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February 2020

In Their Best Interest


Small businesses have more options for competitive worker benefits

By David Gould

Successful golf operations are run by seasoned leaders who hire well and train well. They assemble the best employees possible and strive to keep their team intact.

But despite how proficient such a leader may be, if their course is a standalone they’ll face an uphill battle when it comes to employee benefits.

For better or worse, American workers see employment as their lifeline to health care and retirement savings. Large employers turn this into a positive, packaging benefits aggressively to attract and retain coveted talent. That isn’t possible for small firms, which have neither the scale nor the budgets to play that game.

The last decade or more has been a particularly difficult time for any small business to provide workers a health plan. Steadily rising costs along with complex and fast-changing regulations have posed the biggest obstacles. In the matter of retirement savings, a course’s modest head count has always been problematic. Size matters to the established financial firms that make their business setting up 401(k) plans and serving as their custodian.

“There’s a point at which a pivotal player in a 401(k) plan, known as the record keeper, simply won’t commit,” says Todd Turner, a financial advisor with Commonwealth Financial Group, in Charleston, South Carolina. “If they can’t foresee a pool of invested funds building quickly to around $1 million, they won’t consider it worthwhile to get involved with your company.”

The course owner who creates a family-type atmosphere and compensates generously with salary and bonuses may figure that’s sufficient to recruit and retain good workers. Job satisfaction for senior people who maintain turfgrass and run the golf side of the operation may naturally be high, at least early on. The folks who manage the back office or food-and-beverage services also may find the golf environment strongly appealing, although their skill sets translate easily to other industries.

What golf courses are up against is the allure of generous benefit programs, as a relief from the financial stress workers report feeling. This is documented in research from the Employee Benefit Research Institute (EBRI), which publishes a yearly report on benefit trends and worker attitudes. The 2019 edition of that report, which surveyed workers at companies of all types and sizes, showed that a strong U.S. economy has kept health and retirement benefits flowing, from firms that can afford them.

“Health insurance remains the most frequently offered at 78 percent,” the EBRI report stated. “Followed by dental insurance at 68 percent and retirement savings plans at 67 percent.”
These perks ease worker anxiety, according to the report. And yes, they look to their workplace for relief – the survey says “88 percent report that retirement savings plans contribute the most toward a feeling of financial security [while] health insurance tops the list, with 89 percent saying this contributes to financial security.”

Lately, the federal government has shown it wants to help small business and the U.S. worker with this issue. Going back a decade, the Affordable Care Act was seen as a way to make health insurance so accessible that employees of smaller organizations wouldn’t mind if coverage wasn’t available through their workplace. That hasn’t been borne out, so politicians have continued to seek solutions.

In June 2019, the government debuted a financial instrument called the individual coverage health reimbursement arrangement, or ICHRA. Compared to its two-year-old predecessor, QSEHRA, it’s available to businesses of all sizes and it lets the employer scale health benefits across nine different classes. January 1, 2020, was the effective date for the new provision, so feedback from business owners is not yet forthcoming.

Experts say the ICHRA expands on the benefits a QSEHRA plan represented and provides greater flexibility. An ICHRA allows employers to reimburse their workers tax-free for individual insurance and medical expenses. They have the choice to reimburse individual health insurance premiums only or reimburse premiums plus out-of-pocket medical expenses. There are no minimum or maximum employer contribution requirements, a key feature.

Employers offering ICHRA truly are freed from group-plan headaches around renewals, participation rates and physician networks, along with the familiar annual cost hikes. They simply decide which benefits go to which classes of employees, set monthly allowances for each and proceed on that basis. Employees get to choose the coverage they want. That said, going the ICHRA route is best accomplished by having a professional third-party administrator oversee your plan. Experts warn that administering your own ICHRA plan is difficult and could open you up to legal liability. One large administrator sets its ICHRA fees at $150 for initial setup, with a plan maintenance fee of $29 per month plus $15 per month per employee.

Den Bishop, president of the health care consultancy Holmes Murphy and much-quoted author of “The Book on Healthcare Reform,” has spoken in laudatory terms about the ICHRA option for employers. A frequent critic of government inaction on health care, Bishop expressed appreciation at seeing Republicans and Democrats both widely supporting the legislation. The employer is “no longer in the health-care business with the ICHRA,” Bishop has said. “That’s where I think health care could go.”

Bishop’s company has partnered with the National Golf Course Owners Association (NGCOA) to provide members with discounted group-health rates through pooling, i.e., gathering up individual golf courses into a single insurance customer. Big insurers like Aetna, which is underwriting the NGCOA plan, can then extend all the perks and preferences they have long provided to big corporations, such as lower premiums and deductibles.

 There also is a partnership initiative in progress for the NGCOA on retirement benefits. Triggering it was a labor department rule change, released in July, allowing smaller firms to band together to offer 401(k) plans to their workers. The rule, which took effect in September, encourages businesses in different industries to team up for a retirement plan as long as they are located in the same geographical area or in the same industry.

“This is finally a way to even the playing field for small and medium-sized business, when it comes to offering 401(k) plans,” says Turner, whose company approached NGCOA last year offering to help golf courses form the “multi-employer” plans that the labor department’s rule supports. Turner referred to data that showed some 38 million employees of small and midsize companies do not have a workplace retirement plan. In 2018, 53 percent of workers at companies with fewer than 100 employees had access to one, compared with 85 percent of workers at larger firms.

“Between cost and administrative load, the small business owner was deterred from offering a 401(k),” Turner explains. “Now they’re seeing an option with lower costs and less paperwork.”

Of course, the employer match to employee contributions remains a fairly high bar for many smaller businesses to get over. Matches have actually been on the rise: Fidelity, which manages 30 million retirement accounts, reports that the average employer 401(k) match reached 4.7 percent (of the worker’s base salary) in 2019. That’s a record high. In the years prior to 2011, the average employer match was usually between 3 and 4 percent. And workers who study up on 401(k) performance are quite likely to read articles describing the employer’s contributions as a critical ingredient. “The match is certainly important,” comments Turner. “But even without employers putting money in, the tax advantage on contributions by the employee, plus the tax-free growth, makes this a great savings tool.”

The U.S. government has one more trick up its sleeve to support retirement savings, a bill moving through Congress called the SECURE Act. The SECURE Act would make it easier for small business owners to set up “safe harbor” retirement plans that are simpler to administer and less costly. Interestingly, part-time workers would be eligible to participate in an employer retirement plan under the bill. The Act also would push back the age at which retirement plan participants need to take required minimum distributions (RMDs), from 70½ to 72.

The challenge of offering major benefits remains formidable for a golf operation, but the public and private sectors keep trying to ease that burden. What they’ve done so far is worth a long look from course owners who’ve been seeking to improve what they bring to the table in their negotiations with valuable workers.

David Gould is a Massachusetts-based freelance writer and frequent contributor to Golf Business.



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March 2020 Issue

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