Healthcare is top of mind for many workers, so it’s not surprising that the closer employees get to retirement, the more worried they are about the costs of healthcare. That’s why it can make great sense to offer a Health Savings Plans (HSA) alongside the 401k. Even better? Ensure employees also have access to sound financial guidance.
Saving and Making Wise Choices…
According to an eHealth report, the biggest financial worries of workers and retirees in their 60s and 70s, in order of concern, are: the cost of health care; running out of money during retirement; and, inflation. Health Savings Plans (HSAs), offered alongside the 401k, can make a big difference on the path to retirement:
Health Savings Plans (HSAs)…allow employees to save for future medical expenses, even past retirement. Bob Rees, senior vice president of Medicare for eHealth, noted that workers can save $4,150 for individuals and twice that for married, and those 55 and older can save another 1,000 per year. The strategy may not be for everyone, he noted, but for those who don’t have chronic medical conditions, and low costs for drugs or other medical expenses, it can help. “The money saved in the account is yours to keep, and although you can no longer add to it when you’re no longer enrolled in a qualifying health plan, you can use the money as a tax-advantaged savings account to pay for a broad range of qualified medical expenses now and in retirement,” Rees said.
Employees nearing retirement can also benefit greatly from financial guidance which includes support with Medicare choices, since this is an aspect of retirement that tends to generate a lot of confusion and stress:
…Medicare recipients often seek out the lowest premiums, but…they should be aware of possible health care needs and think about out-of-pocket costs as well. Retired Americans, or those close to retirement, have a lot of concerns about the costs of health care they will be facing…. Those concerns seem likely to have an effect on lifestyle options for seniors: 55% say concerns about health care costs cause them to spend less in non-medical areas than they would otherwise.
Addressing Retirement Concerns
401k plan sponsors play a major role in helping employees retire successfully; indeed the work of plan design, services and engagement, is critical in addressing the concerning gaps on the path to retirement:
Only 33% of those currently retired said they saved any money specifically for health care costs in retirement….Those who are retired were considerably more likely to think they would not have enough money to get through retirement (42%) than were those who had not yet retired (29%).One of the problems is debt: 46% of respondents reported having non-mortgage debt; among those, nearly 80% were in debt $5,000 or more….Experts say that informing workers about retirement savings options and encouraging the use of retirement advisors can go a long way toward helping employees be in a better financial position for retirement. Basic tools such as 401(k) plans can help, and good resources to help with choosing Medicare plans are another strategy.
While diligently working to engage employees in effective planning and savings strategies for healthy retirement, sponsors also need to safeguard their own futures: as fiduciaries, sponsors can be held personally liable for breaches under the high standards of ERISA. Unforeseen challenges arise all the time, and seemingly small oversights have been triggering costly lawsuits. The average ERISA claim costs a business over $1.2 million in legal fees.
Although ERISA bonds are required by the DOL, they do not protect plan sponsors. That’s why Colonial Surety offers a convenient and affordable package, created especially to help plan sponsors mitigate their risks. Armed with our Fiduciary Liability coverage, for a few dollars a day, you’ll have defense costs and penalty limits up to $1,000,000 if faced with alleged or actual breaches of duty in connection with the employee retirement plan. Cyber liability coverage is included at no extra cost, providing additional protection–for the plan and company–against regulatory actions related to data and privacy, as well as expert response services.
Our packages are available for 1, 2, and 3-year terms, providing flexibility and locked-in rates. Get your coverage in place in minutes now:
Liability Insurance for Plan Sponsors HERE
Serving customers since 1930, Colonial Surety is the trusted source for the pension industry to secure legally required ERISA bonds, fiduciary liability insurance and cyber-liability insurance. We help safeguard plan sponsors, pension professionals and financial advisors — and keep their businesses compliant — with pain-free, efficient, and friendly service every time. Colonial Surety Company is rated “A Excellent” by A.M. Best Company, US Treasury-listed and in business all across the country.