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Pension Benefits Trends & Implications for 2002

February 7, 2002
Related Topics: Featured Article, Compensation, Benefits

Employees need help in two key areas of retirement planning, according torespondents to the Workforce 2002 HR Trends Survey. Seventy-six percent of therespondents said employees need help in deciding how to invest their 401(k)funds. Sixty-one percent felt there is a need for employees to do overalllong-term retirement planning.

401(k)s viewed as vital
Companies continue to believe that the 401(k) plan remains a vitalcornerstone of the employee retirement package. Ninety-five percent of thecompanies responding to the Workforce trends survey say they have a 401(k) planor intend to add one in the next 18 months.

Also, 96 percent of the responding companies said the 401(k) match was eitherincreasing or staying the same. Only 4 percent said the match was decreasing orbeing eliminated entirely.

Eighty-one percent of responding companies matched employee 401(k)contributions, at the following levels:

  • 10 percent match or less: 46 percent
  • 11-15 percent match: 3 percent
  • 16-25 percent match: 5 percent
  • 26-50 percent match: 18 percent
  • More than 50 percent: 9 percent

Nineteen percent of the responding companies did not match 401(k)contributions by employees.

Increases seemed to be on the minds of some survey respondents. A 100-personcompany is "offering a catch-up provision for participants 50 and older."(This catch-up was made possible by the Economic Growth and Tax ReliefReconciliation Act of 2001, which made other changes to 401(k) plans that gointo effect this year. For more details on these, visit’sfrequently asked questions on 401(k)s:

A respondent from a company with 100 to 499 employees said they were "increasingthe company match." Another respondent, also from a 100 to 499-personorganization, said his company had "increased the dollar amount to which we doa 100 percent match."

Changes in 401(k) practices
Fifty-eight percent of the Workforce survey respondents said they wereinvestigating or planning to make changes to their 401(k) plan in the next 18months, including:

  • Increasing investment education resources/training: 27 percent
  • Offering more investment options: 22 percent
  • Changing the amount of the match: 10 percent
  • Changing plan administration: 9 percent
  • Changing investment management firm: 7 percent
  • Other: 7 percent

In addition, 14 percent of those responding saw an increased threat of legalliability regarding pension plan investment performance.

Reducing administrative costs is also a recurring theme among respondents."We are evaluating our plan administrative expenses with the choice being toswitch plan administrators or shift costs," said an HR professional from acompany with 100 to 499 employees.

A respondent from a company with 5,000 to 24,999 employees echoed the sameviewpoint. That company is "looking to reduce costs of administration and/orfund management."

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