Watson Finds Employer Spending on Retirement Benefits
Declining
October 21, 2009 (PLANSPONSOR.com) - Employers'
investment in workers' retirement benefits, measured by
benefit values as a percentage of pay, has dropped
consistently over the last decade, according to research by
Watson Wyatt.
A Watson Wyatt analysis of 183 employers found that the
total value of retirement benefits - DB, DC and retiree
health plans - provided to employees decreased from 7.8% of
pay in 2002 to 6.9% of pay in 2008, according to a press
release. For the 79 companies that maintained DB plans
throughout this period, the value of the overall benefits
declined from 9.4% to 8.6% of pay, mostly due to a
significant cut in post-retirement health benefits.
In the same time period, the 61 companies that provided
only a DC plan saw a small increase in overall benefits
value - from 5.3% to 5.6% of pay - due to enhanced employer
contributions, the press release said.
The remaining 43 companies in the sample transitioned
from DB to DC-only coverage between 2002 and 2008. Although
these companies increased their DC benefit values by an
average of 2.7%, this gain covered only approximately half
of the DB value loss that was incurred by closing or
freezing plans. For these companies, overall investment
fell substantially, from 8.7% of pay in 2002 to 5.5% of pay
in 2008.
"The tumult of the last decade, with its market bubbles
and crashes, two recessions, rising health care expenses
and compensation pressures, has caused employers to
scramble to look for savings," said Jim Shaddy, North
America retirement practice director at Watson Wyatt, in
the press release. "As a result, a number of employers have
pushed some of the risk and cost in their retirement plans
onto employees' shoulders."
According to the announcement, an analysis of a larger
data set of more than 600 companies found that some
industries - manufacturing, transportation (including the
airline sector) and communications - experienced declines
greater than 30% in value of their retirement offering from
1998 to 2008. Other more profitable industries, such as
chemicals, drugs and pharmaceuticals, had a smaller
decrease in the same time frame.
The study report can be obtained from
www.watsonwyatt.com/employercommitment
. A free registration is required.
Rebecca Moore
editors@plansponsor.com