Employee benefits in 2021: Keep your seatbelts fastened

Predicting the future of the benefits industry is an inexact science, at best. One year ago, who could have foreseen the impact of the coronavirus pandemic, widespread social unrest and a contentious presidential election/?

Nevertheless, industry leaders are sharing their insights on the year just past and what 2021 may have in store. If experience is the best teacher, then 2020 provided a graduate-level education for brokers. Along with the obvious economic lessons, employee and client relationships were also key parts of the curriculum.

“Yes, 2020 was challenging from a sales perspective, but it also opened up the doors to humanizing what we do with our clients,” says Fernando Martinez, executive benefits advisor for Clarus Benefits Group in Houston. “The opportunity to really genuinely show you care presented itself throughout the year due to COVID-19 and the economic downturn. The lesson I have learned is to always ask how someone is doing. Regardless of whether there is an opportunity to partner now, later or never, you can always be a beacon of light for someone who might be going through hard times, either in business or personally.”

The pandemic also exposed a lack of preparation by many clients, says Andrew Beil, director of financial planning for Prime Capital Investment Advisors in Overland Park, Kansas.

“We are stronger and more resilient as an industry than we often give ourselves credit for. Life is full of unforeseen challenges. If we maintain level heads and strong resolve, we can come through them stronger and better than where we started.”

“What became clear was that individuals around the country were not ready for a pandemic-like event,” he says. “So many had minimal savings to last them a few months before government intervention came into play. As much as our industry has produced plenty of evergreen financial planning material, we need to do a better job of providing guidance, coaching and real-life practice around implementing theoretical financial concepts. This guidance needs to begin the moment a person enters the workforce, at the very least.”

Despite a rough 2020, Jennifer Berman, CEO of MZQ Consulting in Pikesville, Maryland, believes the industry is poised to take on the challenges of 2021.

“We are stronger and more resilient as an industry than we often give ourselves credit for,” she says. “Life is full of unforeseen challenges. If we maintain level heads and strong resolve, we can come through them stronger and better than where we started.”

Pandemic and politics

“This will be the biggest year for any broker who is hungry enough and creative enough to use everything going on as a catalyst. The conversation has changed dramatically.” 

Two topics are likely to dominate the conversation early in the new year: the arrival of COVID-19 vaccines and the inauguration of Joe Biden as the 46th president, with a divided Congress.

“The vaccine progression is definitely the hot topic and the most encouraging subject to watch in 2021, specifically around the timing of distribution,” Beil says. ”How patient will the American public be if there’s a slight delay in the distribution of a vaccine? Current expectations are that the vaccines will be available to the general public around May or June of next year due to the options waiting approval and more in development that are hoped to be approved by that point. Assuming that is the case, we see the economy getting back on track to moderate growth.”

Berman agrees with this assessment.

“We still have a rough road ahead,” she says. “I’m highly optimistic that the vaccines will help to normalize our society and ultimately, that will stabilize the economy in the mid- to long term. However, we are still in great peril. With or without a stimulus bill, I anticipate that the first half of 2021 will be dicey. That said, without one, we are at real risk of severe economic hardship.” The stimulus bill debate could be a litmus test on whether the new Congress will be able to work together.

“Additional fiscal stimulus is a point that can definitely help in the early going of the year, but with current stalemates in Congress, it’s a question of whether the two sides can actually work something out,” Beil says. “If a compromise can be made for added stimulus, though, it could be the needed bridge to an available vaccine for individuals and businesses who need it.” Brokers must be prepared for the economic realities of 2021, without or without the benefit of vaccines.

“This will be the biggest year for any broker who is hungry enough and creative enough to use everything going on as a catalyst,” Martinez says. “The conversation has changed dramatically, because more than ever, decision-makers understand that they are not making a 12-month decision, but a three- to five-year decision. The groundwork for controlling your health care cost begins today.

“Vaccines or no vaccines, meet people where they are, understand that each individual has a right to their own opinion and do your best to respect it,” he adds. “The world could use a little more grace instead of judgment.”

Look for Washington to play a greater role in several issues of importance to brokers. “Health care is a hot-button topic to begin with, but with a divided Congress, we could see further impasse on the subject in the early going,” Beil says. “We also know that the primary focus for the Biden administration will be on the pandemic and how we as a nation come out of it. Health care should be a large conversation as part of that because of the possible lingering effects from COVID-19.”

Fate of transparency

“We have the potential as a society to pull ourselves out of this. I think the key is going to be resolving the public health crisis as quickly as humanly possible, coupled with sound macroeconomic decision-making at the federal level.”

Berman is also keeping a close eye on the fate of transparency rules.

“I am very focused right now on the final transparency rule issued by the Trump administration at the end of October,” she says. “The implementation of these rules, which includes the disclosure of massive amounts of previously proprietary pricing information, has the potential to dramatically change how self-funded plans are structured. While these rules will certainly be challenged in the courts, I don’t think they will be struck down. It also seems highly unlikely that the Biden administration will try to stop or dramatically change these rules, because they are implementing key provisions of the ACA.”

Martinez again recommends being prepared for whatever may be in store.

“I have no control over these types of changes, but I know one thing: Evolving is rarely ever a bad thing,” he says. “Transparency is huge for us; however, it now has become a buzzword for many, it will be interesting to see how that conversation evolves.”

And a great deal is riding on how quickly the economy recovers.

“The benefits industry will be drastically impacted by the general economy, but in many ways is ‘along for the ride,’” Berman says. “As employment levels drop, we of course have fewer lives available to cover through employer-based plans. Individual households are also likely to decline to purchase coverage where funds are not sufficient to cover other basic needs.”

However, she notes that the current economic crisis is fundamentally different from 2008.

“It is the result of factors external to our economic system, as opposed to unsound financial practices,” she says. “As a result, I firmly believe that we have the potential as a society to pull ourselves out of this. I think the key is going to be resolving the public health crisis as quickly as humanly possible, coupled with sound macroeconomic decision-making at the federal level.”

Aside from national politics and economics, Beil has several other topics on his radar heading into 2021.

• Holistic financial approach. “While retirement savings is always the major topic that is discussed, we as an industry need to shift some of our focus to a more comprehensive mindset to help individuals in areas that are just as important to them. More people are coming into the workforce with large amounts of student loan debt and virtually no emergency savings. They may know it’s important to start saving for retirement early, but they often don’t see it as their top priority when they have minimal, immediate financial security.”
• Wellness programs. “We will continue to focus heavily on financial wellness and education as part of our process, along with our continued and regular market and economic updates and insights. We could see further benefits focused on health and wellness as we come out of the pandemic, but with some expectation of what we had before the pandemic when it comes to ways to retain and prospect talent.”
• HSAs. “I’ve talked to plenty of clients that don’t have access to one or don’t know anything about them. If there’s one benefit option that needs to continue to gain traction, it’s definitely one that will fight medical costs in retirement and provide major tax-advantages.” Brokers also expect significant changes to the way they do business as the economy transitions back to a new normal.

“Our firm has done a tremendous job in transitioning remotely,” Martinez says. “I believe that we will have to continue to keep our heads on a swivel and be able to be flexible throughout the next 12 to 24 months. More than ever, people want a true evaluation of their benefit opportunities, both traditional and non-traditional. And if you cannot speak on both, someone else will plant a seed and eventually this will turn into an ex-client.

“Clients aren’t looking for a relationship; they’re looking for a partnership,” he adds. “If you can’t be an extension of their team and provide a consultant’s view on various topics, you could be on the way out. It’s why we continue to see so many mergers and acquisitions.”

Bernman’s company, MZQ, has also evolved in a number of ways to better help clients get through the pandemic.

“This has included setting up a PPP-forgiveness assistance practice, advising brokers and groups on how to comply with the many new rules and regulations that have been issued, and helping to uncover the implications of the pandemic on our status quo,” she says. “For example, the huge flood of temporary layoffs, furloughs, etc., we saw in 2020 will have a major impact on employer mandate reporting (Forms 1094-C and 1095-C) for 2020 and 2021. Helping people with the issues they are facing now is paramount.”

Meanwhile, Beil says Prime Capital Investment Advisors is integrating best practices learned from 2020.

“As we look toward the future, it will be important to embrace many of the lessons we learned last year, both strategic and tactical,” he says. “The rise of our ‘Zoom culture’ is certainly something that is likely to stick. To that end, I think large-scale employee meetings and things of that nature may be something of the past for many organizations. There will, of course, be other changes and lessons learned. But it’s important to remember that the fundamentals of our industry will not change.

“Ultimately, the best brokers and advisors I work with care about helping people. They understand their clients and bring them solutions that meet the individualized needs of their businesses and employees. The solutions themselves are always changing, and that’s as it should be. The relationships really shouldn’t change though; that’s how we, as an industry, add value.”

As much as everyone looked forward to the end of 2020, the new year is likely to bring more of the same, at least for a while. Berman encourages brokers to continue to ride out the storm as they look forward to brighter days ahead.

“Don’t unbuckle your seatbelts just yet,“ she says. “Unfortunately for all of us, January 1 is just a date on the calendar. I do see a better future, but I don’t think things will start to quiet down until well into the new year.”