Improved economy changing benefit plansNews added by Benefits Pro on July 8, 2014

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By Dan Cook

An improving economy has restored confidence in the future among financial executives with large corporations. That renewed sense of confidence is causing some shifts in trends that were cited just months ago, and could have implications for those attempting to make money off new products created to serve employers who offer health insurance to their workers.

The survey, Managing Financial Risk in Retirement and Benefits Programs, was commissioned by Prudential Financial and drew information based upon interviews with 182 financial execs.

The survey was designed to elicit information about how these pros are managing their benefits plans. Health coverage and pension plans were of top concern. While some of the responses supported data from earlier studies, at least one trend emerged that might give pause to those consulting firms that have been working hard to build up new private exchange books of business.

This survey found that more than half (57 percent) of respondents “wouldn’t consider the idea” of moving their employees from a company sponsored plan to a public exchange. More than one-third (37 percent) said they were unlikely to transition workers to a private exchange, and 34 percent said they probably wouldn’t shift retirees to a private exchange.

“Respondents in this year’s survey are examining newly established private health insurance exchanges, although relatively few are taking advantage of them yet. Most companies are not likely to consider switching employees out of company-provided health coverage completely and into public insurance exchanges,” the study said.

While 28 percent and 27 percent said they were likely to use a private exchange for employees and retirees respectively, it’s the “not sure” groups in the middle (24 percent and 28 percent respectively) that could determine the success of the emerging private exchanges. And they still tend to see offering health and retirement benefits as a way to attract top talent.

“Everyone is looking at how to better control benefit costs and healthcare is still the No. 1 issue,” said Jim Gemus, senior vice president of product for Prudential Group Insurance. “But they are acutely aware of the need to retain employees and attract new ones. The improving economy and recovery of the financial markets is making it a bit easier to do this.”

The survey found, not surprisingly, that controlling the cost of health benefits remains the top priority for those interviewed. They’re also planning to outsource at least a portion of benefits administration of management of Family and Medical Leave Act tasks.

Other findings from this extensive survey include:
  • 80 percent are either transitioning more cost to employees or are likely to do so;
  • Only 38 percent say they’re willing to end employer-paid health care and direct employees to public health insurance exchanges;
  • 41 percent “would be willing to provide subsidies to employees for use on private health insurance exchanges;”
  • 35 percent already have closed their pension plans to new entrants;
  • 25 percent have frozen them;
  • 53 percent said their companies either transferred defined benefit liabilities to a third-party insurer or are likely to within two years (an 18 percent increase from 2010 results);
  • More than half believe “a significant portion of their workforce will have to delay retirement because of inadequate savings;”
  • 61 percent believe the average retirement age, which they say is already rising, will increase further;
  • 53 percent) say “providing downside risk protection through a guaranteed income feature would help plan participants make better investment decisions;”
  • 50 percent will probably “add a guaranteed income feature to their defined contribution plan” although only 5 percent now offer one;
  • Nearly 50 percent say they'll outsource “some or all of their benefits administration;” 27 percent already do so;
  • 20 percent outsource their absence management and Family and Medical Leave Act duties and 45 percent are considering it;
  • 70 percent “believe offering voluntary benefits is a way to increase employee satisfaction” and 58 percent “are likely to expand voluntary benefit offerings.”
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