In 2013, the nonpartisan Employee Benefit Research Institute (EBRI) commemorated its 35th anniversary. While much has changed with health and retirement benefits during the past three decades -- the first generation of the Employee Retirement Income Security Act (ERISA) -- many of the issues that were present at EBRI’s beginning remain today. But even if core issues endure, the historic shift away from “traditional” defined benefit pension plans and toward 401(k)-type defined contribution retirement plans, along with the recent enactment of the Patient Protection and Affordable Care Act of 2010 (PPACA), and the demographic shifts attendant with the retirement of the Baby Boomers and the workplace ascendency of the Generation X and Millennial cohorts, employee benefits are certain to continue to change and evolve in the future. Each year EBRI holds two policy forums which bring together a cross-section of national experts in the benefits field, congressional and executive branch staff, and representatives from academia, interest groups, and labor to examine public policy issues affecting health and retirement benefits. This paper summarizes the presentations and discussions at EBRI’s 73rd policy forum held in Washington, DC, on Dec. 12, 2013. Titled “Employee Benefits: Today, Tomorrow, and Yesterday,” the symposium offered expert perspectives on not only the workplace and work force of the past, but the challenges of today’s multi-generational workplace, and the difficulties and opportunities that lie ahead. Following a review of the benefits landscape by EBRI’s research team, panels discussed: 1978 to 2013: The Changing Role of Employers in Employee Benefits; Employee Benefits from 2013 to 2048: The Road to Tomorrow; 2013 to 2048: Work Force Trends and Preferences, Today and Tomorrow.

This is the first part of a history of the Employee Benefit Research Institute (EBRI), which the EBRI board has asked Dallas Salisbury to fully document between now and his move from EBRI President (after 37 years in that position) to EBRI President Emeritus in 2016. In early 1977, three representatives of consulting firms got together to discuss newly created responsibilities stemming from enactment of the Employee Retirement Income Security Act of 1974 (ERISA), their effects on consulting firms, and the need for objective, reliable, nonpartisan analysis. An April 1978 planning document highlighted a number of reasons for starting the Employee Benefit Research Institute: increasing public awareness of employee benefits; growing adverse publicity about employer-sponsored programs; a lack of understanding of the benefits system among the public, the press, and the government; a need for better information about employee benefits and better distribution of this information. On September 18, 1978, the Institute was incorporated. The EBRI Bylaws set forth six purposes: to promote, improve, and further the common interests of persons involved in the employee benefit field through activities, including the encouragement and conduct of research relating to employee benefit plans, whether governmental, private, or otherwise, including the tens of millions of participants in these programs who rely upon them for economic security; to promote employee benefit plans as an important means of strengthening the system of free enterprise; to promote goodwill and harmony among employers and employees through the development and advancement of employee benefit plans; to bring together for their common interests persons who are interested in employee benefit plans; to assemble and disseminate information on employee benefits, by publication or otherwise, to the general public, including interested organizations, both private and governmental; and to sponsor lectures, debates, round tables, forums, and study groups on employee benefit plans. EBRI opened its doors on December 4, 1978. The Institute’s early work supported the 1978 President’s Commission on Pension Policy, which generated visibility for both retirement issues and EBRI and led to an expansion of EBRI’s membership and horizons.

This paper updates previous estimates by the Employee Benefit Research Institute (EBRI) using a Monte Carlo simulation model to estimate the amount of savings needed to cover health insurance premiums and out-of-pocket health care expenses in retirement. Savings targets declined between 2 percent and 10 percent between 2013-2014. This report discusses the model, the savings targets, and continued reasons for the decline in savings targets. Estimates are presented for those who supplement Medicare with a combination of individual health insurance through Medigap Plan F coverage and Medicare Part D for outpatient prescription drug coverage. Medicare beneficiaries can expect to pay a share of their costs out of pocket because of program deductibles and other cost sharing. Separate estimates are presented for men and women. In 2014, a man would need $64,000 in savings and a woman would need $83,000 if each had a goal of having a 50 percent chance of having enough money saved to cover health care expenses in retirement. If either instead wanted a 90 percent chance of having enough savings, $116,000 would be needed for a man and $131,000 would be needed for a woman. For a married couple both with drug expenses at the 90th percentile throughout retirement who wanted a 90 percent chance of having enough money saved for health care expenses in retirement by age 65, targeted savings fell from $360,000 in 2013 to $326,000 in 2014. The Patient Protection and Affordable Care Act is reducing cost sharing in the Part D coverage gap or so-called “donut hole”; by 2020, co-insurance in the coverage gap will be phased in to 25 percent. This year-to-year reduction in co-insurance will continue to reduce the savings needed for health care expenses in retirement, all else being equal, for individuals with the highest drug use, which is one reason why this analysis finds reductions in needed savings for health care expenses in retirement. Improvements in the outlook for growth in premiums and other costs related to the Medicare program also contributed to the decline in savings targets. However, it should be noted that many individuals will need more than the amounts cited in this report. This analysis does not factor in the savings needed to cover long-term care expenses, nor does it take into account the fact that many individuals retire prior to becoming eligible for Medicare. However, some workers will need to save less than what is reported if they choose to work past age 65, thereby postponing enrollment in Medicare Parts B and D if they receive health benefits as active workers. The PDF for the above title, published in the October 2014 issue of EBRI Notes, also contains the fulltext of another October 2014 EBRI Notes article abstracted on SSRN: “IRA Asset Allocation, 2012, and Longitudinal Results, 2010-2012.”

This paper updates previous estimates by the Employee Benefit Research Institute on savings needed to cover health insurance premiums and health care expenses in retirement. Much like EBRI’s 2012 report, this analysis finds that the savings targets for a 65-year-old retiring in 2013 were not higher than the savings targets for a 65-year-old in the previous year. In fact, these particular savings targets have continued to fall, with the decline ranging from 6-11 percent. This report discusses the model, the savings targets, and continued reasons for the decline in savings targets. In 2010, Medicare covered 62 percent of the cost of health care services for Medicare beneficiaries age 65 and older, while out-of-pocket spending accounted for 12 percent, and private insurance covered 13 percent. Individuals can expect to pay a greater share of their costs out-of-pocket in the future because of the combination of the financial condition of the Medicare program and cutbacks to employment-based retiree health programs. Because women have longer life expectancies than men, women will generally need larger savings than men to cover health insurance premiums and health care expenses in retirement post-65 when examining needed savings regardless of the savings targets. In 2013, a man would need $65,000 in savings and a woman would need $86,000 if each had a goal of having a 50 percent chance of having enough money saved to cover health care expenses in retirement. If either instead wanted a 90 percent chance of having enough savings, $122,000 would be needed for a man and $139,000 would be needed for a woman. Savings targets declined between 6 percent and 11 percent between 2012 and 2013 for a person or couple age 65. For a married couple both with drug expenses at the 90th percentile throughout retirement who wanted a 90 percent chance of having enough money saved for health care expenses in retirement by age 65, targeted savings fell from $387,000 in 2012 to $360,000 in 2013. The PDF for the above title, published in the October 2013 issue of EBRI Notes, also contains the fulltext of another October 2013 EBRI Notes article abstracted on SSRN: “IRA Asset Allocation, 2011.”

This paper provides estimates for savings needed to cover health insurance to supplement Medicare and out-of-pocket expenses for health care services in retirement. Medicare generally covers only about 60 percent of the cost of health care services (not including long-term care) for Medicare beneficiaries ages 65 and older, while out-of-pocket spending accounts for 13 percent. The Patient Protection and Affordable Care Act (PPACA) reduces cost sharing in the Part D “donut hole” down to 25 percent by 2020. This year-to-year reduction in coinsurance will continue to reduce savings needed for health care expenses in retirement, all else equal, for individuals with the highest prescription drug use. EBRI analysis finds 1-2 percent reductions in needed savings among individuals with median drug use and 4-5 percent reductions in needed savings among individuals at the 90th percentile in drug use since EBRI’s 2011 analysis. A 65-year-old man would need $70,000 in savings and a woman would need $93,000 in 2012 if each had a goal of having a 50 percent chance of having enough money saved to cover health care expenses (excluding long-term care) in retirement. A 65-year-old couple, both with median drug expenses, would need $163,000 in 2012 to have a 50 percent chance of having enough money to cover health care expenses (excluding long-term care) in retirement, $227,000 to have a 75 percent chance of covering those expenses, and $283,000 to have a 90 percent chance of doing so. These estimates are 1-2 percent lower than the savings targets estimated in 2011. Many individuals will need more money than the amounts cited in this report because this analysis does not factor in the savings needed to cover long-term care expenses, nor does it take into account the fact that many individuals retire prior to becoming eligible for Medicare. However, some workers will need to save less than what is reported if they choose to work during retirement, thereby postponing enrollment in Medicare Parts B and D if they receive health benefits as active workers. Finally, issues surrounding retirement income security are certain to become an even greater challenge in the future as employers continue to scale back retiree health benefits and as policymakers begin to address financial shortfalls in the Medicare program with solutions that are likely to shift more responsibility for health care costs to Medicare beneficiaries.The PDF for the above title, published in the October 2012 issue of EBRI Notes, also contains the fulltext of another October 2012 EBRI Notes article abstracted on SSRN: “IRA Asset Allocation, 2010.”

Explores the origins and emergence of the 401(k) plan as a dominant retirement savings vehicle in the United States, as well as the evolution and impact of certain design elements, notably the application of an employer matching contribution, in influencing individual saving behaviors. A 2010 survey found that the design of the employer match can be a powerful motivator in boosting the amount of money participants put into their 401(k) retirement accounts. Cost was a key factor for employers in determining the level of deferral at which to match, and the new nondiscrimination requirements led to greater interest in employee education about these workplace programs. To avoid the complications associated with nondiscrimination testing, a growing number of employers are relying on a match incentive, a design which requires certain minimum amounts of employer contribution. Automatic enrollment plan designs have provided an effective means for plan sponsors to encourage or expand participation without necessarily tying participation to a financial incentive.

In 2003, the Medicare Prescription Drug, Improvement, and Modernization Act of 2003 (MMA) added outpatient prescription drugs as an optional benefit. When the program was originally enacted, it included a controversial feature: a coverage gap, more commonly known as the “donut hole.” The Patient Protection and Affordable Care Act of 2010 (PPACA) included provisions to reduce this coverage gap. This paper examines the impact that repealing PPACA would have on savings targets for health care expenses in retirement. The estimates suggest that retirees with high levels of prescription drug use throughout retirement would see their savings targets increase roughly 30-40 percent were the coverage gap reduction in PPACA repealed. Individuals at the median (midpoint) level of prescription drug use throughout retirement would not see any change in savings targets. This analysis uses a Monte Carlo simulation model to estimate the amount of savings needed to cover health insurance premiums and out-of-pocket health care expenses in retirement. Estimates are presented for persons who supplement Medicare with a combination of individual health insurance through Plan F Medigap coverage and Medicare Part D for outpatient prescription drug coverage. For each source of supplemental coverage, the model simulated 100,000 observations allowing for uncertainty related to individual mortality and rates of return on assets in retirement, and it computed the present value of the savings needed to cover health insurance premiums and out-of-pocket expenses in retirement at age 65. These observations were used to determine asset targets for having adequate savings to cover retiree health costs 50 percent, 75 percent, and 90 percent of the time. Estimates are also jointly presented for a stylized couple both of whom are assumed to retire simultaneously at age 65. The PDF for the above title, published in the August 2011 issue of EBRI Notes, also contains the fulltext of another August 2011 EBRI Notes article abstracted on SSRN: “The Importance of Defined Benefit Plans for Retirement Income Adequacy.”

UPDATED MODELING: This report updates earlier modeling by EBRI on the level of savings needed for health care expenses in retirement. Some prior estimates have been significantly revised down as a result of changes to Medicare Part D cost sharing that will be phased in by 2020 due to recently enacted health reform. However, the research indicates that retirees will continue to need a substantial amount of savings to cover their health care expenses in retirement, and that uncertainty related to health care use, prescription drug use, and longevity will still play a major role in planning for retiree health care. As before, EBRI's research shows that women will need significantly higher levels of savings than men, due to their greater longevity. Results are shown by the desired level of probability (50, 75, and 90 percent) of having enough savings to cover health costs in retirement. SAVINGS TO SUPPLEMENT MEDICARE WITH MEDIGAP AND PART D: EBRI finds that a man with median drug expenditures would need $65,000 in savings and a woman would need $93,000 if they want an average (50 percent) chance of having enough money to cover health care expenses in retirement. For a higher (90 percent) chance of having enough, a man would need $124,000 and a woman $152,000. A couple both with median drug expenses would need $158,000 for a 50 percent chance of having enough money, and $271,000 for a 90 percent chance. At the highest (90th percentile) level of drug spending, a man would need $187,000 and a woman $213,000 to have a 90 percent chance of having enough money to cover health care expenses in retirement. SAVINGS TO SUPPLEMENT MEDICARE WITH SUBSIDIZED EMPLOYMENT-BASED COVERAGE: A 65-year-old man retiring in 2010 with retiree health benefits from a former employer will need $66,000 to have a 50 percent chance of having enough savings to cover health care expenses in retirement; for a 90 percent chance, he would need $125,000. Women would need $88,000 and $143,000, respectively. Few employers continue to provide subsidized retiree health coverage. SAVINGS TO SUPPLEMENT MEDICARE WITH EMPLOYMENT-BASED COVERAGE WITHOUT SUBSIDY: Retirees who have employment-based retiree health benefits to supplement Medicare and whose former employer does not subsidize premiums will need to save more money than retirees whose premiums are subsidized. A man without subsidized premiums would need $109,000 in savings to cover health care costs in retirement if he wants a 50 percent chance of having enough money to cover health care expenses in retirement, while a woman would need $146,000. To have a 90 chance of having enough savings to cover health care costs in retirement, a man would need $211,000 and a woman would need $242,000 if the benefit is through a former employer and not subsidized. WIDE VARIATION IN MEDIGAP PREMIUMS AFFECTS SAVINGS TARGETS: There is wide variation in Medigap premiums. The average premium was $1479 for Plan F in 2010, but Connecticut had the highest average premium for Plan F at $2493. Indiana has the higher premium variation, with at least one plan offering Plan F at a premium of $14,604.

This paper presents a review by the Employee Benefit Research Institute of 251 401(k) plan sponsors that have suspended matching contributions for their approximately 4.4 million workers. The review found that those employing 50 percent of the workers also maintained an open defined benefit plan. An additional 16 percent of workers were with employers that were still obligated to fund a frozen defined benefit plan. Further, 8 percent of the workers were with an employer that had both an open and a frozen defined benefit plan that carried funding obligations. Because of the current economic conditions, many of these employers must make what are unexpected contributions to the defined benefit plan as a result of asset losses and liability growth, but they can eliminate what are discretionary matching contributions to a 401(k)-type plan. For the 50 percent of the workers in this group of 251 employers, the 401(k)-type retirement plan is an additional benefit to the open defined benefit pension plan; thus, retirement benefits are still being provided by the employer, in spite of the suspended 401(k) matching contribution. Having detailed information on these firms would allow for a more detailed analysis and firmer findings, but the information gleaned from what is available suggests that most 401(k)-type matching contribution suspensions for this group of companies are taking place at employers that also have other retirement plan obligations, specifically for a defined benefit pension. It must be noted that it is not known how many out of the universe beyond this group of 251 employers have suspended matching contributions, covering how many additional workers. The PDF for the above title, published in the June 2009 issue of EBRI Notes, also contains the fulltext of another June 2009 EBRI Notes article abstracted on SSRN: “Savings Needed for Health Expenses in Retirement: An Examination of Persons Ages 55 and 65 in 2009.”

This paper provides estimates for savings needed to cover health insurance to supplement Medicare and out-of-pocket expenses for health care services in retirement. It finds that a male age 65 in 2008 and retiring at age 65 will need anywhere from $64,000 to $159,000 in savings to cover health insurance premiums and out-of-pocket expenses in retirement if they are comfortable with a 50 percent chance of having enough money and $196,000 to $331,000 if they prefer a 90 percent chance. Women age 65 retiring in 2008 will need anywhere from $86,000 to $184,000 in savings to cover health insurance premiums and out-of-pocket expenses in retirement if they are comfortable with a 50 percent chance of having enough money, and $223,000 to $390,000 if they prefer a 90 percent chance. Persons currently age 55 will need even greater savings when they turn 65 in 2018. Past EBRI research has examined how much money an individual needs for health care expenses in retirement, focusing on how savings varies by length of life and health care cost increases. Past research was based on computer modeling that used deterministic (non-random) analytical techniques. The research presented in this paper builds on that earlier work by introducing random (stochastic) computer modeling to more realistically examine the uncertainty of longevity and investment risk as well as future health care cost increases. This paper begins with a brief discussion of the modeling technique, followed by main findings and updated data on trends in retiree health benefits.

Understanding how to achieve longer work lives: The 2008 Recent Retirees Survey was undertaken to better understand the tools and practices that might encourage workers to postpone their retirement and remain longer with their company. Why do people retire when they do? Respondents typically retired from employers for one of four reasons: retirement becomes affordable, lack of job satisfaction, a desire for more personal or family time, and/or their own health status. Narrow window for asking people to work longer: One of the major findings from the survey is that employers have a narrow window of up to two years in which they may be able to intervene to change retiring workers' decisions by offering them incentives to remain with the company. Employers may just need to ask: Many retirees report they would have been open to an approach from their employer asking them to stay longer with the company. Sixty-one percent say they would have viewed the experience positively. Just 10 percent indicate they would have reacted negatively to an approach asking them to delay their retirement. Work incentives vary in appeal: The survey tested a total of 19 possible incentives that might encourage retiring workers to postpone retirement. Four of these appear especially likely to be successful: Half of retirees (48 percent) indicate that feeling truly needed for an assignment would have been extremely or very effective in encouraging them to delay their retirement. Moreover, of those ranking this as one of the top two most effective incentives, 72 percent say it might have prompted them to stay at least two more years with the company. Half of retirees with a defined benefit pension state receiving a full pension while working part time would have been effective in delaying their retirement (50 percent), and almost as many feel this way about receiving a partial pension while working part time (44 percent). Seven in 10 of those rating each among the top two most effective incentives report they would likely have stayed at least two more years if it had been offered to them (72 percent for full pension, 71 percent for partial pension). However, this would necessitate a change in federal law and several other compensation-related incentives may be almost as compelling. Thirty-eight percent report that being able to work seasonally or on a contract basis would have been effective in encouraging them to delay retirement. Among those rating this as one of the top two incentives, more than three-quarters (77 percent) say it might have prompted them to stay two years or more with the company.

Nearly two years after the Pension Protection Act of 2006 became law, it is PPA's provisions - automatically enrolling new workers in their employer's 401(k) plan, automatically putting their contributions into diversified default investments, and automatically increasing their annual contributions - that are receiving most attention by retirement professionals. Because of the PPA's far-reaching effects on 401(k)-type plans, the Employee Benefit Research Institute (EBRI) devoted its May 2008 policy forum to an examination of defined contribution plans in the wake of the legislation. Early results indicate that PPA is, in fact, beginning to achieve the growth in automatic 401(k) enrollment and savings that its sponsors predicted. This paper presents highlights from the policy forum. Eleven speakers participated in the policy forum. Following are some key points made by policy forum presenters: - Automatic enrollment can nearly double participation in some defined contribution plans. - An increasing number of employers, especially large employers, are adopting automatic enrollment. - Eliminating the company match in a 401(k) plan seems to have only a modest impact on automatic enrollment. - Workers appear to be much more willing to accept automatic enrollment today than they were in the 1990s. - Defined contribution (401(k)-type) retirement plans are becoming popular in many countries worldwide.

This paper examines fundamental tax reform as it relates to employment-based health benefits and health insurance. It focuses on the specifics of the Bush proposal, but the issues apply to the overall concept of changing the way health insurance is taxed. It summarizes the current tax treatment of health benefits, presents the details of changing the current tax treatment of health insurance to a standard deduction, discusses tax credits as an alternative to capping the current exclusion of health benefits from taxable income, and addresses various implications of such proposals.

• Health benefits a big potential target for raising revenue: President Bush’s FY 2008 budget estimates all employee benefits-related “tax expenditures” (government revenue foregone due to special tax treatment) will amount to $328 billion next year, or 34 percent of the $961 billion worth of total tax expenditures in the federal budget. Tax-favored employment-based health insurance benefits account for the largest single tax expenditure: almost 17 percent of the total amount and almost 49 percent of all employee benefits-related tax expenditures.

This paper provides a framework for evaluating and comparing Social Security policies by delineating 11 broad areas of consideration and highlighting some of the relevant questions within these areas. This framework is not a comprehensive list of all considerations but is intended to provide a feel for their complexity and to highlight some of their most popularly recognized interactive possibilities. As the first report to be delivered in the course of the Employee Benefit Research Institute's Social Security Reform Analysis Project, this paper sets the theoretical framework in which to place the forthcoming technical results from the EBRI/SSASIM2 Policy Simulation Model. This model will produce stochastically generated data regarding specific reforms; these data will comprise the content of the next EBRI Issue Brief on Social Security.