ACA May Mean Adviser Opportunity

When Nationwide Retirement Institute set out to survey small businesses, with 50 to 299 employees, on their reactions to the Patient Protection and Affordable Care Act (ACA), it found a few surprises. First, companies said their ability to offer competitive medical benefits diminished as employees came to see their health care benefits as less attractive than those provided under government plans. To compensate, many of these businesses are increasing their contribution to employee retirement plans—and most say they need help from advisers with their benefits programs.

A few factors are in play, says John Carter, president of the retirement plans business at Nationwide. “First, the employees have more choices,” he tells PLANADVISER. “They have the employee benefit plan, or they can turn to the exchange.” As a result, the overall benefits package is a critical area for employers to examine. “If the employee chooses to go to the exchange, the company then has the salary and the retirement plan to focus on to recruit and retain staff.”

“A company’s health benefits package once proved to be a deciding factor in where employees chose to work. With health care now available on the open market, it’s harder for employers to separate from the pack,” Carter says. “Today’s job prospects will look for employers that provide them the greatest amount of total compensation. That includes those who match a higher percentage of what they will invest into a company retirement plan.”

Slightly more than two-thirds of employees in small businesses (64%) already see their health benefits as less attractive than what they can find on the open market. Carter points out that this option was not as attractive before the ACA, which made it illegal for insurance companies to turn down people for pre-existing conditions in non-employer-sponsored health care.  

Small businesses are increasingly turning to financial advisers for assistance, Carter says, noting this is unsurprising when you look at small businesses and the role of medical benefits in retaining and keeping employees. “Forty-four percent of small-business owners said the ACA is difficult to navigate,” he says, and 34% said they are not prepared to handle the changes.

Adviser Opportunity

Carter also points out that nearly half of the smaller companies with at least 50 employees (43%) have increased their contributions to the retirement plan—a mere four months into the ACA’s implementation. “It’s a clear sign they are ready to re-engage with the plan’s features, having discussions with employees so they really see the benefit of the plan,” he says. “It’s a huge opportunity for advisers.”

Those same plans, Carter notes, will be under the same ACA requirements to provide health insurance for their full-time employees starting January 1. These smaller employers have a big appetite for help, according to Nationwide’s survey: 77% of small businesses said having an adviser familiar with the ACA would benefit their company. Seventy-two percent said they’d want to talk to an adviser who is familiar with the ACA.

Advisers interested in this part of their book of business can turn to resources such as those offered by Nationwide to prepare for helpful conversations with small businesses. Among the offerings on Nationwide’s site are white papers, tools, capabilities and content from The American College.

Kevin McGarry, director of the Nationwide Retirement Institute, also notes the need for advisers to help business owners with their questions on the ACA. “Advisers will have to devise strategies that furnish further incentives to the best employees to stay with their existing companies,” he says. “Plans that allow for larger benefit contributions to certain employees will be an attractive option, as will be offering retirement benefits with greater matching contributions.”

Among the findings:

• 67% of small-business owners believe the ACA will make it more difficult to offer competitive medical benefits;
• 44% say a greater need exists now to offer employee benefits than before the ACA was adopted; and
• 43% say they’ve already increased their contribution to retirement plans as a result of the ACA.

This survey was conducted online in the U.S. by Harris Poll on behalf of the Nationwide Retirement Institute between October 7 and October 20, 2014, among 334 small-business owners that have 50 to 299 employees and who are moderate/major influencers or primary decisionmakers in the selection of employee benefits for their company.

The 2015 Nationwide Retirement Institute Small Business Owners Survey can be accessed here.