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Survey Finds Healthcare Employers Rely on Retirement Plan Providers For Administration and Support
A survey conducted by Diversified Investment Advisors and the American Hospital Association found that Healthcare employers are relying more on retirement plan providers to administer their plan and help them meet their fiduciary responsibilities
“Healthcare employers have a much greater fiduciary role than ever before. Changes in ERISA 403(b) regulations, Department of Labor plan audit requirements and the need to help ensure their employees are saving enough for their retirement has made retirement plan administration a greater focus for them,” said Brodie Wood, vice president and not-for-profit practice leader at Diversified. “At the same time healthcare reform has put additional but different kinds of pressure on healthcare employers, prompting them to turn to plan providers for more tactical assistance with their retirement plan management – something that is outside their core area of expertise. This confluence of changes presents tremendous opportunities for retirement plan providers to assist plan sponsors with a more streamlined, seamless process for plan design and administration, while affording their employees access to the best tools to make retirement planning decisions.”
Among the survey’s key findings:
- In 2010, 79% of plan sponsors reported having an advisor, a three percentage point increase over 2009.
- Retirement plan advisors perform a variety of tasks especially those surrounding investment management decisions. Eighty-one percent of respondents said their advisors provide ongoing investment monitoring, 67% assist with investment selection, 54% help develop the investment policy statement, and 30% said they act as a plan fiduciary.
- Nearly half (48%) of plan sponsors are turning to their current accountants to conduct their plan audit. However, 13% will rely on their plan provider to arrange for an auditor, and 19% will hire a new auditor, a ten percentage point increase from one year ago.
- A majority (72%) of plan sponsors outsource some aspect of their DC plan management to their plan provider: 52% for loans, 50% for hardship withdrawals, 37% for Qualified Domestic Relations Orders and 37% to handle enrollment.
- Of the 37% of healthcare plan sponsors that employ on-site representatives (a four percentage point increase over the previous year), 46% of reps are full-time, an 11% increase over two years ago.
- Onsite representatives perform a variety of services designed to improve plan utilization and enhance the participant experience by enrolling employees (90%), helping them understand the plan (90%), providing retirement income planning (89%), improving employee appreciation of the plan (81%), giving financial guidance (77%) and providing investment advice (51%).
- Vendor changes are on the rise as well. Respondents said they plan to change recordkeepers (11%), consolidate recordkeeping for multiple plans (9%), change advisors (8%), reduce the number of plan providers (4%) and consolidate investments for multiple plans (4%).
Wood noted that, in addition to increased regulations, another driving factor for these changes is the volume of mergers and acquisitions within the healthcare industry, which is expected to increase in 2011. “When hospitals and hospital systems merge, there are usually multiple plan providers and scores of participants involved,” he said. “For a healthcare organization to take that task upon itself would require significant human and financial resources which is why outsourcing plan management and consolidating the number of providers, often to a single provider, is a continuing trend.”
Healthcare employers are also earnest about encouraging more active participation in their retirement plans with the help of retirement plan advisors and more on-site representation, as well as improved employee electronic communications. According to the report, nearly 80% of healthcare employers cited employee education among their top priorities for the next 12 months and many are turning to technology to help get the word out quickly and effectively. The survey found that 52% of plan sponsors e-mail materials to participants’
Retirement Plan Trends in Today’s Healthcare Market – 2010 is the eighth annual survey conducted by Diversified and the AHA. The study focuses on healthcare organizations’
The American Hospital Association (AHA) is a not-for-profit association of health care provider organizations and individuals that are committed to the health improvement of their communities. The AHA is the national advocate for its members, which includes more than 5000 hospitals, health care systems, networks, and other providers of care, and 38,000 individuals. Founded in 1898, the AHA provides education for health care leaders and is a source of information on health care issues and trends. For more information, visit the AHA Web site at www.aha.org.
About AHA Solutions, Inc.
AHA Solutions, Inc. is a resource to hospitals pursuing operational excellence. As an American Hospital Association (AHA) member service, AHA Solutions collaborates with hospital leaders and market consultants to conduct product due diligence and identify solutions to hospital challenges in the areas of finance, human resources, patient flow and technology. AHA Solutions provides related marketplace analytics and education to support product decision-making. As a subsidiary of the AHA, the organization convenes people with like interests for knowledge sharing centered on timely information and research.
AHA Solutions is proud to reinvest its profits in the AHA mission: creating healthier communities. For more information, contact AHA Solutions at (800) 242-4677 or visit www.aha-solutions.org.
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Diversified Investment Advisors, Inc. is a leading provider of customized retirement plan administration, participant communication and open architecture investment solutions for mid- to large-sized organizations
About The Retirement Research Council™
The Retirement Research Council, the research group of Diversified, is dedicated to:
- Drawing a comprehensive picture of the institutional retirement plans market;
- Detailing trends to assist with the strategic evaluation of retirement plans; and
- Providing retirement plan sponsors and their advisors with comprehensive benchmarking information.
Drawing on more than 50 years of experience in retirement plan management, the Council periodically assembles a panel of experts from all facets of the retirement plans market to evaluate the current and future impact of trends shaping our industry.