Containing Health-Care Costs Is Top Concern for Employers

CU360
March 23, 2009 | COMMENTS

When it comes to employees considering retirement, there's a continuing disconnect between organizational priorities and individual concerns. That dilemma, along with health care costs and generational differences, are among the top compensation and benefits trends identified by Deloitte Consulting and the International Society of Certified Employee Benefit Specialists.

For employers, the current financial crisis has thrust cost-related issues to the forefront at the expense of attracting, developing, and retaining employees. The top six employer priorities reported in the 2009 Total Rewards Priorities Survey are:

1. Containing health care costs is the top strategic challenge facing organizations today, according to 68% of employers responding to the survey.
2. Talent management (65% of respondents) held the top spot last year but dropped to second place this year.
3. Aligning the total compensation and benefits strategy with business strategy and brand (51%).
4. Willingness of employees to pay for an increasing portion of benefit plan coverage while managing the total compensation budget (48%).
5. The ability of compensation and benefits programs to accommodate the varying needs of different generations (45%).
6. Employers' ability to continue funding employee retirement programs, noted by 36% of respondents (up from 27% last year).

The employer response to retirement, however, contrasts with the number-one personal challenge of "my ability to afford retirement" reported by HR professionals responding to the survey. Seventy-six percent of individuals say their top concern is whether they'll be able to afford to retire, and 44% now plan to delay retirement.

"If the trend of delaying retirement becomes a reality, organizations will need to adapt their talent strategies and budgets to account for the unexpected retention of near-retirement employees," cautioned Dick Kleinert, a principal with Deloitte Consulting and co-director of the survey.

The results also exposed a growing emphasis on "personal responsibility," a positive sign at a time of increased cost pressures. "The willingness to take personal responsibility in the face of economic pressures presents opportunities for organizations to offset cost concerns in the areas of retirement planning and health care consumerism" says Kleinert.

To take greater responsibility, 48% of respondents intend to participate in wellness and disease-management programs, while 44% plan to increase their level of contributions to their private savings. And 35% plan to initiate formal retirement planning and/or estate planning through resources other than their employers. One-third of respondents expect to increase contributions to qualified retirement plans.

Employers say they plan to take a number of measures to help support employees in this regard, including:

• Increased employee communication and education.
• Better tools for retirement planning.
• Enhanced pre-retirement planning sessions.
• Incentives for participation in fitness, wellness, and disease-management programs.
• Focus on other reward programs—flexible work arrangements, learning and development programs, and paid time off.

Regarding generational issues, nearly one-quarter of respondents don't believe their organizations' leadership teams understand the different compensation and benefits perspectives of the different generations in their workforce. Almost one-third said their compensation strategies were not aligned with the four distinct age groups. Furthermore, 37% believe generational preferences are not even considered in making changes to total compensation and benefits programs.