As smaller businesses grapple with the Patient Protection and Affordable Care Act (ACA), they are more interested than ever in support from advisers who understand the terms of the ACA and can help them understand what these mean for company benefits packages—and retirement plans. Recently, Alison Cooke Mintzer, editor-in-chief of PLANADVISER magazine, spoke with Adam Beck, assistant professor of health insurance at The American College, John Carter, president of Nationwide’s retirement plans business, and Kevin McGarry, director for the Nationwide Retirement Institute, about the ACA, the influence it is having on retirement plan sponsors and how advisers can leverage the act to their advantage.
PA: Why should retirement plan advisers and plan sponsors care about the Affordable Care Act?
Beck: For starters, we’re talking about a monumental shift in the regulation, availability and cost of employee health benefits. Large- and small-business owners, and simply individuals, all have questions.
There’s confusion out there, so advisers need to know what the act has changed. Where it crosses into retirement territory—aside from any impact on planning for retirement health costs—is that over the next decade many employers will stop offering major medical/health expense insurance. To make up for that lost, and very tax-advantaged, form of compensation, many businesses of all sizes will have to decide how they can replace health benefits.
A primary way businesses may fill that gap will be with retirement benefits—in their contribution to defined contribution (DC) plans, in the types of plans they offer or possibly in supplemental benefits, which a plan adviser may aid in offering. But the unintended consequences on retirement plans could be significant.
Carter: We have a lot of experience with small-business owners managing change. We surveyed 500 of them at the end of 2014, and since then have already seen the companies with 100 associates or more taking action because of the act. Sixty-seven percent believe it will make it harder for them to offer competitive medical benefits.
Of course, medical benefits are key to an overall compensation package. Sixty-four percent report that their employees, just in the last four months, have said their health benefits are less attractive than what’s on the exchanges. The small-business owners we work with feel a lot of pressure; they need to increase the retirement contributions—and many already have—to stay competitive.
McGarry: They’re also seeking to change overall benefit packages. In fact, 44% noted a greater need to provide employee benefits than before the ACA was adopted. Advisers should be prepared to discuss the goals for specific benefit packages. They have been searching for information on the Affordable Care Act and leveraging the thought leadership from the Nationwide Retirement Institute to be better partners with their plan sponsors.