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New Diversified Investment Advisors Survey Shows That More U.S. Companies Are Considering Total Benefits OutsourcingNew Diversified Investment Advisors Survey Shows That More U.S. Companies Are Considering Total Benefits Outsourcing PURCHASE, N.Y.--(BUSINESS WIRE)--Oct. 20, 2005--Amidst increasing pressures to save financial and human resources associated with the administration of retirement, health and welfare benefits plans, 22% of U.S. companies are currently considering Total Benefits Outsourcing (TBO), while another 11% have either implemented or are in the process of implementing TBO, according to a just-released survey, Report on Retirement Plans--2005. Diversified Investment Advisors, a national investment advisory firm specializing in retirement plans, conducted the survey. While respondents cited various reasons for finding TBO attractive, more than one-third (37%) of respondents cited either lower administrative and recordkeeping costs or lower internal staffing needs as TBO's single biggest advantage. "As companies adopt a more holistic, integrated approach to human resources management, the interest in outsourcing has grown, which ultimately benefits both employers and employees," said Eric Henon, a Vice President at Diversified. "In addition to being more cost-effective, companies that implement TBO can more easily provide their employees with a total compensation statement that includes detailed information about the status of their retirement, health and welfare benefits along with a summary of their monetary earnings. Not only is this a powerful reminder that their total compensation is much more than just their wages, but it would allow them to make more informed and better choices about aspects of their benefits that are within their control." In another key finding, the Diversified survey reveals that the EGTRRA (Economic Growth and Tax Relief Reconciliation Act) tax credit has had the intended effect on employee behavior, with 62% of defined contribution plan administrators reporting increased levels of participation in their plan as a result of the credit. In addition, 65% of respondents said it led to increased levels of contributions. "EGTRRA's impact on stimulating retirement savings comes at a critical time when people need to be more proactive in saving in light of wavering confidence in the future of Social Security and defined benefit plans. Congress should take the necessary steps toward making these EGTRRA enhancements permanent before the expiration in 2011," said Henon. "With that said, EGTRRA has not been without its challenges, as defined contribution administrators have had to manage additional regulatory changes associated with the Act." Among the Diversified study's key findings were: -- Nearly 90% of defined benefit plan administrators say their plan impacted their ability to recruit the most qualified employees, with about one-quarter of those saying the impact was major. Ninety-two percent of defined contribution plan administrators say their plan has the same impact, and 29% of those reported the impact was major. -- Ninety-two percent of defined contribution plan sponsors and 93% of defined benefit plan sponsors say their plan impacts their ability to retain the most qualified employees. The percent of employers that find their plan has a major impact on their ability to recruit the most qualified applicants is 30 points higher among 401(a) defined contribution plans (58%) than it is among traditional defined benefit plan sponsors (28%). -- Among the changes or enhancements defined contribution plan administrators were planning within the next year, employee education remained at the top of the list for 43% of respondents. About one-third are considering financial planning in the next year; 33% may add investment options, and 23% will consider consolidating administrative functions for multiple plan types with a single provider. -- One-quarter of defined benefit plan administrators said they will consider terminating their plan within the next year, and another 25% said they will consider moving to a pension equity plan from a traditional defined benefit plan. Others plan to reduce benefits (24%), freeze the plan (23%) or move to a cash balance plan (20%). -- One-fifth of firms said they now offer a 401(a) plan that does not include a 401(k) feature, up from only 11% in 2004. Offering a 401(a) plan can potentially increase the visibility of employer contributions and subsequently, employee appreciation for retirement benefits. "These firms may see these plans as a way to differentiate themselves in a competitive marketplace, especially in light of the fact that many companies have already or are thinking about freezing or terminating their defined benefit plans," said Henon. "The growing interest in 401(a) plans may be a by-product of the trend away from defined benefit plans and toward defined contribution plans." Consistent with Diversified's study of large corporate retirement plan trends conducted in 2004, reliance on in-house staff continues to be an issue for plan sponsors, as companies fail to optimize the administrative and management resources available to them by plan providers and other external resources. For example: -- Most companies (86%) involve their HR department in the administration of their defined contribution plan, with a median number of four full-time equivalents . Slightly more than half of defined contribution plans with under $50 million in assets have less than one full-time employee devoted to plan administration. At the other end of the spectrum, 70% of the largest plans (at least $500 million in assets) have 20 or more full-time HR staff involved in plan administration. The study showed that statistics are very similar pertaining to the administration of defined benefit plans, as well. -- Monitoring multiple vendor relationships can be a costly part of defined benefit plan administration, with more than 40% of plan sponsors with at least 25,000 employees using four or more vendors. -- Bundling plan services with a single provider is an action cited by many respondents, with 34% of defined benefit plan providers having considered the move within the last year. Fourteen percent of defined contribution sponsors looked into reducing the number of providers within the last year. "The survey results really point to how much more effective corporations could be in utilizing the expert resources available to them from plan providers and benefits consultants, for example," said Henon. "Whether bundling plan administration, investment services, and actuarial services with a single vendor or consolidating the vendor relationships linked to a company's myriad of plans, corporate plan sponsors can focus their internal HR, legal and finance resources more strategically and achieve significant cost savings at the same time." About the Survey Diversified Investment Advisors' Report on Retirement Plans--2005 survey was conducted by Diversified Investment Advisors and administered by LIMRA International and FGI Research, Inc. among U.S. companies with at least 1,000 employees. The survey featured responses from 204 individuals responsible for the administration of benefits at their firm. Of those companies surveyed, all offer a defined contribution plan and 138 offered a defined benefit plan. Report on Retirement Plans--2005 contains data based on the 2004 plan year and focuses specifically on the defined benefit and defined contribution plans of U.S. companies. About Diversified Diversified Investment Advisors is a national investment advisory firm specializing in retirement plans. The company's expertise covers the entire spectrum of defined benefit and defined contribution plans, including: 401(k); 403(b); 457; non-qualified deferred compensation; profit sharing; money purchase; cash balance and Taft-Hartley plans; and rollover and Roth IRA. Headquartered in Purchase, NY, the company's regional offices are located in Arkansas, California, Illinois, Iowa, Louisiana, Maryland, Massachusetts, New York, North Carolina, Ohio, Oregon, Pennsylvania, Texas and Wisconsin. Visit our Web site at www.divinvest.com. Contacts Diversified Investment Advisors Wendy Daniels, 914-697-8967 danielw@divinvest.com or Kitchen Public Relations Nina Dietrich, 201-493-8944 ninallc@aol.com or David Norman, 212-687-8999 dnorman@kitchenpr.com Homepage For personal help planning for your retirement http://www.retirement-plan.us For web information about planning your retirement. http://www.retirement-retirement.com/category-20.php |
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