New Voya study offers benchmarking insights specific to health care organizations
The 2019 Voya Health Care Report – Prescription for Retirement Plans in the Health Care Sector – delivers insights on the current challenges that health care organizations face with the structure and management of their defined contribution (DC) retirement plans. It also explores the key issues in motivating employees to save for retirement and constructing an overall financial wellness program that guides employees to and through retirement. The survey unveiled emerging trends that will help human resources professionals of health care organizations, as well as their advisors, consultants and plan providers. You can see a quick snapshot of the study here or access the full report and analysis.
Trends in the health care sector
In their primary mission of caring for patients, health care organizations continue to move toward a value-based model of care and away from a volume-based model. Patients entering a health care facility through the emergency room is a revenue-losing model for today’s health care systems. Similarly, hospitals filling beds with individuals whose conditions require surgery is a poor scenario for the health and financial well-being of patients. The health care industry’s approach adopts on a grand scale the age-old adage, “An ounce of prevention is worth a pound of cure.” Health care organizations and patients alike find the best value in a model where health systems treat people less like patients and more like members of a club that continuously monitors them and looks out for their day-to-day health and overall well-being.
The retirement plan industry has transitioned similarly. The goal of the retirement plan is no longer the single nest egg waiting for employees the day they leave work and move into the world of retirement. Instead, the emphasis has shifted to holistic financial wellness and having a sufficiently funded financial plan for all stages of employees’ lives, including partial retirement, early retirement and advanced retirement. A sound financial wellness program is nuanced enough to address the financial aspects of many of life’s pre-retirement stages, including debt management, budgeting, investment advice, college expense planning, health savings accounts, retirement income planning and overall financial wellness.
- 81% of plan sponsors believe helping their employees with financial wellness is a very important or important priority for them over the next two years
- 88% of health care organizations rely on the services of a retirement plan advisor or consultant
- On average, 67% of non-highly compensated employees (NHCE) participate in their plan and NHCE contributions average 8% of pay
- 54% of health care organizations wish their retirement plan service provider would do more to help the retirement readiness of their employees
- Only 6% of health care organizations currently offer caregiver financial planning service, but 25% plan to provide this service in the near future (within 12 months)
5 key take-aways
1. Financial wellness is the new frontier
One important take-away from the health care survey results is the growing importance of financial wellness. Organizations are seeking ways to enhance the financial wellness of their employees beyond the debt counselling and budgeting services traditionally available in employee assistance programs (EAPs). Taking these services out of the EAP program and bundling them with other services helps increase utilization and effectiveness, and impacts worker absences, engagement, productivity and quality of care.
Financial wellness has become a popular topic across all market sectors as more employers embrace the perspectives of Millennials and Generation Z, who view their lifetime in the workforce differently than prior generations. For younger generations, the burden of student debt and life events associated with starting families affects their concept of “retirement.” Being financially “well” throughout life concerns these new generations as much as saving for retirement. This trend impacts the workforce of health care organizations as it does workers in other sectors.
- 81% of plan sponsors prioritize holistic financial wellness
- 54% of health care organizations wish their provider would do more to help with employee retirement readiness and financial wellness
- 59% think more one-on-one meetings and 58% think more group education will help employees be more retirement ready
- 36% of plans offer managed accounts
2. Most health care organizations are mid-sized and regional
Despite the consolidation of many organizations into a very small number of health care systems, most health care organizations today remain mid-sized or large and regional or local. There are very few giants to serve in the current landscape. This is reflected in the pool of organizations responding to the survey:
- Only 3% of health care organizations are national in scope.
- Most health care organizations operate a single facility, or a regional group of facilities.
- Most plans are mid-sized or large - 38% hold over $75 million and an additional 25% hold $25-$74.9 million in plan assets.
- Only 5% employ more than 20,000 employees and only 12% have plan assets of $1 billion or more.
3. Health care plan metrics now closely align with those of corporate plans
Health care is no longer an outlier. Gone are the days where a 30% participation rate or a 2% average deferral rate is considered the norm. Nurses, orderlies, administrators and other health care workers have similar financial wellness needs as workers in any other segment of the workforce. Therefore, expectations for growth and performance in their retirement plans should be no different. Pressed to compete for many of the same trained and tech-savvy workers that corporations seek, health care organizations have implemented plan design changes to lift plan metrics such as participation rates, deferral rates, employer contributions and automatic deferral increases to more closely resemble those of corporate plans. For the health care organizations taking part in our survey:
- Average non-highly compensated employee (NHCE) participation rate stands at 67%
- Average NHCE deferral rate is at 8%
- 27% of organizations offer a non-elective fixed employer contribution
- One-third of organizations with a non-elective employer contribution contribute 6%+ of salary
4. Service providers are expected to drive participant savings rates
In today’s retirement plan market, the onus is on the retirement plan administrator to drive the retirement savings rate. Employee participation is less of an issue than it was 20 or 30 years ago. Nonetheless, many health care organizations understand their employees would benefit from enhanced retirement readiness, and that’s where they turn to retirement plan service providers for help. Retirement plan administrators are expected to formulate strategies and implement plan design changes that press employees to contribute more to their plans and call on employers to match it.
- 92% of organizations measure plan success based on participation rate
- 47% measure plan success based on retirement readiness of employees
- 42% measure plan success based on improving financial wellness of employees
5. Health care organizations rely on plan advisors and consultants
Like many studies before it, the 2019 Voya Health Care Report documents how employers gain from partnering with a retirement plan advisor or consultant. Retaining the services of a plan advisor or consultant helps document that the organization is able to administer the plan with the care and diligence of a prudent expert.
- 88% enlist the services of a plan advisor or plan consultant for guidance on their retirement plan.
- More than three-quarters rely on the plan advisor or plan consultant to:
- Make plan design recommendations
- Help understand the fees providers charge
- Assist with fiduciary responsibilities.
Please contact your Voya representative to review results of this survey and to benchmark your plan practices, identify areas of opportunity for your plan, review the current thinking on behavioral finance and consider new ideas worthy of investigation – such as plan design changes, financial wellness or managed accounts. A thorough investigation can bring about a breakthrough for your organization – measurable not only in plan outcomes but also in business metrics such as employee retention, cost of care, quality of care and organizational growth.
Voya Financial®, in collaboration with the American Society for Healthcare Human Resources Administration (ASHHRA) of the American Hospital Association (AHA), recently conducted its first annual survey on retirement plans in the health care sector. We surveyed 95 hospital administrators and chief financial officers about key issues impacting defined contribution and defined benefit plans sponsored by health care organizations. This study was designed to present health care organizations with comprehensive benchmarking information to help them strategically evaluate their retirement plans.