Wholesale changes are in store for both pension and 401(k) plans, according to a survey of 140 financial executives by Prudential Financial. Nearly half of the execs at companies with pension plans said their firms were considering freezing or terminating their pension plans in the next two years. Seventeen percent have already closed their DB plan to new entrants, and 27% said they are likely to do so in the next two years.
Forty-five percent said their pension plan performance has had a substantial impact on their company's financial performance in the past year, and 57% said reducing the volatility of their plans' funding status is a high priority. As a result, 74% said their companies are undertaking a risk assessment of their pension plans, 66% are adopting a more conservative asset allocation strategy, and 60% will be increasing contributions.
As far as 401(k)s and other DC plans are concerned, 63% are more concerned than they were a year ago about employees who are financially unable to retire. Because of the market's tremendous losses in 2008, 44% said they are adding products to their retirement plans that will help protect investors against market declines.
In addition, 59% of defined contribution plan sponsors are more concerned about fiduciary risks than they were a year ago, 58% are concerned about the cost of matching contributions, and 59% are taking a closer look at administration costs.
Twenty percent said they have already ceased employer contribution matches in their 401(k)s, and 46% plan to suspend these matches over the next two years. That said, 60% said they will increase automatic enrollment and contribution escalation efforts within the next two years.
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