Retirement Trends in Health Care: The Life You Save May Be Your Own By: Rob Goldman

How many times have you been buried by work and found yourself saying, “It’s not like I’m saving lives…!” Well, for those who work in the healthcare industry, they are literally saving lives. With such challenging and detail-focused jobs, along with balancing equally busy personal and family lives, health care workers often have little time left to focus on their own needs. Somewhere near the bottom of the pile lies the often-neglected, but desperately important, retirement planning needs.

As financial professionals, it is our job to help plan sponsors create an optimal retirement program. By understanding this industry and the people who work in it, we are better positioned to serve. In partnership with the American Hospital Association, Transamerica’s annual study, Retirement Plan Trends in Today’s Healthcare Market
[1], can be a valuable resource to help frame stronger conversations with healthcare organizations and potentially yield better results for employees.

According to the study, the majority of healthcare plan sponsors consider the primary goal of their retirement program to be helping employees accumulate income for retirement. As such, plan participation rate – historically the most common benchmark of a plan’s success – has continued to trend downward for these organizations, and “retirement readiness of employees” is most frequently cited as the top measure of success.

Strong plan design is critical for healthcare employers. Because employees in this field have demanding jobs and long hours, it is important that plan sponsors offer a competitive retirement plan that takes the guess work out of financial planning. Healthcare plan sponsors continue to take proactive steps to address plan challenges by holding one-on-one and group meetings, offering an employer-matching contribution, and implementing automatic features. All of these add up to a solid benefit for participants that can help them reach financial independence in retirement.

Some challenges are particularly unique to the healthcare industry. For example, more than one-third of plan sponsors in this market have experienced a merger or acquisition. The majority of mergers are based on acquisition of assets versus acquisition of stock. The surviving retirement plan is typically a 401(k) or Roth 401(k) plan, or, less frequently, a 403(b) or Roth 403(b). While almost half of these events utilized the services of a financial professional, there is tremendous opportunity here to assist plan sponsors with these complex transactions.

Another challenge that needs attention is employer- matching contributions. While almost all plans provide an employer contribution, the level of contribution is declining, which could impact employees’ ability to achieve a fully funded retirement. The most commonly reported matching formula last year was $.50 up to 6% of pay. This year, a lower employer-matching formula of $.50 up to only 3% of pay increased markedly. Healthcare organizations looking to cut costs may end up inadvertently affecting their employees’ future nest eggs by reducing this contribution. It is crucial to have conversations with these employers about the importance of sound plan design.

While more healthcare organizations implement features such as automatic enrollment and automatic escalation, there is a tendency to implement a low default deferral rate. The most common default contribution rate is 3%, and implementation of higher default deferral rates, such as 4% or higher, has declined. And while 82% of healthcare plan sponsors are concerned that the default rate is not high enough, they also express concern about raising it, citing “concern about employees’ take home pay” and “recommendation of consultant/advisor” as the most influential factors for maintaining the lower rates.

Regarding the use of a professional advisor, more than eight in 10 healthcare plan sponsors partner with an intermediary, who is most likely to be an investment or benefits consultant specializing in healthcare plans. The typical services employed by the intermediary include reviewing investment options, helping formulate the investment policy statement, supporting investment and service provider due diligence, and explaining provider fees.

When we’re not feeling well, we turn to healthcare providers and their hard-working employees for help. Not surprisingly, these organizations are typically paternalistic with benefits and have an innate desire to help their own employees. With 784,626 healthcare organizations in the United States, representing an annual revenue of $1.6668 trillion and employing over 16 million Americans
[2], there is no better time to explore this market and its many needs and challenges.

You may not be saving lives, but you may be helping those who do save for themselves.

To download a copy of the full survey, click HERE

[1] Transamerica Retirement Solutions’ defined contribution and deferred compensation retirement services are endorsed by the American Hospital Association. AHA Solutions, Inc., a subsidiary of the American Hospital Association, is compensated for use of the AHA marks and for its support in marketing endorsed products and services. By agreement, pricing of endorsed products and services may not be increased by Transamerica Retirement Solutions to reflect fees paid to any AHA affiliate. AHA does not endorse securities or investment products offered by or through Transamerica Retirement Solutions. None of the AHA or its affiliates, including AHA Solutions, Inc. is a registered investment advisor, and none provides investment advice.

[2] Source: U.S. Census Bureau, Statistic Brain Research Institute, 3/20/2016.

Rob Goldman

Robert Goldman is a Regional Vice President – Institutional Markets, New York Regional Office at Transamerica Retirement Solutions. His responsibilities include supporting the marketing and sale of Transamerica’s retirement plan services to both corporate and not-for-profit retirement plan sponsors....

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