Grant Thornton 2012 retirement benefit cost management survey
Employers are still grappling with economic uncertainty and the costs of managing employee benefits, including retirement benefits. In fact, Grant Thornton's recent survey of CFOs found that 79% of respondents consider retirement and other employee benefits to be a top cost management concern.
Grant Thornton recently surveyed employers about their approaches to managing the costs of retirement plans.
Survey results: managing the costs
The survey asked respondents whether they use certain retirement plan cost-management approaches and, if so, how effective those approaches have been.
Approaches applicable to all types of plans
The most popular cost management approach for all plans was "conducting competitive bidding for plan vendors to reduce fees paid to the vendors (such as auditors, actuaries, third-party administrators or law firms)." Of the respondents using this approach, nearly 80% find it effective.
In second place was "paying plan expenses (such as annual plan audit fees) from plan assets." Among the respondents using this strategy now, almost 70% report it as effective.
Nearly 50% of respondents identified one approach — "charge back employer expenses to plan" — as being effective, but only a small percentage of the respondents use it.
Approaches applicable to 401(k) and 403(b) plans
In the category of approaches applicable to 401(k) and 403(b) plans, "reduce or eliminate matching contributions to 401(k) or 403(b) plans" garnered first place as a highly effective way to manage costs, but is not widely used. This approach became popular when the recession began, but as the economy has improved and competition for employees has grown, it has become less popular.
Approaches applicable to defined benefit plans
Only 14% of respondents reported using defined benefit plans, which is why the majority of respondents reported not using various cost-management approaches for these plans. The approach "freezing all benefit accruals" garnered the most support for being highly effective.
Survey demographics
The survey generated responses from 139 employers, with the following industries being the most heavily represented:
Most respondents reported annual revenues of $1 million to $50 million. The range of $101 million to $500 million in annual revenues ra a close second.
Conclusion
The Grant Thornton survey identifies several approaches that employers have found effective in managing costs. In particular, respondents identified competitive bidding for plan vendors and paying plan expenses from plan assets. These approaches, as well as others identified in the survey, provide employers with an opportunity to reduce costs.
In response to a question about the number of full-time employees working at their organizations, one-third of respondents reported their organizations have fewer than 100, and one-fourth indicated 101 to 500 full-time employees. Another one-fifth of the respondents have between 1,001 and 10,000 employees. Only a small number of respondents have more than 10,000 employees.
Footnotes
1 These percentages do not total 100% because not all respondents provided information regarding their annual revenues.
2 These percentages do not total 100% because not all respondents provided information regarding the number of employees.
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