Pension Benefits: Trends & Implications for 2002

The results of a 2002 Workforce HR Trends survey reveal that employees need retirement help. 

In addition to this report of the study's highlights, a very helpful online resource companion was compiled by the editors of Workforce magazine including 10 Web site links.

Employees need help in two key areas of retirement planning, according to respondents to the Workforce 2002 HR Trends Survey. Seventy-six percent of the respondents said employees need help in deciding how to invest their 401(k) funds. Sixty-one percent felt there is a need for employees to do overall long-term retirement planning.

401(k)s viewed as vital 

Companies continue to believe that the 401(k) plan remains a vital cornerstone of the employee retirement package. Ninety-five percent of the companies responding to the Workforce trends survey say they have a 401(k) plan or intend to add one in the next 18 months.

Also, 96 percent of the responding companies said the 401(k) match was either increasing or staying the same. Only 4 percent said the match was decreasing or being eliminated entirely.

Eighty-one percent of responding companies matched employee 401(k) contributions, at the following levels:

10 percent match or less: 46 percent 
11-15 percent match: 3 percent 
16-25 percent match: 5 percent 
26-50 percent match: 18 percent 
More than 50 percent: 9 percent 

Nineteen percent of the responding companies did not match 401(k) contributions by employees.

Increases seemed to be on the minds of some survey respondents. A 100-person company is "offering a catch-up provision for participants 50 and older." (This catch-up was made possible by the Economic Growth and Tax Relief Reconciliation Act of 2001, which made other changes to 401(k) plans that go into effect this year. For more details on these, visit Power.com's frequently asked questions on 401(k)s:

A respondent from a company with 100 to 499 employees said they were "increasing the company match." Another respondent, also from a 100 to 499-person organization, said his company had "increased the dollar amount to which we do a 100 percent match."

Changes in 401(k) practices 

Fifty-eight percent of the Workforce survey respondents said they were investigating or planning to make changes to their 401(k) plan in the next 18 months, including:

Increasing investment education resources/training: 27 percent
Offering more investment options: 22 percent
Changing the amount of the match: 10 percent
Changing plan administration: 9 percent
Changing investment management firm: 7 percent
Other: 7 percent 

In addition, 14 percent of those responding saw an increased threat of legal liability regarding pension plan investment performance.

Reducing administrative costs is also a recurring theme among respondents. "We are evaluating our plan administrative expenses with the choice being to switch plan administrators or shift costs," said an HR professional from a company with 100 to 499 employees.

A respondent from a company with 5,000 to 24,999 employees echoed the same viewpoint. That company is "looking to reduce costs of administration and/or fund management."