Benefits May 2, 2013

Canadian Sponsors Confident in Retirement Benefits

May 2, 2013 (PLANSPONSOR.com) – Most Canadian employers believe their retirement plans are competitive, according to a recent survey.
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The survey, “Canadian Retirement Trends Survey Highlights 2012,” was conducted by Aon Hewitt to assess the views and near-future actions of Canadian employers with regards to the design, management and delivery of capital accumulation (CAP)/defined contribution (DC) plans, defined benefit (DB) plans and retiree medical plans.

Across all plans, the survey found 95% of plan sponsors are “somewhat or very confident” in the competitive position of their plan and see it as a key priority; 59% are likely to assess retirement program design during 2013; 83% will review plan member communication material; and 12% are “very confident” that employees are taking accountability for their retirement future.

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Among CAP/DC plan sponsors, 33% now use webcasts/webinars to deliver financial education and an additional 35% intend to do so during 2013; 84% of CAP providers plan to communicate with plan members to provide general education about plans; 75% are likely to communicate general investment education; 50% intend to measure to competitiveness of their plans in 2013; and 54% offer target-date/lifecycle funds.

For DB plans, the survey reveals: 50% of plan sponsors operate plans that are either closed to new members or frozen; 69% are unlikely to evaluate phased retirement alternatives; 69% of plan design changes are motivated by the amount or volatility of costs; and 61% are unlikely to analyze aging workforce issues.

Sixty-two percent of respondents offer retiree medical and dental benefits to current retirees; 41% offer retiree medical and dental benefits to future retirees; 25% will increase contribution rates required for current and future retirees; 25% plan to reduce benefits for future retirees or reduce (or eliminate) benefit eligibility altogether; and 10% are likely to move to a DC medical plan.

Aon Hewitt warns that awareness of Canada’s changing demographic structure “does not seem to have spurred plan sponsors into addressing long-term sustainability strategies as they struggle with short-term financial pressures and regulatory requirements.” To maintain a sustainable and cost-effective private pension structure in Canada, the consultant says, “it is imperative that employers target retirement challenges head on.”

During October and November 2012, a total of 203 Canadian employers were polled for this survey, the results of which can be downloaded from here.

Benefits May 2, 2013

Retirement Readiness a Top Priority for Plan Sponsors

May 2, 2013 (PLANSPONSOR.com) – A recent Deloitte survey found employee retirement readiness continues to be a top priority among more than three-quarters (78%) of 401(k) plan sponsors.
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The survey also found 401(k) account balances are at an all-time high, with surveyed plan sponsors reporting average account balances of just above $85,000. However, only 12% of plan sponsors reported that “most employees are or will be financially prepared for retirement.”

The “12th Annual 401(k) Benchmarking Survey,” conducted by Deloitte, the International Foundation of Employee Benefit Plans (IFEBP) and the International Society of Certified Employee Benefit Specialists (ISCEBS), shows a 7% increase in the number of plan sponsors conducting retirement readiness assessments for employees. This is a jump to 32% in 2012 from 25% in 2011.

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According to the survey, offering options such as automatic enrollment, Roth 401(k) features and individual financial counseling have had a positive impact on plan participation and awareness. Eighty-six percent of plan sponsors who implemented automatic enrollment have seen a positive impact on plan participation by employees. The Roth 401(k) feature continued to increase in popularity among plan sponsors, with 53% reporting that their plans now offer a Roth feature, representing a 6% jump from 2011. More plan sponsors began offering employees individual financial counseling and advice – up from 50% in 2011 to 61% in 2012 – further underscoring the emphasis plan sponsors are placing on participant education.

“Plan sponsors clearly recognize the importance of saving for retirement and are working hard to provide their employees with the right tools to help them effectively plan for this next life stage,” said Stacy Sandler, principal, Human Capital, Deloitte Consulting LLP. “In fact, we found that nearly nine out of 10 plan sponsors (88%) feel that enhancing their existing participant education strategies is somewhat or very likely to help their employees’ ability to be ready for retirement.”

Scott Cole, senior manager, Human Capital, Deloitte Consulting LLP, added, “Despite the encouraging data regarding the increase in 401(k) balances and educational tools offered, more still needs to be done to help employees adequately prepare for their individual retirement needs. For example, approximately two-thirds of those plan sponsors surveyed believe that less than 10% of their employees take advantage of the educational resources offered. Simplifying retirement education and making it less daunting or intimidating to participants may be the key to improving participation and retirement readiness in the future.”

The survey was conducted electronically and polled 400 respondents, evenly distributed by geography, size and ownership status (i.e., publicly or privately held). A copy of the survey can be downloaded from here.

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