Employers, employees differ regarding retirement benefits

by Patrick J. Walsh

for the Business Journal

How companies view their role in providing their employees with retirement benefits and financial planning services may differ dramatically from the employees' expectations of those benefits and services.

Merrill Lynch's latest survey of employees and employers uncovered a troublesome difference in attitudes and actions regarding retirement planning. Employees, we found, have high and increasing expectations of the support their employers will give them in providing retirement income.

In contrast, employers questioned for the survey "Planning Employee Benefits: Meeting the Challenge of Different Expectations," said that in an effort to cut costs and improve their competitiveness, they have scaled back certain employee benefits, including some retirement benefits.

Survey results. For the employer survey conducted in late 1997, Merrill Lynch interviewed a cross section of 403 employers: small companies of 25 to 199 employees; midsize companies with 200 to 1,999 employees; and large companies with 2,000 or more employees. The survey was conducted through International Communications Research.

The employers' answers to this survey were compared with employees' answers to the companion survey, "The Ninth Annual Merrill Lynch Retirement and Financial Planning Survey," in which 938 employed and retired individuals were interviewed.

In the employee survey, a quarter of employees said they think employers have the main responsibility for providing them with retirement income. That's up dramatically from the 15 percent answering this way in 1996. Yet almost 80 percent of employers this year said they feel strongly that individuals should have the main responsibility for retirement income. Only 11 percent of employers said they have the main responsibility.

The employer's challenge. The challenge for employers in the years ahead will be to reconcile the difference in expectations between themselves and their employees. As a business owner who hopes to attract and retain qualified employees, you need to become more aware of:

?The importance your employees place on employer-provided retirement income.

?The need to give employees ways to save for their own retirement.

?The educational assistance employees require to make saving and investing decisions.

In answering the need to offer retirement plans, many companies have chosen defined-contribution plans such as 401(k) and 403(b) plans. Three-quarters of large companies, 69 percent of midsize companies and 57 percent of small companies offer some type of defined-contribution plan. Despite the importance placed on company-provided plans, employers in general are decreasing resources for communications methods that employees prefer, while devoting more resources to methods that are least favored by employees.

For example, employees overwhelmingly favor financial statements for information, second only to individual counseling. Yet employers have decreased their use of personalized statements from 88 percent in 1996 to 78 percent this year, and only 36 percent of employers reported offering individualized counseling.

The next three methods most popular with employees brochures and newsletters, seminars and software all showed a slight decrease in usage. Employers slightly increased their use of videotapes, audio tapes and online information, which are the methods least preferred by employees.

In light of these findings, employers may want to intensify their employee-education efforts, concentrating on the basics of retirement saving and investing, and using the most popular delivery methods.

Benefits managers should consider supplementing traditional print-based educational materials with personalized means of communication, such as seminars and individual counseling.

The employer's future role. In the survey, 77 percent of employers said they believe that employees could benefit from education about financial planning. Yet companies have been slow to add this feature to their benefits plans only four out of 10 employers offered financial planning services.

Findings from the employee survey seem to indicate that individuals who plan their finances are more confident and better prepared to manage their employer-sponsored retirement plan accounts. Better management of plan resources by employees may relieve employers of some of the burden of helping employees prepare for retirement.

Both employers and employees agree that employees can benefit from this type of assistance. Incorporating financial planning services into employee benefits packages may be the wave of the future.

(Patrick J. Walsh is senior vice president and director of group employee services for Merrill Lynch.)

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