With such a concentrated focus on the Affordable Care Act (ACA) in 2014, other benefits programs temporarily took a back seat to health care. Now as employers begin to refocus on human capital and the programs critical for recruiting and retaining good workers, there is a shift back towards a focus on the employee’s total benefits package. Employee Benefit News recently released its annual Benefits Barometer with data showing the state of the industry and expert commentary shedding light on what’s in store for 2015 in the areas of health care, wellness, retirement plans and voluntary benefits.
It looks like 2015 is poised to become the year of the Cadillac Tax as employers look to better control health care spending before the tax goes into effect in 2018. Employers will consider various strategies to delay this 40% tax on the value of health insurance benefits when it exceeds a threshold of $10,200 for individual coverage and $27,500 for family coverage. It is expected that roughly half of large U.S. employers will hit these thresholds in 2018 with a significantly larger percentage in subsequent years.
How will employers offset some of these taxes? Some possibilities include:
- Benefits outsourcing where employers partner with a vendor to help track employees for ACA reporting and IRS reporting purposes (http://www.benefitsrg.com/benefits-resource-group/resources/CJF_Qtr2_2014.html)
- Wellness programs (http://benefitsrg.com/solutions/employee-benefits/wellness-programs) to encourage healthier lifestyles (see below)
- Consumer-directed health plans (CDHP)
- Direct contracting with health care providers accountable for employee health outcomes
- Private exchanges (http://www.benefitsrg.com/2241)
- Health care cost transparency tools to help employees navigate the health care system
- Spousal surcharges or lowered subsidies for spousal health coverage
As employers started implementing flexible hours, in-house exercise facilities and smarter food choices, they saw positive results. Indeed, 93% of employers surveyed by the National Business Group on Health (NBGH) indicate they plan to expand or maintain funding for their wellness-based incentive program over the next three to five years.
However, it’s often not as simple as just implementing a wellness program. That program needs to hold up to scrutiny. In a recent case, the EEOC claims that Honeywell’s wellness program violates the Americans with Disabilities Act and the Genetic Information Nondiscrimination Act by imposing penalties on employees who decline to participate in the company’s biometric screening program. Read more about this case here. (http://www.benefitsrg.com/2266)
It remains to be seen how the case is going to play out, but it is clear the government needs to become much more specific about the extent of its support for employer-sponsored wellness programs. Nevertheless, 44% of the employers surveyed said they plan to maintain or increase their investment in wellness programs, even if their company were to move away from direct involvement in employer-sponsored health coverage.
New Approaches for Retirement Plans
Employers will be taking a fresh look at their retirement programs and looking for ways to integrate them holistically within the total benefits strategy. Some employers will move to more simplified 401(k) plans with fewer options and others will look at adding managed accounts and target-date funds to the equation.
According to one report, “retirement readiness” will also grow in importance this year, with 78% of surveyed employers saying that retirement readiness has become a top issue for their employees. Additionally, 82% say retirement security will become a more important issue for employees in the next three years.
Voluntary benefits, especially critical illness and accident insurance, have continued to grow in popularity. However, with such continued focus on ACA compliance, we don’t expect many new programs to be offered. Looking ahead, companies would be wise to target voluntary benefits by employee demographic, looking at both life-cycle and life event marketing.
Let’s have a conversation about the state of your total benefits package and discuss some of these issues to find ways you can better integrate your plans. We encourage you to contact Charles J. Farro, Chairman, CEO and co-founder of Marsh & McLennan Agency formerly Benefits Resource Group. You can contact Chuck at 216.393.1800 or firstname.lastname@example.org.