Defined benefit pension income plays a critical role in reducing the risk of poverty and hardship among older Americans, according to the report The Pension Factor: Assessing the Role of Defined Benefit Plans in Reducing Elder Hardships.
The report found that rates of poverty among older households lacking pension income were about six times greater than those with such income.
“This analysis reveals that pensions have a unique, independent and positive impact on older Americans’ economic well-being,” says Beth Almeida, executive director of the National Institute on Retirement Security. “This ‘pension factor’ is particularly powerful for improving the economic security of vulnerable older households, women and members of racial/ethic minority groups.”
Almeida said that ensuring older Americans have pensions could help governments save money. The report shows that in 2006, there was US$7.3 billion in public assistance expenditures attributed to pensions.
“That’s about 8.5% of aggregate public assistance dollars received by all American households in 2006 for the same benefits programs,” says Almeida. “These are sizable dollars.”
Key findings from the report indicate that pension receipt among older American households in 2006 was associated with the following:
• 1.72 million fewer poor households and 2.97 million fewer near-poor households;
• 560,000 fewer households experiencing a food hardship;
• 380,000 fewer households experiencing a shelter hardship;
• 320,000 fewer households experiencing a healthcare hardship; and
• 1.35 million fewer households receiving means-tested public assistance.
“With our analysis, we now have hard numbers on the people and budget impacts of pensions,” says Dr. Frank Porell, report lead author and a professor of gerontology at the McCormack Graduate School of Policy Studies at the University of Massachusetts Boston. “The bottom line: pensions help older Americans escape poverty—especially women and minorities who we know are most vulnerable.”
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Employees reducing contributions
Prudential Research has found that in the last five years, approximately 16% of U.K. employees who personally pay into a pension have either reduced their amount or stopped contributing altogether.
Prudential’s research found that more people are planning to rely on state pensions to fund their retirement. The number of employees expected to rely on state pensions is expected to rise in the next 10 years to 27%, compared with only 22% of those retiring this year.
Based on these findings, there is growing concern that there will be a significant increase in future pensioner poverty.
“It’s worrying that many people who have been working for years and saving for retirement seem to have given up hope and stopped paying into their pensions,” says Martyn Bogira, director of defined contribution solutions with Prudential. “This is the last thing they should be doing.”
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Employee cost-sharing up sharply in prescription drug plans
A survey from Buck Consultants has found that an increasing number of U.S. employers are using cost-sharing as a utilization management tool in their prescription drug programs.
With 99% of respondents providing prescription drug coverage for active employees, the survey was conducted to identify the strategies that employers are using to manage their prescription drug and benefits costs.
Buck Consultants reported that 76% of respondents use employee cost-sharing as a utilization management tool, an increase of 25% from last year. The most common target cost-sharing range is between 11% and 20% of claim costs.
“While the cost of prescription drug coverage varies widely, 30% or the largest group of respondents, pharmacy benefits represent between 11% and 15% of total healthcare costs,” says Michael Jacobs, a principal and national clinical practice leader with Buck Consultants. “This is down from last year’s survey, when the largest group indicated its drug benefits made up between 16% and 20% of total healthcare costs.”
With respect to clinical management, the most important steps respondents are taking to control pharmacy benefits costs include more than prescription drug coverage. Employers are taking special note of care management, disease management and low-cost generic pricing programs offered by retail pharmacy chains.
Other noteworthy findings
• Strategic initiatives for long-term cost management include providing employees with tools and information and adding consumerism to the program.
• Employers are increasing their efforts in managing specialty medications, with 59% of respondents adhering to clinical guidelines as part of their specialty drug management programs.
• The top priorities in managing specialty drug therapies include adhering to clinical guidelines, clinical management and centralized distribution.