2020 Outlook: Trends Shaping the Employee Benefits Landscape
2020 Outlook: Trends Shaping the Employee Benefits Landscape
Employee benefits have become a strategic priority for organizations. With unemployment at historic lows and as more workers choose to become part of the gig economy, employers are struggling to find and keep top talent. As the war for talent intensifies, organizations of all sizes are realizing that their employee benefit options can be a strategic advantage—or disadvantage.
As we head into 2020, plan sponsors are thinking about how to offer benefits that resonate with a multi-generational workforce and remain competitive in an evolving marketplace—while staying within the organization’s budget. Here, we review some of the most important trends that are shaping the employee benefits landscape in 2020.
Well-being: Take a new look at addressing more than just retirement
For the past several years, many employers have sought to offer benefits that look at the overall well-being of employees, including their health, financial and emotional needs. While most employers consider well-being a high priority, getting employees to actually take advantage of these nontraditional offerings remains a serious challenge. One reason may be that well-being programs offer benefits that employees either don’t understand or don’t view as being valuable. Plan sponsors that are seeking to improve their employees’ overall well-being in 2020 should start by analyzing data about how employees are using—or underusing—existing benefits to better understand where there are opportunities for improvement. In addition, employers should have conversations with employees and conduct surveys to determine their needs and the best way to address them in a more holistic manner.
Student loan repayment and emergency savings plans become more common
In recent years a host of new benefits have become more commonplace in benefits lineups. The list of increasingly common, nontraditional benefits includes flexible work, paid paternity leave, financial advice, budgeting tools and most importantly, student loan repayment assistance programs. With $1.5 trillion in outstanding student loans (according to data from the Federal Reserve Bank of New York), education debt ranks second behind mortgages in terms of the most common form of consumer debt. More employers are realizing that the stress related to student loan debt is affecting employee productivity and are looking to address this by offering repayment programs. Another tool employers are using to help employees build a stronger financial foundation is automated emergency savings plans. Employees are offering these plans to help employees build short-term savings so they don’t dip into their retirement accounts for fast cash. Look for service providers to promote these plans more prominently in 2020.
Mobile technology to improve employee engagement
Service providers and plan sponsors continue to find better ways to engage employees about their benefits, and mobile apps are moving from nice-to-have to need-to-have offerings as we head into 2020. Employees want access to benefit information whenever they need it, not just when they are sitting at a computer. In addition, apps and other interactive tools are making it easier for employees to consume information and make decisions about their benefits offerings. Many service providers now offer tools such as savings calculators and healthcare consumption projections that allow employees to see how their decisions affect outcomes over time.
Cybersecurity remains a primary concern
Retirement accounts contain loads of personal information and nearly $30 trillion in assets. This makes them an enormous target for hackers and other cybercriminals who are becoming increasingly sophisticated. Now more than ever, plan sponsors need to be proactive in addressing cybersecurity. In addition to having cyber as a central element of the plan’s overall risk management policy, plan sponsors need to think through process considerations for cybersecurity—including designating who is responsible for designing, documenting, implementing and maintaining the strategy.
Preparing for Gen Z and multi-generational workforces
With the oldest being 24 years of age, Gen Z is starting to graduate college and enter the workforce—adding yet another level to the multi-generational workforces that employers must manage. A recent MetLife survey showed that more than half of Gen Z’ers are stressed about finances, highlighting the need for employers to educate these young professionals and help them learn about financial management. To do so, employers should consider delivering benefits information in formats that resonate with digital natives, including mobile apps, video and social media. But employers need to realize that not all employees want to consume information the same way; older workers may be more comfortable getting information through more traditional formats. Delivering information in multiple formats and channels is becoming increasingly important.
Corporate pension buyouts accelerate—along with PBGC premium increases
U.S. corporate pension plan buyout sales equaled $7.7 billion in the third quarter of 2019, up 23 percent from the same timeframe last year, according to the Secure Retirement Institute (SRI). Forty percent of plan sponsors told SRI that they were interested in a pension plan buyout in 2020, so the trend is poised to continue. Pension Benefit Guaranty Corp. (PBGC) premium increases are a main driver of this trend. Plan sponsors considering a buyout, however, need to be wary of the assumptions used to calculate benefits, because several plan participants have filed class-action lawsuits claiming they were shortchanged when plan sponsors used outdated actuarial assumptions to calculate annuities.
BDO Insight: Don’t simply check the box in 2020
Benefits are an important tool when trying to recruit and retain talent in this tight job market, so savvy plan sponsors are no longer taking a check-the-box approach to evaluating their benefits strategy. To stay competitive, plan sponsors should be looking more strategically at their benefits, analyzing whether they reflect the company culture, create value for the employees throughout the organization and are relevant to the needs of a multi-generational workforce.
Doing this—while adapting to new trends that are affecting the benefits landscape—is no easy task. But it can be done if you make it a priority in 2020. Your BDO representative is ready to assist you in identifying ways to strengthen your benefits plan in the new year.