The coronavirus is a challenge unlike most public employers have faced. The pandemic has brought major changes to both retirement and health care benefits, including defined benefit and contribution plans, prescription drug benefits, mental health offerings and short-term disability benefits.
A new International Foundation report, Employee Benefits in a COVID-19 World, examines what employers are doing as their organization adapts to the new world. The following findings are based on the report’s 104 responses by public employers.
Defined Benefit (DB) Pension Plans
- About four in five (78%) responding public employers have a defined benefit pension plan. While responding organizations are not taking significant actions with their DB plans due to COVID-19 implications, substantial proportions are considering updating their investment policies (22%) or reviewing their actuarial assumptions/pension plan designs (19%).
Defined Contribution (DC) Retirement Plans
- The Coronavirus Aid, Relief, and Economic Security (CARES) Act has several provisions aimed at easing participant financial burdens during the pandemic by allowing greater access to DC retirement accounts. Of those that offer DC plans, more than three in five (63%) public employers are allowing participants to take new special early distributions from DC accounts (up to $100,000 without the 10% early withdrawal penalty or 20% mandatory withholding through 2020). In addition, 53% are allowing workers to pay back special early distributions during the next three years, as allowed by the new law. Also, more than one-half (52%) are giving participants an extra year to pay back outstanding DC loans that are due in 2020 (now payable in 2021). In addition, 45% of responding public employer plans are temporarily allowing greater loan amounts from DC accounts, up to a maximum of 100% of a participant’s vested balance or $100,000, whichever is less (up from the previous maximum of 50% or $50,000). Going forward, additional public employers that have not implemented these features are considering doing so in the future.
- Five percent of responding public employers are noticing a greater share of their participants making changes to their DC contribution/deferral levels compared with pre-COVID-19 levels, while 10% are noticing a smaller share.
- In addition, 10% of respondents said more participants are taking hardship withdrawals from their DC accounts due to the COVID-19 pandemic, while 39% have noted no change.
- About 6% of respondents stated that more participants are taking loans from DC accounts as a result of the COVID-19 pandemic, while 41% noted no change).
- From the employer side, no public sector respondents are making changes to matching contributions as a result of the COVID-19 pandemic, although 19% are considering making changes in the future.
[Upcoming Webcast: Pension Trustees and Effective Governance of Climate-Related Risks | May 14, 2020]
Health Care Benefits
- Public sector respondents were asked about changes made to their health care offerings due to the implications of COVID-19. While a large proportion of public employer respondents (84%) already offer telehealth/telemedicine services (for physical health ailments), an additional 15% have implemented them due to COVID-19 implications. More than one-half (54%) of respondents have reduced/eliminated cost sharing for telehealth/telemedicine services due to COVID-19 implications.
- Large proportions of public sector respondents offer coverage for nurse advice lines, eliminating the need to add the services during the current pandemic. However, 12% of respondents are reducing/eliminating cost sharing for nurse advice lines due to the implications of COVID-19.
- Few responding public employers (4%) are reducing/eliminating experimental medical procedure exclusions due to COVID-19 pandemic implications.
[Upcoming Webcast: Capping Medical Plan Costs and Improving Care in the Aftermath of COVID-19 | May 21, 2020]
Mental/Behavioral Health Benefits
- Public employers were asked about changes made to specific mental health care offerings due to the implications of COVID-19. Currently, about two in five (37%) responding employers offer telepsychiatry services (access to mental health services via telephone or virtual meeting). In addition, about three in ten (27%) respondents have implemented these services due to the pandemic. Small proportions have reduced/eliminated cost sharing (14%) or have relaxed/eliminated eligibility requirements (12%) for their mental health benefits. However, about one in four (23%) have added additional services or components to their programs, with 15% considering doing so in the future.
Prescription Drug Benefits
- The COVID-19 pandemic has had implications on responding public employers’ prescription drug benefit offerings. More than one-half (51%) have extended the time allowed under prior authorization periods for prescription drugs and have increased quantity limits (38%). Smaller proportions have waived prior authorization requirements for prescription drugs (26%).
Short-Term Disability Benefits
- Those public employers that offer short-term disability benefits were asked whether they were making plan changes due to the implications of COVID-19. Small proportions of responding funds with a service period requirement have (3%) or are considering (5%) reducing or eliminating those service periods to access short-term disability benefits.
- The COVID-19 pandemic has had significant ramifications on operations, forcing public employers to make drastic short-and long-term decisions regarding workplace staffing levels. About one-half (49%) are implementing a temporary hiring freeze, with an additional 14% considering doing so in the future. A substantial proportion have reduced workers’ hours (22%). More than one in five (21%) are temporarily furloughing workers due to implications of the COVID-19 pandemic, with 18% considering doing so in the future.
[On-Demand Webcast: Public Sector Plan Response to COVID-19]
Download the full report: Employee Benefits in a COVID-19 World: April 2020 Survey Report to learn more about how employers are reacting to the COVID-19 pandemic. The report is available free to International Foundation and ISCEBS members.
Learn more about how other employer types are reacting:
Find more coronavirus-related resources for employers on the Foundation’s Coronavirus (COVID-19) Resources page.
Justin Held, CEBS
Senior Research Analyst at the International Foundation
The latest from Word on Benefits:
- How to Support Workforce Mental Health During the COVID-19 Pandemic
- The State of Defined Contribution Retirement Plans in 2021
- Employee Benefits and COVID-19: Changing the Future of Benefits Today
- Meeting the Benefit Needs of Your LGBTQ+ Plan Members
- What Employers Need to Know About COVID-19 Vaccines and Return to Work