Posts Tagged "employer"

Does Private Disability Affect Federal Rolls?

Does Private Disability Affect Federal Rolls?

Economists have long thought that if employees have disability insurance on the job, they might never migrate over to the government’s disability rolls. A new study finds just the opposite.

In Canada, the existence of short-term disability in the private sector increased the number of people going into the national government’s program by 18,300 in 2015 and increased program spending by 5 percent, according to a researcher at the University of Toronto.

The logic behind this is that enrollment rises in the government program, which provides long-term benefits, because a negative incentive is at play. If employees with a disability or workplace injury have short-term coverage at work, they will have a regular source of income to tide them over while they apply for government benefits and wait for a response.

The Canadian study has implications for the United States, because the two countries’ programs are similar. The connection between U.S. government and employer disability is also of interest because some policymakers here would like to see mandates for employer disability become more widespread. Ten U.S. states and the District of Columbia currently require employers to provide the coverage for serious medical conditions.

This research adds a new voice to a lively debate on both sides of the U.S.-Canada border. Others have argued that when companies offer short-term disability, they prevent some people from going onto the government rolls by giving them time off to recover from an illness or injury before it becomes chronic. Employers also have an incentive to control their insurance costs by preventing injuries or accommodating employees with disabilities so they can keep working. …Learn More

The power of words being typed

Viewing Retirement Saving as a Fresh Start

Employers have learned over the years that understanding employee psychology is critical to getting them to save for retirement. Researchers have landed on a novel idea along those lines: explain to employees that they have an opportunity to save in a 401(k) or increase their 401(k) saving on a future date that represents a fresh start, such as a birthday or the first day of spring.

In a 2021 study in the journal Organizational Behavior and Human Decision Processes, this “fresh start framing” during an experiment increased the percentage of workers who agreed to contribute to their employer retirement plans and increased the share of pay contributed to the plans. In both cases, the increases were well in excess of 25 percent in a comparison with employees who were presented with less salient future dates.

Add this technique to a well-established one that growing numbers of employers already use with some success: automatically enrolling workers in the 401(k), and sometimes automatically increasing their contributions, which research has shown can work better than waiting for them to do it themselves. Most of the retirement plans in the study did not have any automatic features, and the fresh start dates proved another way to elicit better saving habits – voluntarily.

The option to delay a commitment to save is based on an assumption that people are more willing to make a change that involves sacrifice if it can be postponed – smokers often try to quit this way. One theory for using a fresh start date is that it imbues a feeling of optimism, giving employees permission to set aside past failures. …Learn More

Medicare’s Tricky if You’re Employed

Medicare optionsI’m employed (obviously), turning 65 in June, and writing this blog to answer a question that is nagging at me and probably many of our readers in the same situation: do I have to sign up for Medicare, and if so which parts?

No one is actually required to sign up for Medicare. But everyone will need the health insurance eventually and failing to follow the rules can subject retirees to a lifetime of higher premiums.

And that surcharge can be substantial. Medicare adds 10 percent onto the Part B premium for every year a 65-year-old worker who should’ve, under the rules, signed up for the coverage for doctors and medical services but did not. Late enrollment in Part D drug coverage also triggers a penalty. More on the penalties later.

Part A is easy. Go ahead and sign up for Medicare’s Part A hospital coverage if you have employer health insurance, says Richard Chan, chief executive of CoverRight, an insurance broker with a consumer-friendly website. The federal Centers for Medicare and Medicaid Services agrees.

Part A won’t incur a late penalty if you paid your Medicare taxes for 10 years while working, because, in that case, Medicare does not charge a monthly premium – and Part A is added financial protection. “It’s free, and if you go to the hospital, Medicare can help cover the gaps that your work insurance doesn’t,” Chan said.

Eligibility for Part A begins three months before the 65th birthday. A couple of important caveats. People who didn’t put in 10 years of work will pay a fairly large Part A premium. And, under federal tax law, people who sign up for Part A are not allowed to contribute to a Health Savings Account, or HSA, which the government views as a health plan.

Part B is trickier. Older workers who have health insurance from a large employer – 20 or more employees – do not have to sign up for Part B until they retire and give up their employer’s coverage.

However, it’s good practice to confirm with the benefits office that the coverage does, in fact, meet Medicare’s requirement that the employer has at least 20 workers because employers with fewer than 20 employees are subject to completely different rules. And it’s not always clear cut whether the threshold has been met if, for example, the company has contractors or part-time employees.

When you eventually do sign up, you’ll need documentation, which is provided by your employer, to prove to Medicare that you were eligible to defer Part B without penalties. …Learn More

Family Medical Leave blocks

Small Business Backing of Paid Leave Grows

The pandemic exposed inequities in the U.S. healthcare system. It also revealed a related shortcoming in our workplaces: the lack of mandated paid family and medical leave for most Americans – and especially lower-paid workers.

The United States is the only developed country that does not have a national policy of paid time off for an extended period for illness or maternity leave. In that way, we are keeping company with places like Micronesia and Tonga.

Many major employers do offer sick time and paid or unpaid maternity leave. Even so, 60 percent of the highest-paid workers, who tend to work in larger companies, don’t have access to paid leave for themselves or a family member for extended periods for a severe illness, according to the National Partnership for Women and Families. The situation is much tougher for lower-paid workers, who are concentrated in small business: 93 percent lack access to paid leave.

Last month, the House approved a reconciliation bill that would mandate four weeks of paid leave for all workers in the event that they or family members become ill. It’s uncertain whether this provision of the reconciliation bill will clear the Senate.

The National Federation of Independent Business (NFIB) has opposed paid leave in the past, arguing that workers who take extended time off strain under-staffed small employers. Although the federal government would pay a supplement to employers for the leave under the House bill, NFIB said the required paperwork creates administrative headaches.

But this position isn’t supported by small business owners, according to a new study. Even prior to the pandemic, they were in favor of a paid leave policy for employees to take care of family members – and COVID has only strengthened their resolve.

In the fall of 2019, 62 percent of small businesses in New Jersey and New York were very or somewhat supportive of paid family leave, the researchers found. By the fall of 2020 – after months of wrestling with how to handle employees whose family members had contracted COVID – small employers’ support had jumped to 71 percent. …Learn More

401k Plans Evolve to Boost Workers’ Savings

Many employees in the private sector, when left to their own devices, either save very little in the company retirement savings plan or don’t even sign up for it.

But a growing number of companies have revamped their 401(k)-style plans over the past two decades to strengthen the incentives for employees to save. While progress has been gradual and uneven, the companies are moving in the right direction.

In a new study, researchers have compiled a unique nationally representative data set that tracks the changes employers have made to their 401(k)s and 403(b)s. The findings describe three important areas in which they are making progress:

  • About 41 percent of the largest 4,200 U.S. employers in this study automatically enrolled workers in a savings plan in 2017 – up sharply from 2 percent in 2003. Workers can still opt out but the vast majority remain in the plans.
  • Similar improvements were also evident in the study’s broader sample of employers of all sizes. In 2017, about a third of all companies had auto-enrollment, compared to virtually none in 2003.
  •  Among companies with auto-enrollment, about 44 percent of the large employers and half of the overall sample are automatically increasing their workers’ contributions.
  • Contributions to the plans are generally rising too.

The researchers credited some of the improvements to the Pension Protection Act. The 2006 law explicitly allowed companies to automatically enroll employees in savings plans and also established a minimum standard for the level of employer contributions made by companies that adopt auto-enrollment. …Learn More

Silhouette of a detective with glasses

$4 Billion in Pension Payments Returned

It’s the employer’s responsibility to find former employees and keep them apprised of any retirement benefits they left behind.

But that hasn’t always worked out. Some employers don’t have former workers’ current contact information, and others don’t bother to track them down. Worst-case scenarios are often fallout from a merger: the company being acquired has kept shoddy pension plan records and the acquirer doesn’t update them.  Some companies have even deleted a participant’s name from the records.

Tyler Compton, an attorney with the Pension Action Center, which connects workers with lost pensions and 401(k) savings plans, said people frequently contact a former employer because they think they might have a plan. But if the worker is told he’s not in the records, he might drop the matter, she said.

The U.S. Department of Labor decided several years ago that employers’ efforts weren’t good enough. The department’s Employee Benefits Security Administration (EBSA) began investigating the problem and pushing companies to improve their methods for finding workers who had quit or been laid off but were owed pension benefits or had savings sitting in an old 401(k).

EBSA has gotten results. Since 2017, more than $4 billion in past due defined benefit pension payments have been returned to millions of plan participants.

By making clear what is expected of employers, regulators “put a lot of pressure, in a good sense, on plan administrators to really up their games,” Jeffrey Holdvogt, a legal partner with McDermott Will & Emery, said in a recent webinar hosted by the Pension Action Center at the University of Massachusetts, Boston. …Learn More

UK Pension Reforms Show Some Promise

woman in the UK on her phone

Unlike the United States, the United Kingdom has implemented bold reforms to its retirement system over the past decade.

Two of the biggest changes were gradual increases in the minimum age for collecting a pension under the national social security program and requiring private employers to automatically enroll their workers in an employee savings plan.

The goals of the reforms were to keep government spending in check and encourage individuals – who are living longer – to work longer, while helping them build up more private savings through employer-based plans. On balance, the notion is that workers will end up better prepared financially when they retire. Time will tell how successful these reforms will ultimately be.

But, so far, the results have been somewhat promising, concludes an Institute of Fiscal Studies report on workers’ changing expectations and attitudes about their retirement prospects.

In a major reform to private-sector plans, lawmakers started expanding coverage in 2012 by requiring that employers – the largest ones were first –  automatically enroll workers earning more than £10,000 (about $14,000) in a retirement savings plan. The total contributions to the plans must now be at least 8 percent of each worker’s earnings, with employers providing at least 3 percent.

This reform seems to have enhanced workers’ sense of financial security. In 2017, 78 percent said in a survey that they expect to get some retirement income from an employer savings plan – up from 63 percent in 2013. And while workers are permitted to opt out of the plans, they are doing so at consistently low rates.

On the retirement front, the minimum age to collect benefits under the U.K. social security system, the National Insurance Scheme, has risen dramatically for women. A decade ago, they could collect a pension at 60, but that had increased to 66 by last year. They are now in line with men, whose minimum age was 65 for many years and also rose to 66 last year. In the future, the increases are expected to continue: a 50-year-old worker would not be able to collect his pension until he is 68. …Learn More