Sponsors Need Better Global Retirement Plan Control

October 26, 2005 (PLANSPONSOR.com) - Most global companies with multinational retirement programs don't have the typical controls in place for those programs, according to a new study.

A Hewitt Associates news release said that its survey of more than 100 large, multinational organizations in Europe and North America found that more than half lack annual goals (64%) or written global strategies (60%) for their retirement plans.

Not only that, but less than half of companies asserted that they were “in control” of the following retirement plan aspects: business strategies, managing costs, managing risk, optimizing processes, enabling their employees and executing globally.

“I am struck by the evident lack of control reported by many global companies that participated in this survey,” Michael Downing, retirement and financial management consultant for Hewitt Associates, said in the news release. “It’s been several years now that companies’ retirement plans have suffered from some of the worst financial market conditions in our history and, more recently, been impacted by corporate scandals and bankruptcies. Companies need to be farther ahead in managing this volatile aspect of their business.”

Most respondents pinpointed managing risk and controlling the costs of their global retirement programs as their top two priorities in the coming years. Forty-seven percent of all respondents, and 53% of North American companies, named aligning their retirement programs with overall business strategies as another top priority. Interestingly, only a scant 4% of companies selected enabling employees to retire as a top priority.

Employee concerns also took a back seat to cost and risk control among the 31% of companies that have established annual retirement goals. They said their most important goal is to make sure that retirement benefits are affordable to their organizations, followed by compliance with appropriate laws.

Executives said Europe and North America are their regions of greatest concern and, even more specifically, identified the following countries of greatest concern: the United States, the United Kingdom, China and Germany.

Taking Back Control

The survey identified four techniques that are helping companies generate a greater degree of control over their retirement programs:

Global strategies and goals.Companies with a written strategy for their global retirement benefits and/or those with annual retirement goals were more likely to rate themselves as “in control” of their retirement programs. More European (42%) than North American companies (28 %) reported having written strategies and, in turn, felt more control over managing risk, managing cost and executing globally.

Global decision-making and execution.A majority of companies (55%) are developing their overall benefit strategy at the global level; however, decisions such as plan changes, investment policy, compliance assurance and service provider selection are more often made at the local level.

Shared functional responsibility for retirement benefits.Half of respondents said their human resources and finance functions share responsibility for the outcomes of global retirement benefits. North American respondents were more likely than their European counterparts to indicate sole HR responsibility.

Use of external resources.Three-quarters of companies use both internal resources and outside advisors for managing aspects of their global retirement benefits, while 16% rely primarily on outside advisors. Respondents who used single worldwide providers or a list of preferred providers for particular services typically reported greater control over their retirement programs.

“State of Controlinfodesk@hewitt.com.