HEALTHCARE
Health Plan Executives Predict the Effect of the Economic Downturn
Fifty-four percent of health plan executives expect small group/business plan renewal to decrease as businesses fail and other market pressures force small companies to eliminate health coverage for employees, according to a survey by CSC. Large employers are expected to maintain their commitment to group health insurance coverage; less than 31% of health plan executives expect a decrease in large group plan renewals.

Almost three-quarters foresee an increase in consumer-directed plans with higher deductibles and lower premiums as employers shift more of the cost to their employees. Nearly two-thirds expect an increase in government program enrollment as economic disruption and unemployment expand welfare participation.

Fewer than 15% of health plan executives predict significant layoffs or other cutbacks in their immediate future. Cost-cutting efforts will remain a top priority, according to almost 50% of those surveyed as will projects directed at growth in selected market segments.

Plan executives are also concerned about their provider networks where the effects of unemployment and economic dislocation are felt almost immediately. Seventy-three percent expect cash flow difficulties among their affiliated providers and 54% foresee the economy affecting the access and availability of some provider networks.

Deward Watts, president of CSC's Global Healthcare Sector said, “The credit crisis, exacerbated by rising unemployment, is decreasing access to healthcare around the country. As businesses look to reduce costs, many will choose products that shift financial responsibility to employees and others will choose to drop health benefits altogether. To remain competitive and grow, health plans must act quickly to design products and implement programs to meet the needs of these new consumers, and to meet the product and benefit requirements of employers, their traditional customers.” For more information, visit www.csc.com/health_plan_survey.

Financial Advisors Scramble to Adjust to New Market Reality
Most advisors fear that their clients’ retirement security has been severely jeopardized by ongoing market deterioration, according to a survey by Brinker Capital. At the beginning of this year, 46% said their clients were still on track to a timely retirement. But 88% of advisors now say their clients are off target for a timely retirement, largely due to market depreciation. Of these respondents, 74% said it would take between one and five years to make up the retirement savings shortfall. As to the reasons for being off-track, 97% cited market depreciation, 51% said their clients didn’t start saving soon enough, and 47% cited their clients' general procrastination.

Sixty-five percent of advisors said that their clients have become more vocal and involved in the investment process. Forty-four percent of advisors say more clients are tapping into their retirement savings to provide liquidity for the near-term. Sixty seven percent said that the proposed full fee disclosure regulations are needed with respect to qualified plans.

Seventy five percent of advisors see a disconnect between their clients’ responses on their risk tolerance questionnaires and the level of risk they are willing to take today. Seventy-six percent said that there should be a reassessment of the way clients’ risk tolerance is measured. Seventy-four percent said the government should not mandate employee and employer participation in 401(k)s. Ninety-two percent of advisors said government should stay out of the management of 401(k)s. For more information, visit www.brinkercapital.com.

403(b) Plan Design is a Key Concern
Plan sponsors say plan design is a key concern for 403(b)s in light of final regulations that go into affect January 1, according to a survey by the Profit Sharing/401k Council of America. Forty-one percent say they need to make changes to their 403(b) plan to comply with new regulations.

On July 23, 2007, the Treasury Department and the IRS released final regulations under section 403(b) of the Internal Revenue Code of 1986. The final regulations will require more employer involvement in the documentation and operation of 403(b) arrangements.

The general effective date is January 1, 2009. MetLife provides a clear explanation of these  regulations on its website www.metlife.com/Applications/Corporate/WPS/CDA/PageGenerator/0,4773,P20675,00.html.

More than 10% are unsure of their plan’s ERISA status, which presents a challenge with 403(b) plans especially in light of changing Form 5500 and audit requirements. Fifty-three percent of 403(b) plans offer a generous match of one dollar or more for every dollar employees contribute. In comparison, only 36.2% of for-profit companies offer the same amount. PSCA says that, as plan sponsors struggle with the new regulations, financial advisors have a greater opportunity to help. For more information, visit www.psca.org.

EMPLOYEE BENEFITS
Baby Boomers Don’t Pass On Wisdom About Benefits
As their Generation Y kids (ages 18 to 30) enter the workforce, Baby Boomers are not talking to them about the importance of employee benefits, according to a study conducted by Harris Interactive for Unum. In fact, more have discussed how to buy a car than how workplace benefits can protect financial security. Forty-three of Generation Y kids are not familiar with supplemental health coverage; 52% are not familiar with critical illness insurance; and 35% are not familiar with disability insurance. However, 76% of employed Baby Boomers and 68% of generation Y workers say the workplace is among their most reliable sources of information about benefits. Sixty-percent of generation Y employees say parents and family are among their most reliable sources for this information. For more information, visit www.unum.com.