Declining returns and increasing volatility on the stock market are hammering down investment returns in defined contribution plans, exposing participants and sponsors to new risks and underscoring the need for greater participant education.

While employers acknowledge the desire for greater education and specific retirement planning advice, they appear reluctant to expand customized financial advice, in part due to concerns over legal liability.

Almost half of 1,000 401(k) plan participants recently surveyed by insurance giant CIGNA say they will make major investment changes in their accounts if balances are lower in January than they were at the beginning of the year.

"These are difficult times, and employees clearly are looking for help in managing their 401(k) portfolios," said Tom Jones, president of CIGNA Retirement & Investment Services. "Retirement planning is a critical workplace education and retention issue, and the gap between what employees need and what employers are providing is startling. They're not just on different pages, they're on different planets."

The vast majority of the 504 HR executives participating in CIGNA's Workplace Report on Retirement Planning acknowledge employee concerns. But benefit pros still seem reluctant to expand customized financial education and guidance.

Some 47% of HR managers said they feel unprepared and uncomfortable about giving their employees retirement advice. While 85% of employers consider it important for employees to access retirement information online, only 38% have posted it.

Consumers gave their employers the equivalent of a "C" grade for education and information, while polled HR executives, on average, graded their employee education programs a "B."

Providing education to employees ranked highest on the list of challenges HR executives face as a plan sponsor, according to 40% of respondents. One-third of respondents identified the economic downturn as their greatest challenge, followed by the decision to offer financial advice (10%).

Some 73% of respondents have made no changes to investments since September. Among those contemplating a change, 17% say they will invest in more conservative assets, 15% will save a higher percentage of salary, 10% say they will invest in more aggressive assets and 5% plan to stop contributions to the plan. Another 7% don't know what changes they will make.

Another disconnect revealed by the survey, 31% of respondents say retirement plans are the most important employee benefit, compared to 9% of HR executives who cite retirement plans as the most important tool for attracting and retaining employees.

"Particularly in today's environment, employees are looking for retirement education," Jones says. "And it's up to employers, working with their retirement plan providers, to design educational programs that build awareness, encourage increased participation and recognize the individuality and specific needs of each employee."

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