“Virtually all employers were under pressure to reduce the cost and risk of their company-sponsored retirement benefits during the years analyzed,” said Kevin Wagner, senior retirement consultant at Towers Watson. “However, just how much they changed their programs and what level of support they could provide varied significantly based on industry-specific factors, including talent supply, cost structure and globalization.”
According to the analysis, the largest decline in total retirement benefits from 1998 to 2008 occurred in the retail and wholesale industry - a drop of 33%, from 5.72% of pay to 3.82%. Among the eight industries analyzed, only service industry workers saw the value of their retirement benefits increase — from 4.16% of pay to 4.30% of pay, an increase of 3%.
According to the analysis, the largest drop in the value of DB benefits from 1998 to 2008 occurred in the retail industry (81%), which, along with the service industries, also provided the lowest level of defined benefits at the end of the period. The value of DC benefits increased for all of the industries analyzed, led by the pharmaceuticals and health care industries, which experienced increases of 97% and 87%, respectively.
“This past decade witnessed a significant shift in retirement plans, as many companies replaced their traditional DB plans with DC and other account-based retirement plans for new workers,” said Wagner. “In the last few years, both the financial crisis and the Pension Protection Action of 2006 have been factors contributing to employers’ careful examination of their retirement plan strategies. The financial crisis also provided a wake-up call for employers to reevaluate their 401(k) plans, as their employees’ balances plummeted.”
