October 29, 2008Contact:Brenda Roodbrendar@ifebp.org (262) 373-7756
Brookfield, Wisconsin—Retirement plan participants appear to be responding to the current economic and financial crisis by delaying retirement, saving less and re-aligning their retirement investments. In a recent survey of retirement plan sponsors and trustees, nearly half, 46% of respondents, stated their employees and plan participants are considering delayed retirement. In addition, 38% of plan sponsors noted that their employees are concerned about not saving enough for retirement.
The survey, Plan Sponsors and Participants: Partners in Times of Crisis, conducted by the International Foundation of Employee Benefit Plans, found that the current financial crisis is having a substantial impact on retirement planning.
Survey respondents not only reported a jump in the number of plan participants considering delaying retirement, but a quarter of respondents cite an increase in the actual number of eligible workers postponing retirement.
In addition to delaying retirement, nearly 30% of respondents report that defined contribution (DC) plan participants have decreased their overall retirement plan contributions and 34% believe plan participants have reduced their exposure to equities in favor of less risky investment alternatives.
The survey was conducted the week of October 20, 2008 and includes responses from 1,089 plan sponsors, representing a cross section of three employee benefit sectors: Corporate Plans, Public and Governmental Plans, and Multiemployer Plans. Because the survey examined each of these sectors, the results show the unique concerns and actions of the different plan sponsors.
Survey results show that during the last six months, 28% of plan sponsors have noticed an increase in the number of plan participants taking loans from DC accounts. Representatives of corporate plans were much more likely to observe this trend, with 44% reporting an increase.
In addition, 29% of respondents believe the current economy has prompted greater numbers of hardship withdrawals. Again, corporations (37%) were more likely than public (24%) and multiemployer (21%) to note this increase.
Corporate plan sponsors were the most likely to report that plan participants are primarily concerned about their inability to save enough for retirement (51%), while representatives of multiemployer and public plans were most likely to report underfunded defined benefit (DB) plans as the major concern of their plan participants (55% and 39% respectively).
“The current economic and financial situation has caused both participants and plan sponsors to evaluate their retirement plans, said Sally Natchek, Senior Director of Research, International Foundation of Employee Benefit Plans. “Employers are reporting lower contribution levels, increased hardship withdrawals, and concern about whether employees will be able to save enough to retire comfortably.”
Plans sponsors of DC plans were more likely to report that their plan participants view the long-term impact as severe (31%), compared to 19% of DB sponsors who think their participants feel that way.
In response to increasing concern, 20% of defined benefit plan sponsors have made changes to their strategic asset allocation in order to reduce risk and protect assets. Only 7% of defined contribution plan sponsors have made changes to their investment product offerings as a result of the economic turmoil; however 22% are considering making changes in the future.
Due to employee concern, and a significant increase in the number of participant questions, many plan sponsors have implemented a variety of communication and education efforts.
Close to half of respondents, 47%, have addressed the economy via a special communication piece, and nearly the same proportion, 46%, have addressed or plan to address the crisis in a regular newsletter. Public employers were the most likely to have used these means of communication and were also most likely to organize individual meetings with external financial advisors and to arrange special group meetings with in-house staff.
“It appears that plan sponsors and participants are forming supportive partnerships and working together to ensure long-term success,” said Natchek.
Plan Sponsors and Participants: Partners in Times of Crisis (Item #6597E) is 13 pages and costs $53 (I.F. Members $40). It is available in print and e-book formats. To order visit www.ifebp.org/books.asp?6597E or contact the Foundation Bookstore at bookstore@ifebp.org or (888) 334-3327, option 4.
###
The International Foundation of Employee Benefit Plans is a nonprofit organization, dedicated to being a leading objective and independent global source of employee benefits, compensation, and financial literacy education and information.