Benefits October 25, 2001

HR Departments Unprepared to Deal with the Turbulent Economy

October 25, 2001 (PLANSPONSOR.com) - Almost of plan sponsors in a recent Cigna survey feel unprepared to provide their participants with retirement planning, at a time when participants have an increased need for guidance in a shaky economy.
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Titled “Workplace Report on Retirement Planning,” the survey was conducted in two parts, one survey was a poll was of 1,000 consumers; the other a survey of 504 human resource executives involved in the administration of their companies’ retirement plans.

Both surveys were conducted during the last weeks of September.

Disheartening

Some of the news is disheartening. For example, 47% of the HR executives interviewed said they are unprepared to provide retirement planning advice to employees. At the same time, only  22% of participants (one in five people) rely on their employer as their primary source of retirement-planning information.

To add insult to injury, participants gave their HR departments’ efforts low marks – the equivalent of a “C”. Overall, 30% of the companies surveyed have taken action to promote awareness about enhanced retirement savings options available under pension reform legislation that takes effect in January.

However, there’s a silver lining. The survey also found that most participants are sticking with their 401(k) plans, despite their concerns about the slowing economy, the recent volatility of the market and its effects on their retirement plans.

There is no sign that participants are seeking to cash out in a hurry. In fact, some are reconsidering their asset allocation and taking advantage of the recently passed pension reform bill that allows for higher contributions to retirement plans. 

Other Conclusions

Among the other findings:

  • 43% of HR executives said the current economic downturn has made their job more difficult
  • 84% percent of HR executives said the current economic situation has increased employees’ attention to their quarterly retirement fund statements
  • 86% percent of them believe their employees are frightened about how the economic downturn has affected investments with their 401(k) or other employer-sponsored retirement plans
  • 30% of HR executives believe their employees are unaware that the tax cut signed into law earlier this year by President Bush allows them to increase contributions to their employer-sponsored retirement plan
  • 31% of consumers said retirement plans are the most important employee benefit
  • 9% of HR executives cited employer-sponsored retirement plans as the most important tool for attracting and retaining employees
  • 47% of participants surveyed said they will make changes to their retirement account if their balance will be lower at the end of 2001 than it was in January
  • 17% said they’d invest in more conservative assets while 15% said they would save a higher percentage of their salary; 10% said they’ll invest in more aggressive assets and 5% will stop their contributions
  • 7% said they don’t know what they will do
  • 73% of consumers surveyed said they’ve made no changes to their retirement accounts since the Sept. 11 terrorist attacks on the United States.

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