Finance executives are not optimistic that their employees will have enough money when they retire, according to a new survey conducted by Hewitt Associates.
Just 30 percent of financial executives are confident that their workers will retire with sufficient assets, according to a new survey of 200 executives by Hewitt Associates. More than 70 percent, on the other hand, believe that their employees’ ability to retire comfortably is connected to their organization’s ability to manage its workforce effectively.
As a result, nearly 60 percent of respondents said they plan to increase employee education about retirement savings in general, and 57 percent said they will increase education about asset allocation and diversifying 401(k) plan balances.
Nearly half of the survey participants said they would make it a priority to lower the 401(k) management fees that their employees pay, though this probably won’t change the retirement prospects of their worker all that much.
On the other hand, of those companies offering defined-benefit pension plans, 60 percent said they did not expect to make any significant changes to their plans in the short term.
Perhaps this is because these plans are in pretty good shape. According to the fifth annual study by actuarial firm Milliman of 100 large U.S. corporations that offer defined-benefit plans, the average investment return on pension assets for 2004 was 12.4 percent, in excess of the expected rate of return for the second straight year.
In addition, 22 of the 100 companies had a surplus at the end of last year, up from 20 in 2003 and just 12 in 2002, according to the Milliman study. To put these numbers into a wider context, however, in 1999 — at the peak of the market bubble — 85 of 100 companies had surplus assets.
Meanwhile, in what seems to be a developing trend, 16 percent of participants in the Hewitt survey said they plan to close their defined-benefit plans to new employees.
Respondents also expressed concerns about the spiraling costs of retiree medical benefits. About 70 percent said they plan to increase cost sharing with current and future retirees during the next two years, and 53 percent plan to reduce retiree benefits.
The overriding motivation for paring benefits is costs. In fact, 65 percent of respondents to the Hewitt survey said their top priority for the next two years will be to identify ways to control the growth in retirement costs, and 49 percent said they will focus on reducing pension cost volatility.