More employees with access to a workplace retirement plans say they are seeing their health care costs go up, and that is having a direct impact how much money they are saving in 401(k) plans, according to a new survey from Bank of America Merrill Lynch.
Almost 80 percent of surveyed employees said they have seen an increase in health care costs last year, up from the roughly 70 percent that claimed as much the previous year.
That means less disposable income, and less money to stash away in retirement plans. Nearly two-thirds of respondents in Merrill's 2017 Workplace Benefits Report said they are saving less for retirement in order to cover rising health care costs.
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The report does not segment the sources of rising health care costs, but data from last year's Kaiser Family Foundation annual employer health benefits survey shows that premium increases continued to outpace overall inflation, albeit at a slower rate from the previous decade.
Family premiums in the group market rose 3 percent last year to an average of $18,142, with employees contributing an average of $5,277 towards premiums.
Since 2011, family premiums have increased 20 percent, a considerably lower rate of inflation from the previous decade; premiums increased 31 percent between 2006 and 2011 and 63 percent between 2001 and 2006. KFF's study noted that the slowing in premium inflation is due, in part, to rising deductibles.
Some participants saving aggressively
While most participants are crimping savings rates, the data from BoA Merrill shows solid portions are saving aggressively for retirement.
More the one-third of the survey's respondents said they are saving 11 percent or more of their salary. Among millennials, 29 percent are saving more than 15 percent of their salary; 24 percent of Gen Xers are saving more than 15 percent; and 18 percent of baby boomers are saving more than 15 percent.
Still, large portions of the workforce claim to be daunted by financial stress, and two-thirds fear running out of money in retirement. With more than any other aspect of their financial lives, people want their employers to help them save for retirement, the study found.
Across age demographics, employees overwhelmingly said they would participate in financial wellness programs. Millennialls were the most amenable to the idea, with 92 percent saying they would use a wellness program at work if offered one.
The study makes a not-so-tacit pitch for investment in wellness programs and the service providers that provide them. "Employers who embrace a culture of financial wellness—similar to the culture created around health wellness—can create a workplace that helps relieve employee stress and my make employees healthier and more productive in the long run," the report says.
In one sense, employers may be unwittingly investing in their workers' financial lives, even if they don't offer a wellness program. According to the study, people are spending real pockets of time dealing with personal financial issues on the company dime. One in five spends five hours a week dealing with financial issues, and another 22 percent spends three to five hours.
Employees spend a median of two hours a week, amounting to 100 hours a year, costing employers as much as several thousand dollars a year per employee.
Determining the return on investment of workplace financial wellness programs has been an impediment to their adoption.
Last year, Financial Finesse, a financial wellness provider, released one of industry's first coordinated attempts to calculate ROI on wellness programs.
In improving overall wellness scores, the Financial Finesses estimates employers savings in the millions of dollars, due to lower administration costs for wage garnishments, lower rates of employee absenteeism associated with financially stressed workers, and greater participation in health savings and flexible spending accounts.
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Nick Thornton
Nick Thornton is a financial writer covering retirement and health care issues for BenefitsPRO and ALM Media. He greatly enjoys learning from the vast minds in the legal, academic, advisory and money management communities when covering the retirement space. He's also written on international marketing trends, financial institution risk management, defense and energy issues, the restaurant industry in New York City, surfing, cigars, rum, travel, and fishing. When not writing, he's pushing into some land or water.
