WRITING SAMPLES : Press Releases FOR IMMEDIATE RELEASE January 6, 2004 Contact: Regulatory Uncertainty Eroding Employer Support for Pension Plans, Hewitt Study Shows LINCOLNSHIRE, Ill. — The uncertain regulatory environment surrounding private pension plans is creating long-term concern among employers offering the plans, according to a new Hewitt Associates (NYSE: HEW) survey of more than 200 large companies. Hewitt's survey shows that employer support for traditional defined benefit plans is at risk. Due to issues such as uncertainty over interest rate relief, many employer sponsors of traditional pension plans say that they will move away from them over the next year if key legislative and regulatory issues are not resolved favorably. Congress considered temporary interest rate relief in 2003 and plans to revisit the issue in 2004. Absent interest rate relief, 39 percent of employers with defined benefit plans intend either to freeze them and move to a defined contribution plan (21 percent), or to provide future benefits to some or all current employees under the traditional defined benefit plan, but provide benefits to new employees through a defined contribution plan (17 percent). Still, 45 percent indicate that they are taking a wait-and-see approach. "The defined benefit plan has long been a cornerstone of American retirement security, but the U.S. pension system is eroding, and it will continue to do so unless congressional or regulatory action is taken to shore it up," said Mike Johnston, Hewitt's North American practice leader for its Retirement and Financial Management Practice. "Employers would find it most helpful for Congress to clarify its intent by rationalizing funding rules and by giving them reassurance about the viability of cash balance plans." Support for Hybrid Pension Plans Continues to Decline If the current legal, regulatory and accounting issues around cash balance and hybrid plans are not resolved in the next year, Hewitt's survey shows that nearly one-third of companies (31 percent) offering the plans intend to freeze them and provide future accruals solely under a defined contribution (401(k)) plan. Only 11 percent say that they would provide future accruals under a traditional defined benefit plan, while 44 percent say that they would continue to wait out the storm before taking action. "While a significant majority of employers have indicated a willingness to wait for legal guidance regarding cash balance and hybrid plans in the short term, their patience is limited, and these plans could be at risk over the long term," said Johnston. "Employers can't continue to offer these plans if the environment doesn't improve. Unfortunately, employees will feel the impact as they potentially lose a retirement benefit in the near future." Over the past 13 years, the percentage of employers offering traditional defined benefit plans has dropped from 83 percent in 1990 to 45 percent in 2003, according to Hewitt's data. Likewise, the percentage of large employers offering any defined benefit plan (including cash balance or hybrid plans) has dropped from 85 percent in 1990 to 68 percent in 2003. According to Hewitt's survey, 33 percent of companies offering some type of defined benefit plan say that volatility of costs is the single greatest threat to today's pension system. Other top concerns include the level of overall costs (19 percent) and cash balance litigation and regulatory uncertainty (13 percent). In terms of employee satisfaction, a majority (51 percent) of surveyed employers think that their employees are completely or very satisfied with their retirement plans and that they provide an adequate level of retirement income. Employers who offer pension and defined contribution plans rated these categories higher than employers who offered defined contribution plans only. Copies of Hewitt's study, "Current Retirement Plan Challenges: Employers' Perspectives," are available for $100 from the Hewitt Information Desk by calling (847)295-5000 or by email at infodesk@hewitt.com. Hewitt Associates ( www.hewitt.com ) is a global human resources outsourcing and consulting firm. It provides services from offices in 38 countries. Back to Top