Employers’ cost to provide benefits have increased 24 percent since 2001

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(This post originally appeared on The Washington Post)

The costs to provide benefits to your employees keeps going up. If you’re an employer you probably already know this. But do you realize how much?  They’ve risen 24 percent between 2001 and 2015.  That’s according to a new study from human resources consulting firm Willis Towers Watson. And guess what?  It’s mostly because of health care.

The study found the total cost of employer-provided benefits — health care, retirement and post-retirement medical — rose from 14.8 percent of pay in 2001 to 18.3 percent of pay in 2015, a jump of 24 percent. During this period, health care costs for active employees more than doubled, rising from 5.7 percent to 11.5 percent of pay.

More concerning to some is the swap between retirement and health care benefits. In 2001, the study found that retirement contributions comprised about three-fifths of the benefits received by workers from their employers with health care making up the remainder. By 2015 that relationship had flipped.

“Health care benefits are eating up a larger portion of dollars while the amount spent on retirement programs is on the decline,” John Bremen, a managing director at Willis Towers Watson said in a statement.  “This reallocation has major implications for employers and employees alike.”

Employers have been changing how they pay for retirement. Over the past 15 years, most have moved away from defined-benefit plans (where future pension payments are calculated based on service and salary throughout an employee’s time of service) and gravitated more toward defined-contribution plans which usually allows employers to adjust what they contribute to an employee’s retirement savings as needed.

Unfortunately, this shift may not be what employees really want. Sure, health care is important for most. But a prior Global Benefits Attitudes Survey conducted by the firm revealed that employees valued their retirement benefits just as much as their health care — and recent studies have shown just how little people are saving for their retirement.


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