents. These Editorial Board: Dallas L. Salisbury, publisher; Stephen Blakely, editor. Any views expressed in this publication and those of the authors should and tips, as 5% well as sala4% ry. of a sample www.shrm.org/surveys weight is employed. think that their employer is likely to continue offering health benefits after 2014, and another 23 percent think their resp perce ondents. ntages are calculated for respondents and their spouse/partner who reported DB plans as the most important Fronstin, Paul. not be ascribed to the officers, "Findings from the 2010 EBRI/MG Strongly Disagr trust eeees, members, or Dis other sponsors of the E agr A Con ee sumer Engag mploye ement in Healt e Agr Benefit Research ee h Care Survey Institute, the EBRI Educ Strongly ." EB Agr RI Issue ee ation and Brief, YOUNG PARTICIPANTS EXPECTING LESS GENEROUS BENEFITS: Despite the likely measurement error in self-reported 7 Research Fund, or their staffs. Nothing herein is to be construed as an attempt to aid or hinder the adoption of any pending legislation, regulation, 9 2% employer is very likely to continue offering them. Almost one-third (31 percent) were unable to say if their employer plan. More no. 350 (Employee Benefit than 29 percent of the 20 Research Institute, Decemb 04 SCF respondents who ha er 2010). d DB plans reported their expected benefits as a Column (1 Different annua ) of Figure 3 prese l accrual rates man yts appl the annu y to differal ent service years benefit accru. al rates from the 2004 and 2007 SCF for those expecting a expected benefits, young DB plan participants reported having less generous benefit formulas than older participants, the SCF or interpretative rule, or as legal, accounting, actuarial, or other such professional advice. Figure 4B presents the annual benefit accrual rates for age and different types of expected benefits from the 2004 and 8 0% 0% was likely to c 0% ontinue providing health benefits after 2014. percentage of final pay, while about 71 percent reported as regular payments. Similarly, in 2007, about 34 percent of Knowledge About Health Reform benefit as regular (monthly or yearly) payments. The two distributions appear to be similar each other, despite the 10 finds. Respondents to the 2007 SCF who expected to work 25 or more years before retirement estimate their mean annual Yes No Unsure at This Time In orde Source: r to cont Employee B Not At rol for outliers of enefi All Lik t R ely esearch Insti to Continue the exp tute esti Not Ver ected ser ymates Likely v ice y from the to Continue ears, 2004 and 2007 S the o Lik bservations w ely to Continue urvey of ith Cthe exp onsumer Fi Very Lik ected ser ely nances (S to Continue vice y CF).ears having more t Unable to Say han 40 years 2007 SCF respondents. Similar to the results presented in Figure 4A, young DB plan participants (those younger than Highly Unlikely Unlikely Likely Highly Likely Unsure at This Time Society for Human Resource Management (SHRM). “2010 SHRM organizations’ response to health care reform polls” EBRI Notes is registered in the U.S. Patent and Trademark Office. ISSN: 1085 ?4452 1085 ?4452/90 $ .50+.50 the responden Sourc ts reported t e: EBRI/MGA h Cons eir expected benefits as a umer Engagement in Health Care percenta Surv ge of fin ey, 2010; al pay, and SHRM while Organi more than zations’ 66 Respons percent report e to ed as existenc * The die of stributi eon xtreme is weighted values by usi in t ng the he sampl lowe e w r a ein ghts of d upper t the 2004 ails and of th 2007 eS distribu urvey of Ctions. Fo onsumer Finances (S r example, t CF), respecti he wei velg y.hted median annual Both individuals and employers admit that they are not very knowledgeable about health reform. Two percent of adults benefit accrual rate to be 1.68 percent, compared with 2.60 percent for those who expected to work less than five years are dropped from the sample. age 35) reported lower annual benefit accrual rates than older ones (e.g., those age 55 or older). The lower benefit (July/August 2 Health Care Ref 010). orm Pol www.sh l, 2010. rm.org/Research/SurveyFindings/Pages/Benefits.aspx regular payments. Source: SHRM Organizations’ Response to Health Care Reform Poll, 2010. accrual rate for a regular payment was 1.35 percent in the 2004 SCF and 1.43 percent in the 2007 SCF. The two with private insurance report that they are extremely knowledgeable about the legislation, and only 7 percent report before retirement. Source: SHRM Organizations’ Response to Health Care Reform Poll, 2010. Source: EBRI/MGA Consumer Engagement in Health Care Survey, 2010. © 2011, Employee Benefit Research Institute ?Education and Research Fund. All rights reserved. ebri.org ebri.org ebri.org ebri.org ebri.org ebri.org ebri.org No No No No No No Nottttttte e e e e e es s s s s s s • Januar • Januar • Januar • Januar • Januar • Januar • January y y y y y y 2011 • 2011 • 2011 • 2011 • 2011 • 2011 • 2011 • Vol. 32, No. 1 Vol. 32, No. 1 Vol. 32, No. 1 Vol. 32, No. 1 Vol. 32, No. 1 Vol. 32, No. 1 Vol. 32, No. 1 13 15 11 9 8 4 2 A monthly newsletter from the EBRI Education and Research Fund © 2011 Employee Benefit Research Institute ebri.org Notes • January 2011 • Vol. 32, No. 1 ebri.org Notes • January 2011 • Vol. 32, No. 1 ebri.org Notes • January 2011 • Vol. 32, No. 1 ebri.org Notes • January 2011 • Vol. 32, No. 1 ebri.org Notes • January 2011 • Vol. 32, No. 1 ebri.org Notes • January 2011 • Vol. 32, No. 1 ebri.org Notes • January 2011 • Vol. 32, No. 1 14 12 10 3 6 7 5 Figure 2 Distribution of Annual Benefit Accrual Rates for Defined Benefit Plan Participants 2004 SCF* 2007 SCF* 2005 NCS** Flat percent per year Figure 4A Percentage of final pay Percentage of final pay of service Mean and Median Annual Benefit Accrual Rates, by Expected Years to Retire and Different Types of the Expected Benefits Annual Benefit Accrual Rate (1) (2) (3) Less than 1.00 percent Expected Benefits Reported as 19.5% Expected Benefits Reported as 4.4% 2.3% 1.00–1.24 percent 6.8 7.3 13.6 Regular Payments a Percentage of Final Pay Total 1.25–1.49 percent 10.9 6.8 9.1 (3) (1) (2) 1.50–1.74 percent 8.7 7.2 38.6 Expected Years to Retire 2004 SCF* 2007 SCF* 2004 SCF* 2007 SCF* 2004 SCF* 2007 SCF* 1.75–1.99 percent 9.7 8.7 27.3 Mean Median Mean Median Mean Median Mean Median Mean Median Mean Median 2.00–2.24 percent 7.3 16.6 6.8 Less than 5 years 2.33% 1.84% 2.12% 1.62% 2.60% 1.80% 3.21% 2.27% 2.46% 1.89% 2.60% 2.07% 2.25 percent or greater 43.1 49.1 2.3 5–9 4.57 1.98 1.82 1.53 2.30 2.05 3.41 2.50 3.59 1.95 2.34 1.79 Average annual accrual rate 2.06 2.48 1.59 10–14 3.60 1.43 1.98 1.44 2.20 2.19 2.31 2.32 3.04 1.74 2.17 2.06 Source: National Compensation Survey: Employee Benefits in Private Industry in the United States, 2005, U.S. Bureau of Labor 15–19 1.53 1.17 1.64 1.17 1.96 1.70 2.31 2.22 1.64 1.32 1.91 1.79 Statistics (May 2007) and Employee Benefit Research Institute estimates from the 2004 and 2007 Survey of Consumer Finances. 20–24 2.05 1.37 1.54 1.51 1.81 1.88 2.15 1.96 1.94 1.69 1.87 1.69 * Weighted by using the sample weights of the 2004 and 2007 Survey of Consumer Finances (SCF), respectively. 25 years or more 0.87 0.74 1.10 1.11 1.68 1.82 2.14 2.14 1.18 1.03 1.68 1.71 Percentages may not add to 100 due to rounding error. Total 2.56 1.35 1.71 1.43 2.06 1.83 2.48 2.22 2.37 1.58 2.07 1.80 ** The distribution of accrual rates is obtained for all private industry workers from the 2005 National Compensation Survey (NCS). Souce: Employee Benefit Research Institute estimates from the 2004 and 2007 Survey of Consumer Finances. * Weighted by using the sample weights of the 2004 and 2007 Survey of Consumer Finances (SCF), respectively. F Fiigur gure 3 e 3 D Diist str riib bu ut tiio on n o of f A An nn nu ual al B Ben enef efiit t A Accr ccru ual al R Rat ates b es by y D Diiffe ffer re en nt T t Typ ypes o es of f t th he E e Ex xp pect ected ed B Ben enef efiit ts s E Ex xpe pec ct ted ed B Bene enef fiit ts s R Repor eport te ed as d as E Ex xpec pect ted B ed Be enef nefiit ts s R Rep epor ort ted ed as as To Totta all Re Reg gul ula ar r P Pa ay yme men nt ts s a P a Per erc cen ent ta ag ge e of of Fi Fina nal l P Pa ay y Figure 4B (3 (3) ) (1 (1) ) (2 (2) ) Mean and Median Annual Benefit Accrual Rates, by Age and Different Types of the Expected Benefits 2004 SCF* 2004 SCF* 2004 SCF* Annual Benefit Accrual Rate 2007 SCF* 2007 SCF* 2007 SCF* Less than 1.00 percent 34.9% 28.8% 19.5% 4.4% 29.4% 17.3% Expected Benefits Reported as Expected Benefits Reported as 1.00–1.24 percent 9.7 12.2 6.8 7.3 8.4 9.5 Regular Payments Percentage of Final Pay Total 1.25–1.49 percent 9.1 13.4 10.9 6.8 9.5 10.4 (3) (1) (2) 1.50–1.74 percent 6.1 11.2 8.7 7.2 7.2 9.5 Age 2004 SCF* 2007 SCF* 2004 SCF* 2007 SCF* 2004 SCF* 2007 SCF* 1.75–1.99 percent 10.5 8.4 9.7 8.7 10.0 8.8 Mean Median Mean Median Mean Median Mean Median Mean Median Mean Median 2.00–2.24 percent 5.0 4.4 7.3 16.6 6.1 10.2 Younger than 35 1.51% 0.96% 1.63% 1.11% 1.59% 1.56% 2.27% 2.25% 1.54% 1.14% 1.98% 1.75% 2.25–2.49 percent 2.8 5.2 9.2 10.7 5.3 7.7 35–44 1.74 1.07 1.71 1.36 1.76 1.82 2.09 2.14 1.77 1.23 1.90 1.83 2.50–2.74 percent 4.4 2.3 6.6 12.6 5.4 7.2 45–54 3.60 1.68 1.63 1.54 2.17 1.89 2.22 2.20 3.06 1.72 1.91 1.77 2.75–2.99 percent 1.5 3.4 3.8 5.9 2.5 4.6 55 or older 2.08 1.87 1.83 1.44 2.63 2.50 3.47 2.65 2.37 1.93 2.50 1.97 3.00 percent or greater 16.0 10.6 17.5 19.9 16.3 14.9 Total 2.56 1.35 1.71 1.43 2.06 1.83 2.48 2.22 2.37 1.58 2.07 1.80 Median 1.35 1.43 1.83 2.22 1.58 1.80 Souce: Employee Benefit Research Institute estimates from the 2004 and 2007 Survey of Consumer Finances. Mean 2.56 1.71 2.06 2.48 2.37 2.07 * Weighted by using the sample weights of the 2004 and 2007 Survey of Consumer Finances (SCF), respectively. Souce: Employee Benefit Research Institute estimates from the 2004 and 2007 Survey of Consumer Finances. * Weighted by using the sample weights of the 2004 and 2007 Survey of Consumer Finances (SCF), respectively. Percentages may not add to 100 due to rounding error.