Retirement benefits will be key to attraction, retention purposes
The Affordable Care Act has had one unintended consequence for small businesses. It has prompted employers to beef up their retirement benefits as a way to attract and retain good employees, according to The Nationwide Retirement Institute.
With implementation of the ACA came a requirement for small businesses with 100 or more full-time employees to offer health insurance. In 2016, that number will be employers with 50 or more full-time employees.
Nationwide’s online survey of 334 U.S. small business owners found that 67% of them believe the ACA will make it more difficult to offer competitive medical benefits and 64% said their employees already consider their health benefits less attractive.
“A company’s health benefits package once proved to be a deciding factor in where employees chose to work. With health care now available on the open market, it’s harder for employers to separate from the pack,” said John Carter, president of Nationwide’s retirement plans’ business. “Today’s job prospects will look for employers that provide them the greatest amount of total compensation. That includes those who match a higher percentage of what they will invest into a company retirement plan.”
Forty-four percent of respondents said that a greater need exists to offer employee benefits than before the ACA was adopted and 43% said they’ve already increased their contribution to their retirement plan as a result of the ACA, the survey found.
“The smaller businesses, when they look at their overall compensation and benefits, are struggling to set themselves apart from larger companies or those with more competitive benefit offerings,” he said.
Employees can now get great health care benefits outside of an employer, thanks to the ACA, which is making employees more mobile. Many can go out on their own now and start a new business because they aren’t constrained by their employer-sponsored medical benefits. Insurance companies have to cover pre-existing conditions under the ACA, which is an added incentive for people to leave their current employer and venture out on their own, Carter said.
“From a macro perspective, if you look at salary, medical benefits and retirement benefits, they are the three areas employees look at together in an entire package. With the medical potential for small businesses being less of an issue, the retirement offering becomes more critical to recruit and retain employees,” Carter said.
The survey, which was conducted online by Harris Poll, surveyed small businesses with 50 to 299 full-time employees. It found that this group was eager for advice from qualified financial advisers.
Forty-three percent of respondents believe the ACA is going to be difficult to navigate. “They are turning to financial advisers for that education, that resource,” Carter said.
Thirty-four percent said they were not prepared for the changes and being compliant with the ACA and 77% of small businesses felt that having an adviser that was familiar with the ACA would benefit their company.
Nearly one-fourth of companies surveyed plan to replace full-time employees with part-time employees so they don’t have to comply with the ACA mandate, he said. Sixteen percent intend to pare down their workforce over the next two years because of the ACA.
The ACA will have a major impact on how Americans approach retirement, Nationwide believes. Medical expenses represent one of the biggest expenses individuals face in retirement. And while some companies are looking at it as an excuse to reduce hours or their workforce in general, the ACA does create opportunities for people to retire on their own terms or open their own business, Nationwide said.
“The ACA guarantees employees cannot be denied coverage for pre-existing conditions and it can help cover the cost of insurance premiums,” Nationwide said. “Therefore, people may not have to work just to keep their employer-sponsored health insurance until they become eligible for Medicare at age 65.
Nationwide, a Fortune 100 company based in Columbus, Ohio, is one of the largest diversified insurance and financial services organizations in the U.S. It provides a full range of insurance and financial services, including auto, commercial, homeowners, farm and life insurance; public and private sector retirement plans, annuities and mutual funds; banking and mortgages;