Healthcare organizations are offering better retirement packages and in-depth investment advice as tools to combat workforce shortages, according to a survey released last week by the American Hospital Association and a national investment advisory firm.
To attract and retain employees, hospitals and systems are expanding eligibility for employee retirement benefit packages. Providers also are responding to employee demands by offering ancillary services, such as investment advice and flexible account spending services, the survey said.
The survey did not look at the cost to hospitals and health systems for expanded benefits, but a human resources executive said between 60% and 80% of healthcare organizations are increasing their spending on retirement plans.
"Those are the benefits employees are looking for when they go to a new employer, or the benefits are a reason to stay," said Amy Goble, assistant vice president of AHA Financial Solutions, a for-profit subsidiary of the AHA that oversaw the survey. "Hospitals can use this (survey) as a tool to compare their plans."
The AHA subsidiary and Diversified Investment Advisors, Purchase, N.Y., conducted a four-week online survey of human resources executives with 32 questions in March and received 303 responses.
The report, Retirement Plan Trends in Today's Healthcare Market-2003, found that the average healthcare employee participation rate in 403(b) plans, which are more typically used by not-for-profit hospitals, is 60% and nearing the 70% rate of 401(k) plans, which are more commonly used by for-profit corporations (See chart).
The 403(b) is the most common plan offered in the healthcare industry-78% of respondents said they provided the option to employees.
The AHA offers both 401(k) and pension plans for its 430 employees, including executives, while the American Medical Association does not offer a 401(k) or pension plan to its members. The AHA, which represents 4,800 hospitals and health systems, had to dip into its assets in 2002 to contribute to its employee pension fund-the result of poor investment performance (Aug. 18, p. 8).
"Organizations see customized retirement planning as a way of increasing job satisfaction and ultimately employee retention," said Chris Cumming, senior vice president of Diversified, which advises employers who offer 403(b) plans.
Hospitals and systems also are catering to employees by offering investment advice and flexible spending services, according to the survey.
Nearly 60% of plan sponsors rely on outside retirement plan providers to make investment advice available to employees. Nearly half-46%-of the human resource executives surveyed reported their providers offered flexible spending account services, while 32% said college savings plans were available.
Employees have begun demanding more education and communication about investing, especially during recent periods of increased market volatility and risk, Goble said.
More than 60% of respondents said improving employee education about investments was a major goal. Another 30% said they would offer financial planning services for employees, while 25% said they would add investment options to their plans within the next 12 months.
Lifespan, a Providence, R.I.-based system that operates five hospitals throughout the state, expanded its cash balance retirement benefit plan for nurses last year by creating annual increases in the percentage it contributes to each employee's retirement account. The system, which employs 10,500 people, spends from $12 million to $14 million on retirement benefits annually.
"We won't be able to attract the best people without a competitive retirement plan," said Brandon Melton, senior vice president of human resources at Lifespan. "We felt we needed to provide additional benefits. Every year a higher percentage of employees are thinking more about retirement than vacation or college plans."
The system is considering expanding the cash balance plan to other employees besides nurses, a move that would cost about $3.5 million annually, he said.
"We are seeing a reaction to the disproportionate challenges faced by the healthcare market: challenges such as employee turnover, workforce shortages and mergers and acquisitions," Cumming said.
Employers realize the aging workforce is demanding better services, said Brian Freiberg, product manager at Wausau Benefits, a health plan administrator that has 2.5 million enrollees and 413 employers. "Different employers will use different tactics that play with the workforce development strategy," Freiberg said. "Retiree benefits are an attractive part of the benefit offering."
The practice is especially favorable because the aging baby boomer workforce has left industries competing for labor, he said. Expanded benefit packages are a "colorful incentive," he said.