There is a difference between having a choice and making a choice.
Open enrollment is in full swing, which sheds light on the tough decisions that employers and employees need to make this time of year. Over the past 50 years, we have seen a great shift in how employers offer benefits to their employees. Companies offering benefits became popular during WWII, when retirement and health benefits were typically fully funded by the employer requiring little financial engagement by employees. Today’s workforce are covered by 401(k) define contribution plans and high deductible health plans requiring employees make more complicated financial decisions.
Employee Benefit vendors are approaching employees telling them they need to contribute 10% of their pay for 401(k), 5% for health insurance, 5% for voluntary benefits, etc. while the financial planner says they need to save 10% of pay for emergencies and college education for their kids. Add payroll taxes of 30% and it’s easy to see how employees become overwhelmed.
Technology has evolved to create electronic exchanges for employers to efficiently offer a “supermarket” of benefits for employees to choose from. With individuals and families different needs, exchanges are gaining popularity and will continue to evolve and be a viable option.
While research finds choice is highly valued by employees, there is a difference between having a choice and making a choice.
As the 401(k) industry learned, plan participants like having many choices, but they don’t like making the final decision – especially in areas where they have little knowledge or understanding. Studies show that contribution and investment decisions made by employees have been poor. The 401(k) marketplace responded with target-date funds and auto-enrollment features with great success.
The health and welfare industry can learn from the 401(k) industry experience on managing employee choice. Successful underwriting is critical to the long-term financial success of any insured benefit an employer provides to its employees. Providing the wrong options to employees often leads to the wrong decisions resulting in the insured plan to fail through poor participation and rising premiums.
At Walsh Duffield, we first help our clients become the “architect of choice” and design the right benefit options for their employees. We then coach our client’s employees with broad financial wellness programs and benefit education so they make the right decision for themselves and their family.
Contact me today to learn more about how Walsh Duffield can help you navigate this year’s open enrollment.
Manager – Group Benefits Division