When companies sit down to budget for 2014 they will have some big decisions to make with respect to how to spend their benefits dollars after the implementation of the Affordable Care Act (ACA). As retirement consultants we recognize that the decisions the companies make to comply with ACA may very likely impact their retirement contributions. Health and wealth converge in the benefits world.Here we examine some important decisions that companies will be faced with, and how those decisions may impact retirement benefits.
|
DECISION |
HEALTH |
RETIREMENT |
|
No significant changes to coverage (80% covered/20% out of pocket) |
Premiums may increase on full coverage plans |
Contributions may be reduced to offset increase in health costs |
|
Adopt a more “consumer driven” plan (60%/40%) |
Premiums will likely be less than a traditional (80%/20%) plan |
Employees will have larger out of pocket expenses, so they may reduce their 401k contributions. Companies may consider offering larger match or adopting Safe Harbor provisions. |
|
No health insurance benefits will be provided by the company |
Employees will be required to purchase insurance from the exchange or be penalized. Company will pay sanctions beginning in 2015 |
Companies may shift all benefits dollars to retirement to offset loss of insurance benefits |
|
Company will discontinue “Cadillac” benefits for executives |
Benefit cuts may impact recruitment or retention of executives |
Companies may design a tiered profit sharing or adopt a Cash Balance plan to provide executives additional retirement benefits |
|
Reduce workforce to push many below 30 hours a week. Insurance only offered to those working over 30 hours |
Health costs may not change dramatically depending on the number of employees dropped due to lack of hours |
Employees who work 20 hours a week or more are included in the retirement plan. Costs for covering those employees in the plan will continue |
Benefits dollars will be in play in 2014, and beyond. The allocation of benefits dollars will impact plan design and employee involvement which may be critical for the company’s success. Business owners will want to have all of their options outlined for them to fully understand the impact of the health and wealth paradigm.
At Benefit Resources we are helping our clients understand their benefit options, the impact of their choices, and how to budget for the changes ahead. We do not specialize in the ACA, but have a working knowledge of the impacts of ACA decisions on retirement. Click here to arrange for a time for us to be involved in planning your benefits dollars for 2014 and beyond.
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