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Employers’ retirement costs drop over 15 years — Willis Towers Watson

However, health-care costs have doubled in same time period

Total retirement costs for employers have declined over the past 15 years even as health-care costs have doubled, according to a report from Willis Towers Watson.

The total retirement cost as percentage of pay, weighted by employer size, dropped to 6.8% in 2015 from 9.1% in 2001, driven primarily by the drop in cost of defined benefit plans to 0.9% from 3.8% and post-retirement medical costs to 0.2% from 1.2%. The cost of defined contribution plans, however, rose to 5.7% from 4.1%.

Many employers, according to the report, shifted away from offering defined benefit plans through freezing benefit accruals, toward enhancements to an existing defined contribution plan or new defined contribution plan altogether.

The percentage of employers offering a DB plan to new hires dropped to 7% in 2015 from 45% in 2001. In 2015, 76% of employers offered a DC plan only to new hires as opposed to 41% in 2001.

The share of cost between active health plans and retirement plans, meanwhile, shifted heavily toward health plans. In 2001, 58.1% of the costs went to retirement plans and 41.9% to health plans. In 2015, the shift went heavily to health plans, contributing 63.5% of costs vs 36.5% of costs for retirement plans.

The report is available on Willis Towers Watson's website.