Employees given responsibility for their healthcare, retirement

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Employees given responsibility for their healthcare, retirement

BY GREGG FIELDS, Miami Herald

July 27, 2003

Although rising unemployment is the most pressing issue for today's labor market, workers on the job also face long-term economic challenges.

The problem: Safety nets for healthcare and retirement -- historically provided through work -- are developing holes. The trend is likely to worsen.

''You could call it a shift in the social contract,'' says Chris Tilly, a professor at the University of Massachusetts in Lowell.

With medical inflation running roughly 10 percent annually, companies are shifting more costs onto the employee.

''It occurs several ways,'' says Alwyn Cassil, public affairs manager for the Center for Studying Health System Change, in a phone interview.

One, they can increase the premium employees pay. Or they can ''buy down'' benefits by increasing deductibles or copays. Or they can eliminate some benefits, like dental.

Paul Fronstin, who does healthcare research for the Employee Benefit Research Institute, says that ``both employer and employee have been sharing the increase.''

The share of premiums employees pay has been stable, he says. But premiums cost more, so employees pay more.

Alicia Munnell, director of the Center for Retirement Research at Boston College, says retirement is another long-term challenge for workers.

In the 1980s, the introduction of 401(k) plans -- in which workers invest tax-deferred income for retirement -- began to replace traditional pensions.

In the 1990s, with the market roaring, many 401(k) plans exploded in value. ''We thought we were all such clever investors,'' she says.

But Munnell, who recently authored a book on 401(k) plans, says the market collapse drove home the risks of a stock market-based retirement system. Furthermore, it appears 401(k) plans won't adequately provide for the nation's retirees. Roughly one-fourth of eligible workers don't contribute at all, while only 8 percent contribute the maximum allowed.

Although many plans are assisted with contributions of stock in their employer, that can be disastrous if the company goes bankrupt, as happened with Enron and others.

In addition, some companies have been suspending their match, Munnell says. They include some of the nation's leading enterprises, including Ford and Charles Schwab.