Employers and Employees Take Wait-and-See Approach to Retirement, Says Aon Consulting
September 30 2009 - 10:00AM
PR Newswire (US)
Neither Side Managing Retirement Risk Properly CHICAGO, Sept. 30
/PRNewswire-FirstCall/ -- Many employees are waiting for an
economic recovery before moving forward with retirement, and
employers are taking the same attitude with retirement program
changes and risk issues, according to Aon Consulting, the global
human capital consulting organization of Aon Corporation
(NYSE:AOC). (Logo:
http://www.newscom.com/cgi-bin/prnh/20041215/CGW049LOGO) Aon
Consulting surveyed 1,313 employers nationwide in its 2009 Benefits
& Talent Survey, and found that more than 90 percent are not
changing their retirement programs, either in terms of benefits or
management. Along those lines, 87 percent of respondents said
employees are delaying retirement due to economic conditions.
What's more, a third of employers have less than 70 percent of
their employees enrolled in their defined contribution (DC) plans,
with the majority (67 percent) saying they believe workers are not
enrolled because they can't afford it. Meanwhile, 38 percent of
these employers believe employees have little knowledge of the
funds needed for retirement and 52 percent said employees have only
some idea of what's needed to retire with enough funds. Just 8
percent believe their employees have a strong understanding of the
funds needed in retirement. Workers wanting to learn more about
retirement savings have turned to their employers for additional
information. In fact, 64 percent of responding employers said there
was an increase in investment-related questions in 2008 vs. 2007,
but only about a third of these organizations increased their
communications around the importance of saving for retirement last
year, while 62 percent said their communication remained unchanged
from the previous year. "The 'wait-and-see' attitude is not
surprising," said Amol Mhatre, senior vice president responsible
for retirement innovation with Aon Consulting. "We may continue to
see dramatic economic swings, as interdependencies grow in the
global economy, and retirement programs and savings can't stop with
every downturn. Retirement security for working Americans will soon
become a challenge for policy makers and employers, along the lines
of health care reform. With a trend toward individual
responsibility, increased mobility, complex investment choices,
rising cost of health care and improved life expectancy, employers
may have to do more to help workers understand and plan for their
retirement needs." In addition to not changing their retirement
communications strategy, 92 percent of organizations are not
changing their pension/defined benefit (DB) programs in the near
future, citing the high cost of company-required contributions (71
percent), volatility (47 percent) and administrative costs (35
percent) as the main reasons. Employers also are not changing the
risk profile of their pension plans, as two-thirds of these
organizations have not made changes to their pension investments
during the past two years and do not intend to do so in the next
two years. The survey also revealed that only 45 percent of
employers offer a DB plan to their employees. That said, 41 percent
of employers have frozen their pension plans to new entrants, 25
percent have frozen their plans entirely and do not have a strategy
regarding plan termination, and 20 percent have frozen their plans
and intend to terminate the plan once funding allows. "We do not
subscribe to the 'wait-and-see' attitude for employers with frozen
pension plans," said Kemp Ross, senior vice president with Aon
Consulting and head of Aon Investment Consulting. "Employers have
no real upside for taking on the financial risks and costs of
frozen pension plans, so organizations need to establish an exit
strategy for such plans, which can be executed with a balanced
approach to funding and investments during the next few years, as
financial markets recover." Trends in 401k Matches/Auto Enrollment
This survey also revealed that 56 percent of respondents offer
matching contributions on DC plans. Of those, approximately half
provide a higher than 3 percent match. Additionally, 41 percent of
employers have an automatic enrollment plan, with 53 percent
implementing a default at 3 percent, and nearly all (99 percent)
planning to keep their default percentage the same this year.
"While most of our survey respondents did not cite changes to
matching contributions, some financially constrained companies did
suspend or modify their 401k match in response to the economic
downturn," said Mhatre. "Companies should take this opportunity to
look strategically at their retirement programs in the context of
total reward strategies. "Defined contribution plans are
increasingly the primary retirement vehicles for American workers.
This will surely change how workers and policy makers view
companies' fiduciary responsibilities. We had a third of survey
respondents suggest that their fiduciary risks have increased since
only a year ago. It is surprising that most companies have not
taken actions to mitigate such risks by taking measures such as
fiduciary training and review of their governance processes." About
the Study Aon Consulting surveyed more than 1,300 employers
nationwide for its 2009 Benefits and Talent Survey. This annual
survey provides a glimpse into the strategies and tactics companies
are using to ensure that they continue to improve talent, reward
success and prepare for economic recovery. It includes findings in
the areas of Retirement, Health Care and Workforce Management. To
learn more about this survey, please click on the following link
http://insight.aon.com/?elqPURLPage=4552. About Aon Consulting Aon
Consulting is among the top global human capital consulting firms,
with 2008 revenues of $1.358 billion and more than 6,300
professionals in 229 offices worldwide. Aon Consulting works with
organizations to improve business performance and shape the
workplace of the future through employee benefits, talent
management and rewards strategies and solutions. Aon Consulting was
named the best employee benefit consulting firm by the readers of
Business Insurance magazine in 2006, 2007 and 2008. For more
information on Aon, please visit http://www.aon.mediaroom.com/.
About Aon Aon Corporation (NYSE:AOC) is the leading global provider
of risk management services, insurance and reinsurance brokerage,
and human capital consulting. Through its more than 37,000
colleagues worldwide, Aon readily delivers distinctive client value
via innovative and effective risk management and workforce
productivity solutions. Aon's industry-leading global resources and
technical expertise are delivered locally through more than 500
offices in more than 120 countries. Named the world's best broker
by Euromoney magazine's 2008 and 2009 Insurance Survey, Aon also
ranked highest on Business Insurance's listing of the world's
largest insurance brokers based on commercial retail, wholesale,
reinsurance and personal lines brokerage revenues in 2008. A.M.
Best deemed Aon the number one insurance broker based on brokerage
revenues in 2007 and 2008, and Aon was voted best insurance
intermediary, best reinsurance intermediary and best employee
benefits consulting firm in 2007 and 2008 by the readers of
Business Insurance. For more information on Aon, log onto
http://www.aon.com/. Media Contact: Joe Micucci 312-381-4786
http://www.newscom.com/cgi-bin/prnh/20041215/CGW049LOGO
http://photoarchive.ap.org/ DATASOURCE: Aon Corporation CONTACT:
Joe Micucci of Aon Corporation, +1-312-381-4786, Web Site:
http://www.aon.com/
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