Data & Research July 2, 2024

Where is the Disconnect Between Employers and Employees?

Payroll Integrations finds that employers pay for benefits their workers think are not very important.

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Many employers are spending money on benefits that do not match the objectives of their workforce, based on a recent survey by Payroll Integrations, which connects payroll provider programs with employers.

According to Payroll Integrations’ recent survey, summarized in the 2024 State of Employee Financial Wellness Report, only 18% of workers expressed interest in the programs their employers are now funding. While 41% of employers indicated they intend to increase their spending on financial education and planning services, workers would rather see their employers make larger investments in retirement plans (43%) and health insurance (54%).

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“Employees are feeling the financial pressure from inflation, higher costs of living and the rise of insurance costs and now, more than ever, employers feel a responsibility to step in to help support their financial well-being,” said Doug Sabella, Payroll Integrations’ CEO, in a release that accompanied the report. “But there’s a clear disconnect between what employers think employees want in terms of financial wellness offerings and benefit programs and what employees feel they need to make a difference.”

While workers in Generation Z want their companies to make lifestyle benefits top priority, older generations place more emphasis on health care and retirement, Payroll Integrations found. Baby Boomers ranked pensions as the most essential benefit, Gen X and Gen Y workers selected additional compensation, Millennials prioritized health savings accounts, and Gen Z employees picked lifestyle compensation.

Know Your Employee

Chris Weirath, a senior vice president and head of business development and client success at Morningstar, recommends that employers understand their employees’ perspective to deliver meaningful wellness and saving tools.

“You can’t force participants to take advice,” says Weirath. “You have to meet people where they are with targeted and useful communication.”

According to the Payroll Integrations report, there is a disconnect between how employers feel they are doing in terms of supporting their employees’ financial well-being and how their employers feel.

According to the study, 49% of employers feel they are fully supporting their employees’ financial well-being, compared with just 28% of employees who feel they are being supported by their workplace. Meanwhile, 95% of employers feel it is their duty to promote their workers’ financial security, but just 36% of workers say they feel totally stable financially.

The Disconnect

Weirath of Morningstar says that a “broad message blanketing everyone” will have little chance of success in engaging and getting response from participants. Rather, financial wellness providers and platforms should be looking to leverage data to target communication to accompany relevant plan rules or changes or to coincide with broader life events such as getting married, buying a home or nearing retirement age.

According to Weirath, Morningstar is looking to leverage participant data in appropriate ways via the plan sponsors themselves, recordkeepers or financial wellness platforms that aggregate participant data. Payroll providers, she notes, may be another source of information to better target participant communication at times they might actually need it.

These benefits best practices could have a substantial impact in attracting and retaining employees. A potential employee’s decision to accept a job offer can be strongly influenced by the benefits that employers provide, according to Payroll Integrations. The majority of workers stated that if benefits like retirement plans (67%) and health insurance (65%) were not included, they would not accept a new job offer.

Companies did agree on the importance of these benefits, viewing health insurance (70%) and retirement plans (80%) as the most important advantages for luring and keeping workers.

Payroll Integrations’ report draws on responses from 250 full-time employees between the ages of 18 and 65 and HR leaders.

Compliance July 1, 2024

The DOL, the IRS and the Chevron Reversal

The Supreme Court’s Chevron reversal creates uncertainty for plan advisers and sponsors.

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The Supreme Court ruled Friday in Loper Bright Enterprises et al. v. Raimondo, Secretary of Commerce et al. that the so-called Chevron Doctrine would no longer apply to cases involving rulemakings of the federal bureaucracy, heralding what could be widespread changes to how trillions of dollars in qualified retirement plans are regulated and managed.

The Chevron Doctrine, established in the Supreme Court’s 1984 ruling in Chevron U.S.A. Inc. v. Natural Resources Defense Council Inc., required federal courts to be deferential to federal agencies’ interpretations of unclear statutes. Based on Loper Bright, courts are now required to “exercise their independent judgment in deciding whether an agency has acted within its statutory authority, and courts may not defer to an agency interpretation of the law simply because a statute is ambiguous.”

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The qualified retirement plan sector, including advisers, plan sponsors and providers, relies in large part on regulatory frameworks and protocols shaped by government bodies, including the Department of Labor and the IRS. Loper Bright could make such guidance less durable due to court challenges, as well as lobbyists and litigators seeking to influence regulations, according to experts.

Julie K. Stapel, a partner with Morgan Lewis & Bockius LLP, says the Loper Bright ruling “will make it easier for courts to overturn DOL and IRS interpretations. This may present challenges to employers sponsoring employee benefit plans, because it will likely decrease the predictability and consistency of interpretations of ERISA and the Internal Revenue Code.”

Stapel adds that “predictability is key because plan-related changes often take a long time to implement, and frequent changes in interpretations can be time-consuming and costly to employers. Frequently changing positions can also discourage plan changes and innovations.”

One major regulation that may be affected by the ruling is the Retirement Security Rule, according to Brian Graff, the CEO of the American Retirement Association. That rule, which seeks to heighten the fiduciary standards of retirement saving advice, is already facing multiple court challenges led by insurers and financial firms.

Industry lobbyist Graff expects the plaintiffs will “probably modify their complaints to reflect the Supreme Court decision,” and the decision could make it more likely for an appellate court to vacate the rule, especially if courts hearing the challenges were already leaning in that direction.

Graff’s own ARA has supported the rule as a way to increase fiduciary obligations for advisers working with small businesses on their retirement plan investment decisions.

In the big picture, Stapel believes changes for many areas of regulatory law could be “profound.” That said, “the DOL has not been terribly successful in being deferred to by federal courts even with the Chevron Doctrine, especially as reflected in the litigation history of the Fiduciary Rule,” she notes, so the difference may not be as dramatic for DOL rulemaking.

Stapel says agencies will still be able to regulate and interpret beyond the literal meaning of the text, since statutes cannot be written to contain every detail, but “what Loper Bright changes is what courts do with that interpretation. Courts can consider agency interpretations but, under the [Supreme] Court’s opinion, may not defer to them.”

The DOL declined to comment on the ruling.

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