Defined-contribution participants aren’t the only ones asking whether they will have enough money for retirement, one consulting group has found.
Mercer reported a 40 percent increase in defined-benefit participants asking for their estimated end benefit in 2009 versus 2008, says Andrew Yerre, defined-benefit business leader in the company’s U.S. outsourcing division. The Mercer unit, which consults on domestic outsourcing and investment issues, is the defined-benefit administrator for 73 clients with 260 defined-benefit plans covering 1.3 million people, says Bruce Lee, principal and spokesman. Last year, 80,000 people asked the company to calculate their estimated benefits, he added.
“The drop in the markets prompted a lot of people to look at employer-sponsored benefits,” Yerre says.
A new annual funding notice is probably another cause for the bump in requests, Yerre says. Before an overhaul to pension law in 2006, participants received arcane and heavily detailed summary annual reports on the status of their defined-benefit plans.
Because of the new law, participants now receive an annual funding notice in addition to the report. This notice simplifies the financial information found in the report, highlighting the funded status or health of the plan as well as its liabilities. The notice doesn’t give participants specific details about their per- sonal estimated end benefit, but it does outline how to request that information.
The annual funding notice has been in effect only since 2008, so this is the first time Mercer has looked at the number of participant requests for information, Lee says. Interestingly, more than half the requests came from participants younger than 55, he adds.
Mercer is encouraging participants to look at their pension as part of all their retirement resources, as well as estimated health care costs, Yerre says. Defined-contribution plans are the main source of people’s retirement savings, so the responsibility of whether a participant has enough for retirement is shifting to the individual; pension plans are playing a more minor role. Meanwhile, workers need to be aware that retiree health care expenses are no longer typically covered by employers and factor them into their retirement strategy, Yerre says.
“People need to understand their total retirement picture,” Yerre says. “The key is looking at all sources of income.”
Workforce Management, June 2010, p. 8 — Subscribe Now!