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ACA's Negative Effect on Retirement Savings Plans


The country may only understand the most basic effect the Affordable Care Act will have on the lives of Americans as new studies find the law's reach will be more widespread than realized.

The country may only understand the most basic effect the Affordable Care Act (ACA) will have on the lives of Americans as new studies find the law’s reach will be more widespread than realized.

The ACA has people braced for major changes in healthcare, and, recently, the RAND Corporation reported the law will affect liability insurance costs, as well. Now, a report from LIMRA Secure Retirement Institute (SRI) found that the ACA will affect retirement savings plans, too.

Nearly half (43%) of employers reported that the ACA affected their current retirement benefits strategy and spending, while 45% expect the law will change their retirement plans in the future.

"Employers have limited resources to use to manage their employees' comprehensive benefits package," Alison Salka, corporate vice president and director, LIMRA SRI Research, said in a statement. “The added complexity and costs of healthcare are definitely taking a toll on employers' ability to manage their retirement savings plans. As a result, employers are looking for more support from the industry to help them provide a comprehensive retirement savings program for their employees."

Of the respondents who said the ACA has changed their strategy, more than half (55%) said they are spending less money on retirement benefits and shifting costs to employees. Meanwhile, 42% are spending less time evaluating their retirement benefits.

According to LIMRA SRI, cost-shifting was more prevalent among employers that offer both a defined benefit plan and defined contribution plan. Access to a retirement savings plan at work usually has a positive impact on employees’ ability to save and prepare for retirement. Of those with defined contribution plan access, 95% have some retirement savings, compared to 73% of those with no access.

Nearly two-thirds (63%) of employers who expect the ACA will affect their plan strategies and spending in the future said they will spend less money on retirement plans.

"For many American workers, their employer-sponsored retirement plan is the primary way they save for retirement," noted Salka. "Our findings about the impact of the ACA underscore the opportunity for plan providers and advisors to help employers better manage the challenges associated with their retirement plans."

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