Living benefit riders to life insurance policies: Pricing considerations and strategy
Adding benefit riders to policies provides meaningful coverage for those who need it, and carriers usually can do so at a relatively low cost.
Throughout the year, Milliman conducts regular Pulse Surveys focused on benefits topics that employers find meaningful and strategically informative. For this survey, we looked at employee financial well-being in the face of an enduring global pandemic. Not only are employers recognizing the need to support their employees during this difficult time, employers are also faced with a competitive labor market. Employers are leveraging financial well-being support and assistance to attract and retain top talent.
Overall, the results from this survey were both a little surprising and certainly compelling. They suggest that financial well-being is on the list of top priorities for the majority of employers (59%) as they work on their benefits program strategies for 2022 and beyond. This Pulse Survey included approximately 50 midsized to large employers covering a broad spectrum of industries. The survey looked at the use of company-sponsored retirement plans, health savings accounts (HSAs), tuition reimbursement, student loan repayment, and educational and other resources, all geared toward supporting the financial well-being of employees. Here are a few highlights from the report.
Not surprising, nearly all respondents indicated that their employees participate in some form of company-sponsored retirement plan, with 75% stating that employee participation is extremely high (75% to 100% of employees participating in the plan). Eighty percent of these plans were 401(k) or 403(b) plans with an employer contribution match ranging from 3% on up. The majority (55%) offered a match of 5% to 10% to their employees. Interestingly, one specific form of retirement plan offering did not show great use among employers (only 42%)—the company-sponsored IRA. Among the employers who did make an IRA available, participation was extremely low.
HSAs continue to thrive as a popular plan option for employees, providing important tax advantages as well as driving savings to cover future healthcare expenses. These savings are an example of a non-retirement plan vehicle designed to support employee financial well-being. The survey indicates that participating in these plans remains relatively high and is supported by employer-funded HSA “seed” money (contributions made to the employee’s account by the employer each year regardless of the employee’s contributions). Among respondents, over half provided some level of employer-funded contribution. Nearly 35% of those offered contributions of $1,000 or more to employee HSA accounts each year.
The total amount of outstanding student loans reached an all-time high in 2020, at $1.57 trillion, according to Experian. That number is estimated to be over $1.71 trillion in 2021, spread out among about 44.7 million borrowers (data via the U.S. Federal Reserve and the Federal Reserve Bank of New York). The vast majority (over 77%) of employers surveyed are unaware of the percentage of their employee populations who have some level of student loan debt. This is not necessarily surprising given the difficulties and privacy concerns that make tracking this information difficult, yet it signals an opportunity to perhaps do more.
The survey looked at two areas in this category: tuition reimbursement and student loan repayment. A slight majority of respondents (51%) indicated that they are still very focused on tuition reimbursement as their primary vehicle to address this aspect of financial well-being. Student loan repayment told a very different story.
The Consolidated Appropriations Act 2021 extended the period (through June 2021) in which an employer may pay a portion (not to exceed $5,250) of a student’s loan under an educational assistance plan; however, less than 5% of our survey respondents indicated that they provided this benefit. As the Biden administration steps up its efforts to push student loan forgiveness and structure federal repayment programs, this issue may find relief through other means.
Employers leverage a variety of educational resources to enhance employee acumen related to managing their personal finances. These resources come through a variety of communication channels. The survey suggested that the majority of these educational resources are delivered through their retirement plan recordkeeper. Interestingly, 33% of respondents also leveraged a third-party financial well-being vendor and/or their medical carrier to supplement these resources. Here are some the survey findings in the category.
|TOP FIVE EDUCATION PROVIDERS||TOP THREE FINANCIAL WELL-BEING TOPICS|
|Retirement recordkeeper||General topics|
|Financial planning partnership (Society for Financial Awareness)||Savings and retirement readiness|
|Financial well-being vendor (Dave Ramsey, Smart Money)||Managing debt and budgeting|
|Employee assistance program|
The survey suggests that employers are acknowledging the need to do more in the area of financial well-being but have not yet made it their very top priority. Nonetheless, it remains a focus of long-term benefits strategic planning. In general, employers strive to create a holistic culture of support for their employees, and this includes designing and providing the necessary resources to help them achieve financial well-being. Success in addressing this issue will result in not only a less stressed workforce, but more productivity and employee retention. Traditional employer financial educational programs are expanding beyond solely company-sponsored retirement programs. These resources must now address a broader array of financial stresses borne by employees to ensure that they understand the importance of managing debt while effectively saving for short-term and long-term financial needs.