Employers looking at retirement options: Hewitt

Employers are re-examining their retirement programs this year in response to recent changes in the financial and legislative environment and out of concern that employees aren't saving enough, a new study by Hewitt Associates Inc. has found.

To address these issues, 58% of employers said they will automatically enroll employees into 401(k) plans by year-end, and 19% said they plan to apply automatic enrollment to additional classifications of workers and expand the feature beyond just new hires, the study said. In addition, 19% of employers that already offer automatic enrollment say they plan to increase the default contribution rate.

Half of employers also say they plan to review their defined contribution fund operations, including fund expenses, revenue sharing and communication to employees, and 48% will conduct a comprehensive review of fund offerings, the study said.

Pamela Hess, director of retirement research at Lincolnshire, Ill.-based Hewitt, attributed the focus on fund operations and expenses to employers' responding to increased attention by government agencies on plan fees and disclosures, as well as recent litigation in this area.

While employers are planning significant changes to their defined contribution plans, the majority of companies offering defined benefit plans say they are not likely to make any changes to them in 2007. However, 6% of employers sponsoring open defined benefit pension plans say they are very likely to close participation to new employees, 4% plan to freeze accruals and 11% are very likely to change the design of their plans. An additional 6% plan to switch from a traditional pension plan to either a cash balance or pension equity plan.

Other key findings of Hewitt's study included:

• 57% of employers already offer or are likely to offer automatic rebalancing in 2007, up from 47% in 2006.

• 12% added a Roth 401(k) in 2006, and 11% say they were very likely to do so in 2007.

• 43% say they offer or are very likely to add third-party investment advisory services, and 19% offer or plan to offer an in-person investment adviser.

• 78% say they plan to make no changes to their company match, while 8% say they plan to increase the company match, and only 1% say they plan to reduce or eliminate the company match.

Hewitt's Web-based survey of 146 large employers was conducted in November and December 2006.

For more details on the survey, visit www.hewitt.com. Copies are available at no charge by contacting Hewitt at 847-295-5000 or via e-mail at info@hewitt.com.