Employee Benefits Largely Untouched

May 6, 2002 (PLANSPONSOR.com) - US companies haven't, for the most part, slashed their 401(k) plans and other benefit packages, as part of cost-cutting moves.

That was the key finding of the 2001 Compensation & Benefits Survey as reported in the Institute of Management Accountant’s (IOMA) Controllers Update.

Among the survey findings in the primary benefit categories were:

Retirement Savings Plans

Far and away, 401(k) plans have become the retirement offering of choice for both small and large firms. About 95% of firms with between $10 million and $500 million in revenues offer a 401(k) program and even 82% of companies with revenues of less than $10 million do.

According to the Controllers’ Council, only 16% of companies provided no dollar match, while more 36% report matching employees’ salary deferral with 50 cents on the dollar – the most common match reported.

Traditional defined benefit pension plan offerings fell in 2001 as companies turned instead to the less costly and more flexible 401(k) plans. In 2001, only 35% of companies reported offering traditional pension plans versus the 47% that did so the year before.

Meanwhile, profit sharing plans were on the rise with 45% of firms reporting this benefit among their offerings. This was up slightly from the 43% who offered them in 2000 and the 37% that offered them in 1998.

“Many companies prefer to keep their base salaries down and tie bonuses to profits. They thus provide an incentive for enhanced employee performance and avoid a commitment to higher pay in low-profit years,” the Controllers Update reports. Profit-sharing plans are most prevalent in the firms with the highest revenue, offered by 66%. The financial services sector was the industry where profit sharing plans were most prevalent, with 59% of firms offering them.

Health Care

Despite 2001’s 10% increases in health care and 14% hike in pharmacy benefit costs, employers continue to provide these benefits, the survey found. The only area that saw some cutbacks was medical and dental coverage for family members, according to the survey.

Employee medical coverage remained consistent with 93% of the polled controllers reporting worker health care coverage – down slightly from last year. Some 38% of companies reported paying the full cost of employee health coverage, the same as last year.

All firms with 10,000 employees and more than $500 million in revenues said they offered health care coverage for staff compared to 88% of firms with under $10 million in annual revenue.
The main area of cutbacks was in medical coverage for family members.

The percentage of companies offering the family medical benefit slipped from 89% last year to 84% this year and only 20% pay the full cost of this benefit, down from the 21% that did so in 2000.

Once again, smaller companies are more inclined to pay the full cost of coverage, with 32% doing so. None of the large companies reported doing so.


Controllers reported that dental care actually grew in popularity, with 86% of employers offering this fringe benefit in 2001. That was up from the 84% that offered in 2000 and the 79% that did so in 1999.

As with medical coverage for family members, dental coverage for employees’ families also took a hit in 2001. Seventy-eight percent of employers offered family dental, down from 81% the year before and only 20% paid the full cost in 2001 versus 22% in 2000 and 26% in 1999.

Life and disability insurance are commonplace offerings among most companies. Far fewer, in turn, offer long-term care. The survey showed that 81% of companies offer life insurance, making it the third most popular fringe benefit offered. Of those who offer it, 72% of companies pay for the full cost of the benefit.

As far as other perks are concerned, 11% of companies offer financial counseling, up from 8% last year. A third of firms offered personal or family counseling, up from 26% the year before, while 22% offer dependent care benefits.