Like other industries, health care employers and benefit plan managers in the health care sector are struggling mightily with their ability to address the retirement preparedness of their evolving workforces.
Whether its the remnants of the baby boomers or introduction of millennials, the workforce dynamic in the health care industry is going through a change as the it continues to cope with the ongoing hiccups of the Affordable Care Act. Plan fiduciaries at health worksites also caution the need to motivate their employees to save adequately and helping them learn how to invest wisely.
The health care segment includes more 4,000 defined contribution plans, with approximately 5,200 retirement plan participants. In total assets, the health care sector has more $317.8 billion, which is about 40% of the overall DC not-for-profit market.
Ty Minnich, vice president, not-for-profit institutional markets at Transamerica Retirement Solutions, says the root of the problem is the pendulum shift from defined benefit to DC retirement plans, which adds to the retirement confusion.
The aging population, although affecting all industries, is creating a workforce management issue particularly in health care, where the demand for younger employees is there, says Minnich. The technical expertise, the knowledge they need with the sophistication of the changes in medical delivery [is critical], yet they have employees entering the retirement period of their careers and they are not retiring because they are not ready to retire, from a financial perceptive.
According to health care retirement plan sponsors, approximately 75% say that employee engagement is one of the most significant challenges in managing a retirement plan. Of the more than 100 hospital administrators and chief financial officers surveyed by Transamerica and the American Hospital Association, most agree that helping employees save for retirement and retaining employees are top goals for their retirement plan.
Another wrench in the operation of health care businesses has been the ACA, and its overnight transformation according to some in consultancy space of how business is done in the field.
[Health care] is undergoing an enormous change, from the perspective on how they get reimbursed for their delivery model, says Minnich. What you seeing is that the smaller regional community-type organizations just cant exist in this marketplace.
David Zetter, of Zetter Healthcare Management Consultants, explains that he is seeing similar shifts in all aspects of benefits and services from small practices to large groups and health systems that the health care accounting and consulting firm works with.
I dont see how health care practices are going to do it, explains Zetter, also a board member of the National Society of Certified Healthcare Business Consultants. Its just getting so expensive, and reimbursements are going down. Its tough for a doctor to make ends meet at this point in time and if they keep wanting to be the employer of choice they are going to have to ante up. Unfortunately thats going to cost them quite a bit of money, especially from a benefits standpoint.
Meanwhile, there has been a change in how plan sponsors measure plan success in the medical industry. There is more of a focus around retirement readiness rather just solely participation rates, according to the study. And this intensified focus on improving employee interaction and tailoring print and electronic education touch points exemplifies how health care retirement plan sponsors are reacting.
It all indicates that the plan sponsors are not only realizing they have to do more to help participants get ready for retirement, but also helping participant to help themselves, says Grace Basile, assistant director of market research at Transamerica Retirement Solutions. Theres no more set it and forget it, theres no more just getting into the plan. Instead, she says its all about increasing [engagement] over time, [and] making sure your investments are appropriate for where you are in your age and career.
Overall, employers and their employees have been riddled with uncertainty of retirement since the recession. However, according to the Employee Benefit Research Institute, retirement confidence reported some meager gains from the losses over the past five years. Approximately 18% of Americans are very confident and 37% are somewhat confident with the future financial needs.
Nevin Adams, co-director of the Employee Benefit Research Institute Center for Research on Retirement Income, adds that all employers not just those in the health care space are faced with the challenges of finding the sweet spot of automatic enrollment, default rates and participation.
One of the things that we are really hearing from employers is that employee benefits are going to continue to be sort of a differentiating factor, Adams tells EBN. He says that demographic shifts are one of the biggest challenges for employers to deal with.
The baby boomers [are] kind of hanging around, and the millenials looking for a place to come in, he notes. The benefit package and how its put together really will make a difference.
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