1 gr ouew r initia to on tivly es on 12 pe wror ce kn etrs’ for fi t na hn ose cia ope l livens, bu ed int 2 on 00 t4 h or e e em aploy rlier. ee And /em,ploy bote hr r th ee la lik tion elish hoip. What od of ha do w ving a e want it t dist o look ribution a like inn td h e th fe u size ture o ? A f n th d w e ah va etra w ge ill be an t nu ha el dist conse ribquute ion ncs w es on ere w aor ctk u aflly orce p high rod er u acm tiv on ity g a an cc d ou ult nim ts a th te aly t New from E B R I 2 t hh ae d Am inve erica stmn e e ntc s ov ne om rsu ys t ? hose that did not. th 1100 13 St. NW ? Suite 878 ? Washington, DC 20005 But, I said earlier that there is a bifurcation. And indeed, some employers and providers are clearly (202) 659-0670 ? www.ebri.org ? Fax: (202) 775-6312 questioning their role in offering core benefits such as 401(k) and health care plans. They note the changing nature of the employer/employee relationship—which in some industries is already far more transactional than paternalistic. This trend, such proponents contend, will only accelerate with the Lori Lucas May 29, 2018 emergence of the gig economy. At the Policy Forum, EBRI’s Jack VanDerhei presented analysis showing President and CEO the potential impact of a growing gig economy on net retirement savings surplus. Today, T. Rowe Price Examining the Role of the Employer finds that 9 percent of Millennials and 19 percent of Gen Exers qualify as “gig workers.” Prudential finds in Workers’ Financial Security that only 16 percent of gig workers have access to employer-sponsored retirement plans. That translates to a 4 percent decrease in net retirement savings surplus, or the present value of simulated retirement At a number of meetings I have attended recently, I’ve noticed an interesting bifurcation in views about 3 surpluses less retirement deficits at retirement age. Should the proportion of gig workers double, the the role of the employer when it comes to work force benefits. projected decrease is 7 percent or potentially just under $1 trillion in reduced retirement account ba On the lance on s. e hand, many plan sponsors are embracing a more active role in securing the overall financial wellness of their workers. EBRI’s Financial Wellbeing Research Center is conducting employer focus One approach that is being given a lot of attention is buttressing the employer-sponsored system with groups around the country, and we’re learning that many employers see the value of undertaking open multiple-employer plans. In an upcoming Issue Brief, Jack VanDerhei models the impact on initiatives to reduce workers’ financial stress—even when they are not necessarily sure what these projected savings shortfalls of various initiatives to improve retirement plan coverage such as Auto IRA initiatives should look like or how to measure success. As one plan sponsor put it, “Every year we hear programs. The results are promising, but what is impossible to factor into any model is the impact of the same thing about stress and financial wellbeing being the biggest issue that we have ... it affects greater availability of open multiple-employer plans on the existing employer-sponsored, defined- [people’s] ability to come to work every day, [their] presentee-ism, and the attitudes [they have] toward contribution system. Will some employers use such plans as an opportunity to reduce their traditional role their work. We understand we need to do something about financial wellness, but we really haven’t in helping workers save for retirement—especially in light of the proliferation of 401(k)-fee lawsuits, for started to tackle that.” example? th Student debt is a particular source of concern. At the Employee Benefit Research Institute’s 38 Policy And, is the current employer-sponsored system worth preserving? In his Issue Brief, “The State of Forum earlier this month, EBRI’s Craig Copeland discussed new research showing that not only Employee Benefits: Findings from the 2017 Health and Workplace Benefits Survey,” Paul Fronstin shows Millennials, but also Gen Xers and even Baby Boomers can be burdened by student debt—which can that 82 percent of workers who say they are very or extremely satisfied with their work force benefits cause financial fragility and impede retirement savings. EBRI’s 2018 Retirement Confidence Survey finds report a high level of job satisfaction. Nearly two-thirds also report excellent or very good morale. That that more than 4-in-10 workers say their debt negatively impacts their ability to save for retirement and compares to only 26 percent of those who say they are not satisfied with their benefits reporting high job 6-in-10 workers with a debt problem say that employer-provided, consumer-debt counseling or credit- satisfaction, and only 22 percent reporting excellent or very good morale. consolidation services would help them better prepare for retirement. What is certainly undisputable is the critical role of defined contribution plans—whether employer At EBRI’s Policy Forum, Cindy Silva, Head of Financial Wellness Strategy for Fidelity Investments made sponsored or not—when it comes to workers’ financial security. According to Craig Copeland’s Issue Brief the case that helping employees manage their student debt was an effective way for employers not only “Individual Account Retirement Plans: An Analysis of the 2016 Survey of Consumer Finances,” at the to retain and attract talent, but also to potentially increase retirement savings. Silva noted that since median, assets in individual account (IA) retirement plans constitute two-thirds of the financial assets implementing a student-debt repayment program, Fidelity has seen turnover for those participating in the among families having IA assets. Further, those with IA assets have substantially higher levels of net program decline. But she’s also hoping that: “The quicker we can get [associates] out of their debt, the worth than those families without: the median net worth for families that owned IA assets was $249,950 sooner they are going to be able to bump up their deferral rate [to their retirement plans].” in 2016 compared with $19,200 for families without IA assets. As Craig notes, it is critically important to “recognize that any policy that alters this system could have consequences—either positive or negative— Health Savings Accounts (HSAs) also have a potential role. In a recent EBRI employer focus group, one for Americans’ ability to fund a comfortable retirement.” employer described an initiative to encourage employees to contribute more to their HSA and to think about the account as another retirement vehicle, with messaging such as: “just because you get a cold So, as we consider the role of the employer in helping workers secure their financial future, it behooves and go to the doctor to pick up a prescription, don’t use your HSA money, let that sit there and let that all of us—employers, providers, policymakers, and pundits—to consider carefully not only the impact of grow, and you can take that with you.” The employer even gave workers extra seed money if they participated in a program to learn more about their HSA. However, the employer noted: “I always tell 1 people, ‘Don’t get too excited about the number of people contributing, because you have to look at what https://www.ebri.org/pdf/briefspdf/EBRI_IB_434_HSAs.11July17.pdf 2 t h http ey a s:re //w co wn wt.ributi ebri.on rg g, be /pdf/c ba rie ufs se p d th f/e EB y’R ll p I_IB_438_H ut a dollaSr in th As.19S ee pla pt1.n p.d ’ f” During the Policy Forum, EBRI’s Paul 3 The Retirement Security Projection Model simulates 1,000 alternative life-paths for each household, starting at 65. Fronstin showed evidence that few HSAs are being used as investment vehicles. Of HSAs that were It assumes a deterministic modeling of costs for food, apparel and services, transportation, entertainment, reading opened in 2016, only 1 percent had investment funds other than money market funds—that number and education, housing, and basic health expenditures, and a stochastic modeling of longevity risk, investment risk, and long-term care (LTC) costs.