U.S. employers changing health, retirement offerings due to coronavirus
The coronavirus pandemic has prompted U.S. employers to make several changes to their health and retirement offerings, according to a new survey by the International Foundation of Employee Benefit Plans.
On the health benefits side, nearly all respondents (98 per cent) said they’re offering virtual health services, up 10 per cent from before the pandemic. And nearly half (49 per cent) reduced or eliminated virtual health cost-sharing to encourage employees to use it.
In recognition of the myriad stressors employees are facing, 12 per cent of employers added virtual mental-health services to their benefits offering and nine per cent reduced or eliminated cost-sharing for those benefits. An additional six per cent relaxed or eliminated their eligibility requirements.
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The survey also found 35 per cent of employers have extended prior authorization periods for prescription drugs, 29 per cent increased quantity limits and 13 per cent waived prior authorization requirements altogether.
On the retirement side, companies are looking at plan changes. Of the companies that provide matching contributions, two per cent said they had reduced the match and eight per cent suspended it. Nearly one in 10 (18 per cent) said they haven’t yet made changes but are thinking about it, while nine per cent said it’s too early to tell.
Two-thirds (63 per cent) of employers said they’re allowing employees to take new coronavirus-related early distributions from their defined contribution account under the U.S. Coronavirus Aid, Relief and Economic Security Act. Under the recent legislation, those distributions aren’t subject to the usual 10 per cent early withdrawal penalty or 20 per cent mandatory tax withholding. As well, 60 per cent of employers said they’re allowing workers up to three years to pay back their early distributions if they choose to.
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Nearly half (48 per cent) of employers said they’ve temporarily increased DC plan loan amounts to a maximum of 100 per cent of the vested balance or US$100,000, whichever is less — a significant increase from the previous maximum of 50 per cent or US$50,000.. Six in 10 (61 per cent) employers said they’re allowing workers to delay making payments on those loans for up to one year.
“For employers, the decision to adopt the new special early distribution isn’t an easy one to make,” said Julie Stich, vice-president of content at the IFEBP, in a press release. “Taking money out now, especially in a volatile market, jeopardizes future retirement security. However, these retirement plan changes may well be a lifeline for Americans who are facing financial hardship due to COVID-19. Employers should educate their employees about the potential impact of early distributions, so employees can make an informed choice.”
Currently, 15 per cent of respondents said they’d seen an increase in the number of employees who’ve taken hardship withdrawals from their DC plans, while 12 per cent reported an increase in employees taking DC plan loans.
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Employers have also been forced to make staffing changes due to the pandemic, with 31 per cent reporting they’ve temporarily furloughed workers, 29 per cent reducing hours and 21 per cent laying off workers or reducing their workforce. Employers are also looking at future changes, with 13 per cent considering furloughs, followed by layoffs (18 per cent) and reduced hours (14 per cent). Almost half (44 per cent) said they’ve temporarily frozen hiring.
The survey also found most employers are covering employee health-care costs while they’re furloughed, with 38 per cent continuing coverage for the entirety of the furlough and cost-sharing continuing as normal; 23 per cent are continuing coverage for the entire period with the employer paying the full cost; and 25 per cent are continuing coverage for a limited time with the same cost-share agreement. Just seven per cent said they’re continuing coverage for a limited time with the employer paying the full cost, with another seven per cent providing employee health-care coverage through the U.S. Consolidated Omnibus Budget Reconciliation Act, with the worker paying the full cost.
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