CHICAGO Executives at three out of five U.S. corporations believe most of their employees will not be financially secure enough to retire by the time they reach 65, according to a new survey conducted by Aon Consulting, Chicago.
The Aon Consulting 2007 Benefits and Talent Survey, which polled executives at 2,172 organizations between spring 2006 and spring 2007, found that 62% of those surveyed expect that less than half of their workers will have enough income to retire between the ages of 62 and 65.
This finding, combined with the high percentage of employers not increasing the benefits in their retirement program, indicate that many organization may need to plan for employing an aging work force, the study said. If the expected results are unacceptable, employers need to review their plan designs and retirement education effort to ensure they are working to achieve the intended results.
Approximately 98% of employers reported they thought employees should know how much money they will need at retirement, but 34% expect their employees to find this information on their own, according to the survey.
Of those companies that offer defined contribution plans, 82% make employer contributions, but the combination of employer and employee contributions may be inadequate, the survey found. Roughly 26% of employers with 401(k) plans contribute less than 2% of payroll to the plan, which the Aon study noted might not meet employees retirement needs.
About 80% of employers offer online retirement planning tools to help educate employees, but the same percentage also believes their employees still do not fully understand how to invest their assets, indicating the education is not fully used, Susan Alford, executive vice president and defined contribution national practice leader with Aon Consulting, said in an interview. Personalized retirement planning tools and education are essential to help employees understand how much income they will need at retirement, she said, but the usage is extremely small.
Automatic options for enrollment, contributions and asset allocation may help increase employee preparedness for retirement, she said.
Aons survey found that only 26% of the employers surveyed have implemented automatic enrollment, with 18% planning to add it in the next 12 months. The remaining 56% have no plans to add automatic enrollment.
Despite the majoritys current inclination against automatic enrollment, Ms. Alford said the long-term trend will likely be toward wider acceptance of automatic features.
We expect more employers to embrace these programs, she said. I think were right on the cusp of that trend as plan sponsors are able to determine their level of liability in implementing automatic features.