June 12 web briefing: Retirement trends – Will the
transformation of employer-sponsored retirement plans continue?
The results of the EBRI/Mercer survey about
retirement program changes conducted just last month provide
some interesting insights into the retirement design changes
employers have recently made, or are considering, and the
drivers for those changes. They also shed some light on other
retirement financial management policy changes that plan
sponsors are implementing or considering, including changes to
investment and contribution policies. Join Mercer for a free,
one-hour web briefing on Tuesday, 12 June 2007 (2:00 PM –
3:00 PM US-ET) where we’ll share the results of the survey and
discuss our perspective on what these results, as well as our
client experiences here and abroad, tell us about
retirement trends post-Pension Protection Act and in light of
changes in accounting rules. Details|
Enroll
|
|
Once relatively unfamiliar and underutilized, automatic enrollment and Roth 401(k)
accounts have gotten a boost from the Pension Protection Act (PPA) and, according to a recent survey conducted by
the Employee Benefit Research Institute (EBRI) and Mercer Human Resource Consulting, are gaining in popularity and
may soon become the norm for defined contribution (DC) plans.
The PPA, passed in August 2006, eliminated many of the barriers to implementing these and other DC
plan features that encourage greater employee savings. The EBRI/Mercer survey, covering 163 organizations that sponsor defined
benefit (DB) plans in addition to DC plans, found that 66% of respondents have either already adopted automatic enrollment, a
feature whereby employees are automatically enrolled in the savings plan unless they actively opt out or select a different
savings rate, or are currently considering adding it. The EBRI/Mercer survey also found that well over one-third (37.6%) of
plan sponsors have already added or are planning to add Roth 401(k) accounts to their DC plans.
In addition to these and other changes in DC plans, the survey confirmed that over one-third of plan sponsors are planning a change to their defined benefit (DB) plan design. While many respondents admit to not completely understanding the financial impact of PPA on their DB plans, where changes are being contemplated, the focus is on reducing or eliminating benefits. Meanwhile, interest in investment policy changes is emerging, although companies are reacting slowly in their efforts to reduce investment risk.
Despite the reactions to recent funding and accounting rules reform, the true course of retirement plans may take years to chart. Hybrid plans, including cash balance, still remain a viable DB option and were given the go-ahead by the PPA, legitimizing them and making them more attractive to implement. But is it too late for hybrid plans to make a comeback? Only time will tell.
|
