83% of Employers Surveyed do not Expect Employer Contribution Changes

December 11, 2008 (PLANSPONSOR.com) - Even as news reports of companies suspending employer match contributions to defined contribution plans continue, a new Mercer survey reveals 83% of employers do not expect to reduce their level of employer contributions.

However, 17% are considering doing so, according to a Mercer press release about its Leading Through Unprecedented Times survey.

More than three-quarters of respondents (77%) say they expect to review investment and administrative fees, which Mercer said may be due to pressure from regulators as well as the decline in investment values. Eighty-five percent of respondents reported they will likely enhance employee education and communication regarding investment choices, objectives and options, and three-quarters of respondents will likely review their fund line-ups, the press release said.

In line with their anticipated actions, when asked to gauge employee concerns related to the economic turmoil, 54% of respondents said that employees expressed a significant level of concern about the impact of economic turmoil on their retirement investments, compared to 37% who said employees expressed significant concern about the health of the company, and 34% who said employees have a high level of anxiety regarding their job security.

For defined benefit plans, employer focus will be primarily on understanding and reducing risk. Changing investment strategy (46%) is reported by survey respondents as the most likely method companies will take to reduce risk rather than changing funding policies (31%). Twenty-four percent of respondents are considering cutting back or stopping accruals, but only 4% say they are very likely to do so.

Health benefit plans seem safe as 84% of survey respondents indicated their company is unlikely to eliminate any health or group benefit programs to cut expenses. Companies instead are more likely to intensify efforts to understand the root causes of increasing costs (77%) and add wellness programs to improve health-related behaviors and increase employee engagement (76%), according to the survey results.

However, 53% of respondents indicate their company will likely increase employee contributions, particularly those representing companies with operations in the U.S. (67%), and 59% of respondents representing companies with operations in the U.S., compared to a survey average of 47%, report they may shift more health costs to employees through such mechanisms as higher deductibles.