Category Archives: Benefits

Do Americans Really Save Too Little and Should We Nudge Them to Save More? The Ethics of Nudging Retirement Savings

Source: Todd J. Zywicki, George Mason Law & Economics Research Paper No. 17-03, January 17, 2017

From the abstract:
The contention that consumers systematically “undersave” for retirement is a frequent example provided by adherents to behavioral economics and behavioral law and economics to purportedly illustrate their theories. Although frequently asserted, the claim that people systematically undersave is rarely assessed empirically.

This article, written for the Georgetown Institute for the Study of Markets and Ethics Symposium on “The Ethics of Nudging,” examines available data on how many people fail to save and the reasons why they do not. According to available evidence, the overwhelming number of households saves enough or more than they need for retirement; only a small minority does not seem to save enough. Those who do not save for retirement lack the money to do so or allocate available resources to paying down consumer and student loan debt. Behavioral economics theories explain little of the observed patterns of saving or non-saving behavior. Moreover, behavioral economics itself suggests that many people probably oversave for retirement and makes no effort to reconcile these offsetting biases.

More fundamental, once it is recognized that there is an opportunity cost to saving more — one must consume less today, borrow more, or work more — the theoretical validity of the claim that people undersave because of behavioral biases is suspect. Given the inherently subjective nature of opportunity cost, a central planner cannot be confident that he can make people better off by influencing their consumption expenditures across time than he could by shifting consumption expenditures across different goods and services today. It is concluded that there is little reason to believe that people would be made better off by nudging them to save more for retirement.

2017 National Study of Employers

Source:Kenneth Matos, Ellen Galinsky and James T. Bond, Families and Work Institute (FWI) and the Society for Human Resource Management (SHRM), 2017

The National Study of Employers is a comprehensive look at employer practices, policies, programs and benefits that address personal and family needs of employees. The survey of more than 900 U.S. employers with 50 or more employees was conducted by the Families and Work Institute and is released by SHRM as part of the When Work Works initiative.

The study provides insight into how employers are responding to the changing demographics of the workforce over time and examines flexible work arrangements, paid and unpaid parental and other caregiver leave, and elder care assistance, among other practices. This is the sixth published study since the project was launched in 1998.

Key findings include:
• Small employers (50-99 employees) were more likely than large employers (1,000 or more employees) to offer all or most employees 1) traditional flextime, the ability to periodically change start and stop times (36% vs. 17%), 2) control over when to take breaks (63% vs. 47%) and time off during the work day to attend to important family or personal needs without loss of pay (51% vs. 33%).
• Growth of workplace flexibility has been stable over the past four years. Out of 18 forms of flexibility studied, there were only four changes:
• An increase in employers that offer telework, allowing employees to work at least some of their paid hours at home on a regular basis (40% in 2016 vs. 33% in 2012).
• An increase in employers that allow employees to return to work gradually after childbirth or adoption (81% in 2016 vs. 73% in 2012).
• An increase in organizations that allow employees to receive special consideration after a career break for personal/family responsibilities (28% in 2016 vs. 21% in 2012).
• A decrease in organizations that allow employees to take time off during the workday to attend to important family or personal needs without loss of pay (81% in 2016 vs. 87% in 2012).
Related:
Summary

Effects of an employee exercise programme on mental health

Source: N. D. Emerson, D. A. Merrill, K. Shedd, R. M. Bilder, P. Siddarth, Occupation Medicine, Volume 67 Issue 2, March 2017
(subscription required)

From the abstract:
Background:
Prior research indicates that workplace wellness programmes (WWPs) are generally associated with lowered healthcare costs and improved employee health. Despite the importance of mental well-being in workplace productivity and attendance, few WWP studies have focused on improvements in psychological well-being.

Aims:
To examine the effects of the Bruin Health Improvement Program (BHIP), a 3-month exercise and nutrition WWP, on seven domains of health: physical and mental health, stress, energy level, social satisfaction, self-efficacy and quality of life.

Methods:
Using data from BHIP completers, we conducted multiple one-way multivariate analyses of variance and follow-up univariate t-tests to examine changes in physical and mental health, stress, energy level, social satisfaction, self-efficacy and quality of life. Effect sizes were also calculated post hoc to determine the magnitude of each effect.

Results:
Results for the 281 participants reveal significant improvements across all seven domains (P < 0.001). Effect sizes ranged from 0.19 to 0.67. Conclusions: This study is unique in revealing the effects of a WWP on multiple domains of psychological well-being. Given rising healthcare costs associated with mental health, targeting mental health through WWP may be an effective strategy for reducing indirect healthcare costs associated with absenteeism and presenteeism.

Public Pension Plan Investment Return Assumptions

Source: National Association of State Retirement Administrators, NASRA Issue Brief, February 2017

From the introduction:
As of September 30, 2016, state and local government retirement systems held assets of $3.82 trillion. These assets are held in trust and invested to pre-fund the cost of pension benefits. The investment return on these assets matters, as investment earnings account for a majority of public pension financing. A shortfall in long-term expected investment earnings must be made up by higher contributions or reduced benefits.

Funding a pension benefit requires the use of projections, known as actuarial assumptions, about future events. Actuarial assumptions fall into one of two broad categories: demographic and economic. Demographic assumptions are those pertaining to a pension plan’s membership, such as changes in the number of working and retired plan participants; when participants will retire, and how long they’ll live after they retire. Economic assumptions pertain to such factors as the rate of wage growth and the future expected investment return on the fund’s assets.

As with other actuarial assumptions, projecting public pension fund investment returns requires a focus on the long-term. This brief discusses how investment return assumptions are established and evaluated, compares these assumptions with public funds’ actual investment experience, and the challenging investment environment public retirement systems currently face.

Public Pension Plan Investment Return Assumptions

Source: National Association of State Retirement Administrators, NASRA Issue Brief, February 2017

As of September 30, 2016, state and local government retirement systems held assets of $3.82 trillion. These assets are held in trust and invested to pre-fund the cost of pension benefits. The investment return on these assets matters, as investment earnings account for a majority of public pension financing. A shortfall in long-term expected investment earnings must be made up by higher contributions or reduced benefits.

Funding a pension benefit requires the use of projections, known as actuarial assumptions, about future events. Actuarial assumptions fall into one of two broad categories: demographic and economic. Demographic assumptions are those pertaining to a pension plan’s membership, such as changes in the number of working and retired plan participants; when participants will retire, and how long they’ll live after they retire. Economic assumptions pertain to such factors as the rate of wage growth and the future expected investment return on the fund’s assets.

As with other actuarial assumptions, projecting public pension fund investment returns requires a focus on the long-term. This brief discusses how investment return assumptions are established and evaluated, compares these assumptions with public funds’ actual investment experience, and the challenging investment environment public retirement systems currently face.

State-Level Trends in Employer-Sponsored Health Insurance, 2011-2015: Chartbook and State Fact Sheets

Source: State Health Access Data Assistance Center (SHADAC) – a program of the Robert Wood Johnson Foundation and a part of the Health Policy and Management Division of the School of Public Health at the University of Minnesota, February 2017

From the summary:
Chartbook
This SHADAC chartbook uses data from the Medical Expenditure Panel Survey-Insurance Component (MEPS-IC) to highlight the experiences of private-sector workers with employer-sponsored insurance (ESI) from 2011 through 2015 at the national level and in the states.
Download the chartbook.

State Fact Sheets
The ESI chartbook is accompanied by state-level fact sheets summarizing key ESI characteristics from 2011 to 2015.
Download a single file for all 50 states and the District of Columbia.
Download the United States fact sheet.

Cost Sharing Among State Defined Benefit Pension Plans: Approaches to managing risk and cost uncertainty

Source: Greg Mennis, Pew Charitable Trusts, January 2017

From the overview:
A number of states with defined benefit, or traditional, pension plans have enacted policies that retain the core elements of the plans while sharing the risk of cost increases—as well as potential gains—between public employees and employers. These mechanisms for sharing costs can help reduce volatility and investment uncertainty while preserving the ability to pay promised pension benefits.

For most public sector defined benefit (DB) plans, the cost of providing these benefits fluctuates, depending on investment performance, inflation, salary growth, life spans, and workforce demographics. Cost volatility can strain state or local budgets or lead to underfunded pension plans if policymakers have not provided sufficient contributions.

In response to the budget strains and funding challenges, some states have looked to alternatives to traditional pensions, including defined contribution, cash balance, and hybrid plans. Still, most state and local governments continue to offer DB plans, though many now use cost-sharing mechanisms to reduce budget uncertainty. Employees continue to receive guaranteed lifetime benefits and in some cases see gains, such as higher cost of living adjustments (COLAs), from strong investment returns….

….This map and table highlight strategies used by large state pension plans to share cost increases with members. Looking at the benefits offered to new workers in 102 primary state retirement plans, Pew’s public sector retirement systems project identified 28 plans in 16 states that use formal cost-sharing mechanisms to manage risk….