The shift toward "employee-centric" benefits is increasingly emphasizing consumer choice and consumer responsibility, as well as shifting risk from the employer to the employee. This is seen most clearly with the growth of voluntary employee-paid benefits beginning in the 1990s, the shift in employer-sponsored retirement plans from defined benefit plans to defined contribution plans, and the rise of consumer-driven health plans.
What are voluntary benefits and how are they impacting employee benefits?
- Voluntary benefits represent various insurance and investment products made available to employees as a "voluntary" option through an employer-sponsored benefit plan. They were originally called payroll-deduction or salary savings plans — names that reflected the mostly employee-pay-all nature of this coverage.
- Today, more than half (52%) of U.S. employers with 10 or more employees currently offer voluntary worksite benefits. The most common benefits offered are cancer (29%), accident (24%), supplemental medical (20%) and short term disability (20%) insurances.[1]
- Voluntary benefits represent a way to satisfy increasingly diverse employee needs, control costs and shift risk from employer to employee.
- Larger employers are more likely to offer voluntary worksite benefits to supplement their core benefits package, smaller businesses look to voluntary worksite benefits as a way to offer an attractive benefits package without reducing profits and to help with health costs.[2]
What has been the shift in retirement benefits?
- In recent decades, there has been a movement away from traditional defined benefit pension plans toward defined contribution retirement plans. Today there are approximately 48,000 insured defined benefit plans compared to 170,000 plans 20 years ago.[3]
- As a result, there has been a proliferation of defined contribution retirement plans such as 401(k) plans. Fifty-four percent of private-industry workers have access to defined contribution plans; among those, 79% (on average) choose to participate. This compares to only 22% of workers who have access to a defined benefit plan at their place of employment.[4]
- Ninety-one percent of full-time employees in medium and large firms participated in employment-based retirement plans in 1985; this dropped to 67% in 2004.[5]
- Less than one-third of small-business employees have a retirement plan.
- A LIMRA 2005 Employee Benefits Study revealed that 34% of employees are not saving anything toward retirement on an annual basis: this proportion translates into more than 44 million employees who are not preparing themselves for retirement.[6]
- One in five Americans nearing retirement lacks any type of a retirement fund at all.[7]
What Are Consumer-Driven Health Plans (CDHPs)?
- Consumer-driven health plans put the employee in charge of his or her own health by shifting some of the costs and risks associated with healthcare to him or her.
- In some cases a saving account — either a health reimbursement account (HRA) or a health savings account (HSA) — can be offered to the employee. HRAs are national accounts funded solely by the employer. HSAs are employee-owned and can be funded by either the employer of the employee.
- A high-deductible health plan with a savings option is the most common example of consumer-driven healthcare; however, just 7% of employers currently offer these plans.[8]