Employee Benefits System Headed For Crisis, Says Report
The employee benefits system is headed for a crisis and employers, individuals and the government must work together to resolve it, says a new report from a business group.
In almost every area of employee benefitsincluding retirement income, health care and long term carethere are clouds on the horizon, according to the report from the American Benefit Council, Washington, an employers group that focuses on employee benefits.
“Without decisive action, our nations already seriously troubled health and retirement systems are headed for a major crisis,” says James A. Klein, president of the Council.
To help resolve the crisis, he says, the Council put together a blueprint of reforms that should be achieved in the next 10 years.
Looking first at retirement income, the report says future retirement systems should have tax and other incentives that encourage employers and employees to contribute to retirement plans that will allow individuals to accumulate enough assets to maintain their living standards in retirement.
In addition, the report says, individuals must achieve higher levels of financial literacy.
The report calls for policy initiatives that will achieve 3 goals. First, the report says, by 2014, virtually all households should have access to some form of investment education and advice. Moreover, 75% of households should calculate the amount of retirement savings needed to maintain their standard of living through retirement and the savings rate necessary to achieve this target.
Second, the report says, by 2014, 74% of all private sector employees should participate in workplace retirement plans.
Third, by 2014, the personal savings rate should reach 15% of disposable income.
Turning to health care, the report says the system must be overhauled to broaden coverage and empower consumers. This includes greater disclosure of health care outcomes and other information, the report says.
As for retiree health care and long term care, future retiree health systems should promote health security, according to the report, and to accomplish this, Medicare must be modernized and must provide more comprehensive coverage.
Moreover, the report says, Congress should establish appropriate tax incentives to promote saving by employees to fund their retirement health needs and long term care. Congress also should provide tax incentives that would allow employers to pre-fund their retiree health benefit programs and encourage them to offer LTC coverage.
Reproduced from National Underwriter Edition, June 18, 2004. Copyright 2004 by The National Underwriter Company in the serial publication. All rights reserved.Copyright in this article as an independent work may be held by the author.