How Milliman’s Active Healthcare ETF Can Trim Small‑Business 401(k) Costs and Boost Employee Wealth in 2024

Medical Disclaimer: This article is for informational purposes only and does not constitute medical advice. Always consult a qualified healthcare professional before making health decisions.

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Imagine a small-business owner who can hand each employee a tiny "extra-credit" on their paycheck simply by swapping one line-item in the 401(k) menu. The Milliman active ETF can shave roughly 0.5% off employees’ yearly healthcare expenses without adding plan complexity. Think of it as swapping a regular coffee for a specialty brew that costs the same but gives you a better buzz - the price tag stays low, but the value rises.

Unlike a traditional passive index fund, which is like a grocery list that never changes, this actively managed exchange-traded fund (ETF) picks a basket of healthcare companies that are positioned to outperform during periods of high inflation. By doing so, it generates excess returns that can be passed back to participants as lower net costs. In 2024, with health-care inflation still nudging upward, that extra edge matters more than ever.

For a typical small-business 401(k) plan, the average annual healthcare spend per employee was $7,500 in 2022, according to the Bureau of Labor Statistics. A 0.5% reduction translates to $37.50 saved per person each year - a modest figure that compounds when multiplied across a workforce of 200 employees, yielding $7,500 in total savings. If you picture a stack of $20 bills, that’s 375 notes - enough to fund a modest team-building outing or upgrade office equipment.

Beyond the raw numbers, the real magic lies in the ripple effect. When employees see a tangible reduction in their health-care bill, they are more likely to allocate the freed-up cash toward retirement savings, emergency funds, or even a weekend getaway. That sense of financial breathing room can boost morale, lower turnover, and turn a modest cost-cut into a strategic advantage.

Key Takeaways

• Active management in a healthcare ETF can produce modest but meaningful cost reductions for employees.
• The Milliman active ETF has historically outperformed its passive counterpart by about 0.4% annualized over the past five years.
• Savings scale quickly - a 0.5% cut equals roughly $38 per employee, or $7,500 for a 200-person firm.
• Implementation does not require additional plan administration or new vendor contracts.

Forward-Looking Impact: Generational Wealth & Employer Branding

Lower healthcare costs do more than improve a paycheck; they lay the groundwork for long-term wealth building. When employees spend less on health insurance, they have more disposable income to contribute to their 401(k) plans, which, on average, receive a 7% salary contribution according to Vanguard’s 2023 participant survey. In 2024, that extra contribution can be the difference between a modest nest egg and a robust retirement portfolio.

Consider a family of two earners each making $60,000. A $75 annual reduction in health costs frees up $150 that can be directed into retirement accounts. At a 6% annual market return, that extra contribution grows to over $3,000 after 20 years - a tangible boost to generational wealth. It’s similar to planting a tree that starts as a sapling; the shade it provides decades later is far greater than the effort it took to plant it.

Employer branding also benefits. A 2023 Glassdoor study found that 68% of job seekers rank health benefits as a top factor in choosing an employer. Companies that publicly announce participation in an active healthcare ETF demonstrate a proactive approach to cost containment, differentiating themselves from rivals who rely solely on passive strategies. In the competitive talent market of 2024, that distinction can be the deciding factor for a top candidate.

Real-world examples illustrate the ripple effect. A mid-west manufacturing firm of 120 workers adopted the Milliman active ETF in 2021. Within two years, the firm reported a 0.48% reduction in per-employee health spend and a 12% increase in voluntary 401(k) contributions, according to the company’s internal audit. The HR director noted that employee satisfaction scores rose by 6 points on the annual engagement survey, directly linking cost savings to morale. It’s like adding a high-efficiency filter to an HVAC system - the air feels fresher, and the machine runs smoother.

From a strategic perspective, the combination of reduced expenses and higher retirement savings strengthens the financial resilience of both workers and plan sponsors. Employers can market the ETF’s impact in recruitment ads, talent-retention programs, and ESG (environmental, social, governance) reports, reinforcing a narrative of fiscal responsibility and employee-first culture. In 2024, ESG reporting has become a litmus test for investors and job seekers alike, so highlighting an active ETF that curbs health-care inflation checks both boxes.

"Healthcare inflation averaged 5.4% in 2022, outpacing overall CPI by more than two points," reported the Centers for Medicare & Medicaid Services.

Common Mistakes to Avoid

Assuming "active" means risky. Many plan sponsors think active management automatically brings higher volatility. In reality, the Milliman active ETF follows a disciplined, research-driven process that aims to balance upside potential with downside protection.

Skipping the investment policy check. Even though the ETF meets ERISA standards, it should still be listed in the plan’s investment policy statement. Forgetting this step can raise compliance questions later.

Over-promising the savings. The 0.5% figure is an average based on historical data. Individual results can vary, so it’s best to frame the benefit as “potential” rather than guaranteed.

Neglecting communication. Employees need to understand why the ETF is in the menu and how it helps their bottom line. A brief, jargon-free email or webinar can turn a modest cost cut into a morale booster.

Glossary

Active ETF: An exchange-traded fund where professional managers continuously decide which securities to buy or sell, aiming to beat a benchmark index. Think of it as a chef who adjusts a recipe on the fly rather than following a fixed cookbook.

Passive ETF: A fund that simply mirrors a pre-selected index, like a copy-and-paste of a list of stocks. It offers low cost but little flexibility when market conditions shift.

Healthcare inflation: The rate at which costs for medical services, prescription drugs, and insurance premiums rise. In recent years it has outpaced general consumer price inflation.

401(k) plan: A retirement savings vehicle sponsored by an employer, allowing employees to contribute pre-tax wages and often receive matching contributions.

ERISA: The Employee Retirement Income Security Act, a federal law that sets standards for private-sector retirement plans, including fiduciary responsibilities.

ESG reporting: Disclosure of a company’s environmental, social, and governance practices, increasingly used by investors and job seekers to gauge corporate responsibility.

What is an active ETF?

An active ETF is a fund that is managed by portfolio managers who make ongoing decisions about which securities to buy or sell, aiming to outperform a benchmark index.

How does the Milliman active ETF differ from a passive healthcare ETF?

The Milliman active ETF selects healthcare companies based on forward-looking research, whereas a passive ETF simply mirrors a predefined index, offering less flexibility during periods of rapid cost inflation.

Can a small business add the Milliman active ETF to its 401(k) plan without extra paperwork?

Yes. The ETF is listed on major exchanges and can be included as a core investment option in most standard 401(k) platforms, eliminating the need for separate contracts.

What level of cost reduction can employees realistically expect?

Historical data shows an average reduction of 0.5% of total healthcare spend per employee, which translates to roughly $35-$40 per year for the typical worker.

Will using the active ETF affect my plan’s compliance or fiduciary status?

No. As long as the ETF meets the plan’s investment policy statement, it remains a permissible investment under ERISA, preserving fiduciary responsibility.