Towers Perrin Survey Finds Most Companies ‘Staying the Course’ When it Comes to Employee Benefits

Even in Challenging Environment, Most U.S. Companies Remained Committed to Striking Right Balance of Cost Reduction and Talent Management

STAMFORD, CT., April 14, 2009 – Despite the pressures of the economic crisis, most U.S. companies continue to view their retirement programs as a vital part of their workplace relationship with employees, even as they struggle to balance cost and talent management issues, according to a survey of close to 500 HR and benefit executives conducted in February by professional services firm Towers Perrin.

Relatively few of the respondent companies are taking precipitous action right now, in terms of dramatically reducing or eliminating current benefit plans. While that’s partly a result of a decade-long focus on plan redesign and cost management, the findings confirm the extent to which most companies are staying the course, at least for the present. In fact, the results indicate many are using the current crisis to find the right balance between cost reduction and talent management, positioning benefits as part of a more holistic “deal,” with employees – one built on shared responsibility for costs and risks.

While companies appear to be trying to keep their programs as consistent as possible, the survey results did underscore the current mood of trepidation in the workplace, given the financial pressures many people now face. As evidence, between 30% and 60% of the survey respondents said that their employees were postponing plans to retire, reducing participation in 401(k) plans and increasing hardship withdrawals and loans from the plan. Only 7% predicted any uptick in 401(k) participation.

In the face of these actions, employers generally are stepping up efforts to address employee concerns through heightened communications and education, and to position benefits as part of a more holistic total rewards package, or “deal,” with employees.

“It’s encouraging that a majority of employers in this survey do not seem to let current concerns outweigh their long-term commitment to their employees,” said Mike Archer, Towers Perrin’s chief actuary and a Principal in the firm’s retirement practice. “That’s a particularly welcome sign for employees at a time when there is so much anxiety about future security. It should have a marked impact on employees’ level of engagement and productivity, both of which are critical elements in helping companies survive and thrive.”

Amid worries about their 2009 performance (56% of respondents expect to see revenues decline, in some cases by as much as 20% or more), a fair number of respondents see the economic crisis as a catalyst for constructive action. For instance:

  • 70% are increasing communication to address employee concerns, and more than 57% said they were not cutting back on investments in benefit communication or education.
  • 53% are trying or considering new benefit strategies they would not have considered otherwise.
  • 47% reported they are taking a more holistic approach to reward management.

Retirement Benefits

The survey results indicate that defined benefit (DB) plan sponsors continue to close their plans to new participants, although at a slower pace than many might have expected. To date, 44% have closed their plans to new participants, with only another 3% planning to do so in the next 18 months. Of the remainder, 10% reported their company was considering the issue, leaving 43% indicating they had no such plans. Significantly, more than two-thirds (69%) reported they have no intention of modifying their DB plans for current participants.

On the defined contribution (DC) front, fewer than 10% of respondents have suspended — or plan to suspend — company contributions to DC plans. Another 19% are considering the action, but nearly three-fourths of respondents have no such intentions. As might be expected, given what’s happened to 401(k) account balances, employers are doing more, not less, to educate employees and communicate about DC investment options. Nearly 40% of respondents said their companies are making or increasing investments in financial education for employees.

One of the more disturbing findings from the survey is the impact the current environment has had on employee perceptions of their retirement horizons. More than half (59%) of respondents said they believed employees planned to postpone retirement in light of the current economic climate. Further — and equally disconcerting — 43% of respondents reported that employees were increasing loans and hardship withdrawals from DC plans, while 38% noted declining overall participation in the plans.

“These trends are serious and a cause for concern,” said Archer. “They suggest that an increasing number of employees may fall far short of their retirement income needs, particularly if they are not participants in a defined benefit plan, do not have other assets and back off from further participation in available defined contribution plans. For employers, the key struggle is finding the appropriate balance between cost and risk — for the company and for employees. How much is too much for either side? What is an effective balance?”

The Benefits in Crisis survey drew responses from 480 HR and benefit executives from a cross-section of midsize and large organizations in the U.S. It was conducted online in February 2009.

About Towers Perrin

Towers Perrin is a global professional services firm that helps organizations improve performance through effective people, risk and financial management. The firm provides innovative solutions in the areas of human capital strategy, program design and management, and in the areas of risk and capital management, insurance and reinsurance intermediary services, and actuarial consulting. Towers Perrin has offices and alliance partners in the United States, Canada, Europe, Asia, Latin America, the Middle East, South Africa, Australia and New Zealand. More information about Towers Perrin is available at

Tags: , , ,