Whether they are employed in state, local or federal government or public K-12 schools, colleges or universities, a significant percentage of today’s workforce is engaged in public service. About 15 percent of Americans work in the public sector, according to the U.S. Bureau of Labor Statistics.
This market traditionally has not been a focus for many brokers and advisors. However, helping to meet the needs of the dynamic public sector workforce presents an opportunity for advisors to expand their businesses, particularly with respect to state and local government and public education.
According to the public sector findings from “MetLife’s 15th Annual U.S. Employee Benefit Trends Study,” employers in this group — including state and local governments and public education employers — are seven percentage points more likely than employers in general to plan to put benefits out to bid. Yet they’re 10 percentage points less likely to consult with a broker or advisor.
Because public sector employers anticipate the need to evaluate their benefit offerings, and the market is not currently highly served by brokers and advisors, now is a prime opportunity to engage. But before diving in, it is important to understand the sector and its subsegments, as well as the unique challenges facing public sector employers — and their workers.
Challenges Facing the Public Sector
Despite a strong economy and high levels of consumer confidence, employees on the whole continue to be worried about their finances. This worry is especially acute in the public sector. On average, public sector employees feel six percentage points less in control of their finances, and eight points more financially worried than employees on the whole, the study revealed.
This financial stress is affecting how public sector employees, particularly those in state and local government, think about retirement and working afterward. More than half of state and local government workers said they plan to return to work after retirement. However, the reasons why state and local government workers are returning to work are very different from those of employees on the whole, according the study.
Government employees are going back to work due to financial concerns, whereas employees in general plan to work after retirement for personal fulfillment. For example, 61 percent of state and local government workers said they plan to work after retirement to pay current bills, compared with only 46 percent of employees on the whole. More than 70 percent of state and local government workers also said they plan to continue working after retirement age to accrue money for retirement later on, compared with only 50 percent of employees in aggregate.
When it comes to other reasons to work after retirement — such as getting out of the house — only about a quarter of state and local government employees said this is a reason to work after retirement. This compared with about half of employees in general, the study found.
As more and more workers become eligible for retirement, public sector employers know they have a role to play in boosting their employees’ financial confidence. The study shows that nearly all (85 percent) public sector employers agree they have a responsibility for the overall health and well-being of their employees. And the “silver tsunami,” or growing number of retirement-eligible public sector workers, will continue to be an issue for state and local governments. According to research from the National Association of Counties, state and local government experienced a 54 percent higher number of retirements in 2016 than in 2014.
Voluntary benefits play a key role in meeting employees’ personal finance needs, but the public sector still needs education and adoption to continue to expand these offerings to employees.
Voluntary Benefits in the Public Sector
Over the past several years, the growth of voluntary benefits in the private sector has exploded.
Driven by skyrocketing health care costs and increased employee expectations, private sector employers are keenly interested in offering voluntary benefits to help their employees feel financially secure. They’re doing this by offering voluntary supplemental health products such as accident insurance, critical illness insurance and hospital indemnity plans that can offset gaps not covered by medical insurance. These plans may also provide access to other types of financial protection such as legal services plans and even insurance for pets.
As they look ahead, 45 percent of employers overall plan to increase the number of nonmedical benefits offered to workers in the next one to three years. However, only 37 percent of public sector employers said they plan to increase their voluntary offerings, and that number drops to only 18 percent among state and local government, according to the study.
Looking at state and local governments specifically, fewer than a third are currently offering supplemental health benefits such as accident insurance, critical illness and hospital indemnity plans, the study revealed.
This presents a key opportunity for brokers and advisors to engage. Brokers and advisors have been critical to driving the importance of strong employer voluntary strategies in the private sector, and the same counsel and expertise can be applied to public sector clients.
Getting Your Foot in the Door
As you think about engaging in the public sector market, consider its unique needs, particularly when it comes to addressing the financial wellness needs of public sector employees, and the challenges public sector employers are facing. To begin to engage, keep the following tips in mind.
Understand the rules of engagement. The benefits that public sector employees receive are funded by tax dollars. Therefore, request for proposal processes in the public sector may be subject to more rigid parameters than those in the private sector. Anticipate some red tape, but don’t let that stop you from making the right recommendations to help employers engage their employees. According to the study, more than half of public sector employers now allow brokers, consultants and carriers to make recommendations for products or services not specifically requested in the RFP.
Lend the expertise the public sector seeks. When it comes to the advice that public sector employers are seeking, they’re particularly interested in a few areas, the study shows. More than employers in general, public sector employers value advice and insights into employee needs, new and innovative benefit solutions, and product bundling.
Know controlling costs is top of mind. The public sector continues to be concerned with controlling benefit costs. In fact, 83 percent of public sector employers say that controlling health and welfare costs is an important benefits objective, compared with 79 percent of employers in general. This reinforces the opportunity for strong voluntary strategies that can provide workers with the choice they’re seeking, but without adding significant cost to employers’ bottom lines.
Think beyond working years. With a significant number of public sector workers set to retire, retiree benefits are top of mind for both employers and employees. Make sure they understand retiree benefit options, and also discuss portability with current or potential public sector clients. Interest in portability in the public sector has risen dramatically over the past couple of years from 50 percent in 2014 to 67 percent in 2016, according to the study. As pensions for state and local government workers continue to face cost pressures, recommend alternatives such as annuities.
Opportunity awaits brokers and advisors in the public sector market. By understanding the unique needs and challenges of this important sector, you’ll be well-positioned to engage and lend the expertise as a broker or consultant partner that the private sector has long valued.