R&I Fast Facts

Financial Preparedness Concerns Mount

The 2023 MetLife Employee Benefits Trend Survey reveals a growing concern over financial and retirement preparedness. Personal saving rates have decreased significantly from 2022.

y Over half (55%) of respondents indicated they are living paycheck to paycheck (an increase from 43% in 2022).

y Previously, 61% of survey participants felt in control of their finances; that has decreased to 55% in 2023.

These general financial feelings translate into saving for retirement.

y The number of employees who are considered on track for meeting their retirement savings goals decreased by 7% (from 37% in 2022 to 30% in 2023).

y Over 42% of employees are behind their savings goals; an increase of 5% from 37% in 2023.

y Half of Americans have less than $50,000 saved in defined contribution plans.

Similarly, in a survey conducted by Nationwide on Economic Impact 52% of survey respondents are not only concerned about their ability to save for retirement, but also the value of their 401(k) accounts depreciating. “Friends and family” was listed as the number one avenue to seek out financial advice. Financial advisors were only used by 30% of employees. Cost was the number one reason people chose to not use a financial planner. As a reminder, ALPA members have access to complimentary initial financial planning services with Charles Schwab along with a myriad of other discounts.

2022 Health Survey Findings

Mercer published its 2022 National Survey of Employer-Sponsored Health Plans, revealing an average 3.2% increase in employer-sponsored health plans. This was lower than projected, and only half the general inflation rate. However, concern remains for significant increases in the years to come.

y Mercer found the average total benefit cost per participant was roughly $15,000 in 2022.

y Although the medical plans only experienced on average a 3.2% increase, spending on specialty drugs increased by 10%.

y Looking forward, the average inflation rate for 2023 is projected to be 5.4%, with 45% of employers absorbing the cost as the labor market tightens and competition for top candidates increases.

y The rate of healthcare inflation is expected to increase in the foreseeable future due to higher wages, and supply costs in the healthcare sector along with high claims from delayed care.

Likewise, the 2023 HSA Bank Wealth Index Report was released in June. The findings support Mercer’s survey in that employers are expanding benefit offerings to stave off attrition. HSA Bank found that Gen Z (61%) and Millennials (51%) are likely to leave an employer if a competitor offers better benefit options. Additionally, as mental health concerns have grown over the past few years, more employers are providing mental health benefits. Coverage has increased by 4% from 2022 to 2023, with 27% of health plans now covering mental health. The HSA Bank Wealth Index Report provides insights into retirement as well; 44% of the participants said inflation impacted their retirement savings. Additionally, younger generations (Gen Z and Millennials) are more concerned about healthcare costs in retirement and are currently more likely to heavily weigh the premium costs when determining which healthcare plan to select.

Long-Haul COVID-19 and Disability Claims

March marked the third anniversary of COVID-19. Although the National Emergency and Public Health Emergency ended in May, we will continue to experience the effects of COVID-19 in the years to come. According to a recent Employee Benefit Plan Review article, the Social Security Administration (SSA) is tracking disability claims related to COVID-19.

As of January 2023, over 44,000 disability claims mentioned COVID-19. It’s estimated that 16 million Americans experience long-haul COVID-19. The long-lasting effects of long-haul COVID-19 are still greatly unknown. The symptoms can be vague and difficult to medically address or document. People can experience fatigue, difficulty concentrating, shortness of breath, dizziness, heart palpitations, chest pain, joint pain, cough, depression or anxiety, fever, and loss of smell. Even if a person is experiencing long-haul COVID-19 they still must meet the SSA definition of disability to receive SSDI, which is the inability to engage in substantial gainful activity due to an illness or injury that is likely to result in death or has lasted for over 12 continuous months. As the SSA grapples with how to handle long-haul COVID-19, it is expected that long-term disability insurers to experience similar issues.

Estimated $1.65 Trillion in Forgotten 401(k) Accounts

In a recent Capitalize Report, forgotten 401(k) assets were estimated at $1.65 trillion which is a 23% increase from 2021 ($1.35 trillion). Forgotten 401(k) accounts occur when employees terminate their employment and do not rollover their 401(k) accounts to their new employer’s plan or to an IRA. Roughly 29.2 million accounts and 25% of all 401(k) assets are considered to be in forgotten 401(k) accounts. The average balance of these accounts is $56,616 and it can potentially result in hundreds of thousands of dollars in lost 401(k) contributions either from never remembering the account or leaving it poorly invested with high administration fees.