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Employers can do a better job of communicating the broad advantages of their financial benefit plans
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Nine out of 10 employers in the U.S. believe that financial benefit plans that help employees save for the future, including 401(k)-type defined contribution plans and health savings accounts, are equally or more important to potential hires in 2012 than five years earlier, and half believe such benefits to be more important than ever, according to Bank of America Merrill Lynch's
Workplace Benefits Report, an annual study of the role financial benefit plans play in employers’ talent management strategies.
Other key survey findings include:
A national sample of 1,000 employers and 1,000 employees were interviewed for the survey from January through March 2012. All surveyed employers offered an active 401(k) plan, with the sample weighted to represent companies of all sizes. Similarly, all surveyed employees were enrolled in a 401(k) plan.
Lack of Communication
More than half (55 percent) of employers only communicate with employees about their financial benefit plans once a year or less. This may be one of the reasons that 30 percent of employees don’t feel they’re taking full advantage of these benefits. When asked why, several employees pointed to not knowing how to optimize them (35 percent) or even what their company offers (10 percent). This lack of communication may be a factor contributing to nearly half (48 percent) of employees being less than satisfied with the benefits offered them.
Employers and employees agree that companies could do a better job of communicating the broad advantages of their financial benefit plans. Similar to the views of employees, most employers admit more can be done to improve communications and help workers understand the benefits they offer, including:
“The challenge for employers is to communicate, in the clearest, most targeted and compelling ways, the advantages that their benefits offer and how to engage with these plans to achieve the best possible outcomes,” said Kevin Crain, head of Institutional Retirement and Benefit Services for Bank of America Merrill Lynch. “HR leaders who embrace communications and effectively leverage their financial benefit plans within broader talent management strategies, can gain a more loyal and empowered workforce, and competitive advantage in the global marketplace.”
Financial Benefits and Talent Management Strategies
Most employers (84 percent) recognize the need to offer competitive financial benefits to retain talented people and stem employee turnover costs, and most employers (81 percent) make financial benefit plans available to employees as part of their company’s core values.
Employers place the greatest importance on a plan’s usefulness to employees (88 percent), the quality of service their employees will receive (86 percent) and a plan’s cost (80 percent). In addition, the flexibility of the plan to support a demographically diverse workforce is an important consideration (72 percent).
Achieving Financial Security
Nearly 70 percent of employers feel some sense of responsibility for helping employees secure the assets needed to sustain them later in life. However, workers nearing or in late stages of their career often find themselves on their own when it comes to transitioning into retirement. For example, just 39 percent of employers offer their retiring employees guidance on what to do with their 401(k) assets, while only 21 percent help educate employees on such issues as preparing for future health care costs or understanding when to take Social Security as they approach traditional retirement age.
This may be in part the reason why less than half (42 percent) of employees feel they are on track to financially support their desired lifestyle in retirement, and another 22 percent have no idea whether they’re on track to do so or not. This lack of confidence may be one reason why 73 percent of employees see themselves working into their 70s.
Another savings vehicle more than half (57 percent) of employees view as important to their financial security is a health savings account (HSA). The survey found that 30 percent of companies offer an HSA option to their employees, among whom 35 percent participate in this tax-advantaged savings vehicle.
When asked what would encourage them to save more in their 401(k), employees cited an increase in company match (89 percent), more affordable health care benefits (73 percent), greater access to education and advice about saving and investing in the plan (53 percent) and a higher maximum contribution limit (46 percent).
Among employers surveyed, 84 percent currently match some level of 401(k) plan contributions. The study found that, in 2011, one-third (33 percent) of employers reinstated or raised their company match, whereas just 8 percent eliminated or lowered their match—an indication that economic conditions are improving.
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