Study shows plunge in re­tire­ment ben­e­fits

Northwest Arkansas Democrat-Gazette - - WEATHER REPORT - BEN STEVERMAN

Em­ploy­ers cut their con­tri­bu­tions to work­ers’ re­tire­ments by a quar­ter from 200115, ac­cord­ing to a new re­port by the con­sult­ing firm Wil­lis Tow­ers Wat­son. The big­gest driver: the de­cline of tra­di­tional de­fined-ben­e­fit pen­sions, re­placed by stingier, 401(k)-style, de­fined-con­tri­bu­tion plans.

Re­tire­ment ben­e­fits — in­clud­ing em­ployer con­tri­bu­tions to pen­sions, 401(k)s and re­tiree health care ben­e­fits — fell from 9.1 per­cent of worker pay in 2001 to 6.8 per­cent in 2015. Spend­ing on tra­di­tional pen­sions plunged 76 per­cent, to less than 1 per­cent of worker pay.

Med­i­cal ben­e­fits for re­tired work­ers be­came in­creas­ingly scant, fall­ing from 1.2 per­cent of worker pay to 0.2 per­cent.

The good news is that many com­pa­nies, while shut­ting down or freez­ing pen­sion plans, have sweet­ened their 401(k) match­ing con­tri­bu­tions. Some large em­ploy­ers, ea­ger to re­cruit top job can­di­dates in such hot ar­eas as tech­nol­ogy, have in­creased ben­e­fits, as The Wall Street

Jour­nal re­ported on Mon­day. An ex­ec­u­tive at Mi­crosoft in charge of ben­e­fits told the

Jour­nal that the com­pany’s newly gen­er­ous em­ployer match had proved so pop­u­lar that “it’s blow­ing my bud­gets.”

But higher 401(k) matches aren’t mak­ing up for the loss of other re­tire­ment ben­e­fits over­all, and even the most gen­er­ous 401(k) plans usu­ally lack a tra­di­tional pen­sion’s big­gest selling point: a guar­an­teed in­come for life.

While re­tire­ment plans got less gen­er­ous, spend­ing on cur­rent work­ers’ health in­sur­ance soared, Wil­lis Tow­ers Wat­son said. To keep up with the ris­ing cost of health care in the U.S., em­ploy­ers dou­bled their spend­ing on health care as a per­cent­age of em­ploy­ees’ pay, from 5.7 per­cent in 2001 to 11.5 per­cent in 2015.

In 2001, re­tire­ment made up the ma­jor­ity of the cost of pro­vid­ing ben­e­fits to em­ploy­ees, Wil­lis Tow­ers Wat­son es­ti­mated. But its share has fallen steadily. By 2015, health care for cur­rent em­ploy­ees was 63 per­cent of all ben­e­fit spend­ing.

Work­ers aren’t nec­es­sar­ily get­ting much for this ex­tra health spend­ing. In fact, other stud­ies have shown that work­ers’ con­tri­bu­tion to their own health care, in the form of de­ductibles and co-pays, is also up.

The ris­ing cost of health care is hit­ting Amer­i­cans twice. While they’re work­ing, health costs are bleed­ing away their abil­ity — and their em­ploy­ers’ abil­ity — to pitch in for re­tire­ment.

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