LIMRA Secure Retirement Institute: 4 in 10 Employers Believe Affordable Care Act Has Impacted Their Retirement Savings Plans
WINDSOR, Conn., April 10, 2014 — According to a new LIMRA Secure Retirement Institute (LIMRA SRI) study, 43 percent of employers report the Affordable Care Act (ACA) has affected their current retirement benefits strategy and spending, and 45 percent believe ACA will change their retirement plans in the future.
Of those who believed the ACA has changed their retirement benefits strategy, 55 percent said they are spending less money on retirement benefits and shifting costs to employees and 42 percent said they are spending less time evaluating their retirement benefits (3 percent report other changes).
“Employers have limited resources to use to manage their employees’ comprehensive benefits package. The added complexity and costs of health care are definitely taking a toll on employers’ ability to manage their retirement savings plans,” said Alison Salka, corporate vice president and director, LIMRA SRI Research. “As a result, employers are looking for more support from the industry to help them provide a comprehensive retirement savings program for their employees.”
Building Household Savings
Prior LIMRA SRI research has shown that access to a retirement savings plan at work has a significant positive impact on a worker’s ability to systematically save for retirement and ultimately, their retirement readiness. The research shows that among employees with defined contribution (DC) plan access through their current employer, 95 percent have at least some household retirement savings versus 73 percent of those with no DC plan access. LIMRA SRI research also finds workers with access to an employer-sponsored retirement savings plan are more likely to feel confident that they will be able to achieve the retirement lifestyle they desire compared to those who do not have access (43% vs. 34%).
Cost-shifting was more prevalent with employers that offer both a defined benefit plan and defined contribution plan (67 percent vs. 48 percent). In addition, employers report dedicating more of their benefits budget to health care diminishes the dollars spent on their retirement plans (chart).
Of those employers who think the ACA will affect their retirement plan strategies and spending in the future, 63 percent believe it will mean less money spent on retirement plans.
“For many American workers, their employer-sponsored retirement plan is the primary way they save for retirement,” noted Salka. “Our findings about the impact of the ACA underscore the opportunity for plan providers and advisors to help employers better manage the challenges associated with their retirement plans.”