New data from auditing firm Deloitte suggests U.S. employers have serious concerns about their employees’ comprehension of 401 (k) fund options and preparations for retirement.
The 2009 401(k) Benchmarking Survey of more than 600 plan sponsors conducted by Deloitte, the International Foundation of Employee Benefit Plans (IFEBP) and the International Society of Certified Employee Benefit Specialists (ISCEBS), finds employers and employees are evaluating their retirement savings strategies as their confidence in retirement income declines.
Pessimism
Overall, employers are not optimistic about employee readiness for retirement, with nearly two-thirds (63%) of respondents indicating they must take an interest in their employees’ readiness for a comfortable retirement, and 14% stating they feel “very” responsible for preparing employees.
Almost one-fifth (19%) of respondents believe “very few” of their employees will be financially prepared for retirement, and there is a broad level of employee confusion typically around selecting fund options (84%) and how much money they will need for retirement (53%).
“Because 401(k) plans represent a primary savings vehicle for employers and a key component of the total rewards package for employees, our survey indicates the ongoing affects of the economic downturn have created a source of anxiety for both employers and employees alike,” says Tim Phoenix, principal with Deloitte Consulting LLP and global leader of total rewards services. “With a greater use of 401(k) plan educational tools, the introduction of ease-of-use features and improved organizational communication, we believe employers will be better positioned to help employees meet their personal retirement goals.”
Reevaluation
The survey also found the economy has employers and employees evaluating their retirement savings strategies. Some organizations surveyed have taken action such as reduction or elimination of employer matching contributions, while 63% of respondents say employees are taking a “wait and see” approach to their retirement savings strategy. Seventeen percent indicated they have seen increased volumes of deferral rate changes, hardship withdrawals, loans and other similar 401 (k) account activities, and 38% reported their employees decreased deferral rates in 2009 while the majority (60%) held steady at their current level of contribution. Twelve percent of employers surveyed also indicated an upswing in opt-outs from automatic enrollment programs.
“The economic crisis has no doubt taken its toll on 401(k) offerings and participants,” says 2009 ISCEBS president C. Scott Boring of Lockton Insurance Brokers, LLC. “But the important thing now is for employees to obtain a clear understanding of the direct impact this has on their plans by taking advantage of the educational tools and resources offered.”
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