Retirement Benefits in Decline

Employers are eliminating their most valuable retirement benefits.


Traditional pension plans have been in decline for decades, and even 401(k) matches continue to be less prevalent than they were five years ago. Retirement benefits that are growing in popularity largely have little cost to employers, including automatic enrollment in 401(k) plans and a Roth 401(k) option, according to a recent survey of 550 human resources professionals who are members of the Society for Human Resource Management. Here’s a look at how retirement benefits have changed over the past five years:

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Continued growth of 401(k)s. Nearly all of the employers surveyed (92 percent) offered a 401(k) plan or similar type of retirement account to workers in 2012, up from 84 percent in 2008, SHRM found.

401(k) matches decline. Fewer employers now provide a 401(k) match than in 2008. The proportion of employers that contribute to worker retirement accounts declined significantly from 75 percent in 2008 to 68 percent in 2012, SHRM found. And only 2 percent of employers plan to institute a 401(k) match in the next 12 months.

More automated features. Automatically enrolling new and sometimes existing employees in a retirement account unless they take action to opt out is an increasingly popular way companies are nudging workers to save for retirement. Some 39 percent of companies automatically enrolled workers in a 401(k) in 2012, up from 32 percent in 2008. Another 2 percent of employers are planning to add this feature in the coming year. About 19 percent of companies also automatically escalate the proportion of employee paychecks that is deposited in 401(k) accounts.

Improved access to the Roth 401(k). A Roth 401(k) option has been increasing in popularity, from 21 percent of employers offering it in 2008 to 34 percent in 2012. Some companies (19 percent) also allow funds in a traditional 401(k) account to be converted to a Roth 401(k).

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Loans continue to be allowed. Most employers (66 percent) permit workers to take loans from their 401(k) plan in 2012, which is statistically similar to the 69 percent that offered 401(k) loans in 2008. And 2 percent of employers even offer a 401(k) plan debit card.

Free advice. Many 401(k) plans offer workers online investment advice (55 percent), one-on-one individual investment advice (44 percent), group investment advice (41 percent), and retirement preparation advice (39 percent).

Frozen pension plans. Traditional pension plans have continued their decline in recent years. Only 21 percent of the companies surveyed continued to offer a traditional pension plan in 2012, compared to 33 percent of companies in 2008. And 12 percent of employers indicated that their pension plans were frozen, making them unavailable to newly hired employees. Another 6 percent of employers offer cash balance pension plans and 7 percent provided a supplemental executive retirement plan.

Loss of retiree health care coverage. Many employers have eliminated their retiree health insurance programs in recent years. The proportion of employers offering retiree health care coverage to employees has declined from almost a third (32 percent) in 2008 to under a quarter (24 percent) in 2012.

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Phased retirement. A few employers offer formal (5 percent) or informal (5 percent) phased retirement programs that allow workers to gradually cut back their hours or responsibilities instead of abruptly retiring.