Revisiting health care organizations' retirement planning

The health care profession has just come through, and is still dealing with, the worst pandemic in a century. Besides the obvious tolls health care workers have gone through, their employers are now dealing with the repercussions and asking themselves how best to recruit and/or retain employees. According to a new study by TIAA , The Current State of Retirement Plans for Healthcare Organizations, the projected turnover for nurses is 23%, and 44% of over the next five years. Twenty-eight percent of physicians are expected to turnover over the next two years.

One area that employees in the health care sector, look to is retirement plans and planning. Certain themes are emerging for health care employees who are looking towards their retirement plans. For example, employers are engaging a multidimensional workforce that is diverse, represents different socioeconomic groups, generations, roles and race.

Similarly, strengthening diversity, equity and inclusion (DE&I) is another new priority for those in health care. The report says that including DE&I into retirement plan design can include investment menus and employee engagement programs. For example, the adoption of automatic services is growing, with 71% of organizations using automatic enrollment and more than half automatically re-enrolling those who opt out each year.

Plan sponsors are also evaluating how their plan’s investment options align with DE&I values. In fact, says the report, 86% of them say it’s important to offer responsible investments on the menu. At the same time, plan sponsors hope to boost employee engagement through programs that provide advice for all, budgeting and debt management, and more.

Ninety-five percent of employees say it would be very or somewhat valuable for their employer to provide stable retirement income guaranteed for as long as they live. With that, the report shows that 61% of employers say their primary goal is to provide a way for participants to save for a lifetime income in retirement.

Another 26% of employers want to help participants accumulate wealth and 13% say lifetime income and wealth accumulation are equally important. So what can plan sponsors do?

The report notes that plan sponsors must take a broad view of their plan strategy from the investment menu to plan success metrics. Of those organizations currently offering an in-plan guaranteed lifetime income option, 85% say it is extremely or very valuable. Among those that do not provide this type of investment option, 43% are highly interested in doing so now compared to 35% in 2020.

Another option is providing target date funds or TDFs to participants. Seventy-seven percent of plan sponsors would be highly interested in a target date solution that allocates a portion of assets to lifetime income.

Auto-enrollment also supports not only the inclusion goals of an organization but also the ease at which employees can invest and grow wealth towards retirement. For example,

• 71% of organizations use automatic enrollment. Of those that don’t, 42% anticipate implementing this provision within the next 12-18 months.
• Organizations offering automatic enrollment experience an average participation rate of 70% compared to 43% for those that don’t.
• Some organizations find success automatically re-enrolling participants who opt out each year. That’s why 66% of them—up from 58% in 2020—have extended it to current employees through an annual re-enrollment opportunity.
• At 67%, 403(b) plan sponsors are more likely than 401(k) sponsors (36%) to offer auto increase of employee contributions.

The report concludes by stressing that a focus on the workforce is paramount, and an effective retirement plan is one of the best ways to reflect it. The most appealing retirement plans are those enabling employees to obtain sufficient income in retirement, with in-plan investment options that offer guaranteed lifetime income.