More than 4 in 10 employers offering defined benefit pensions said they have converted to hybrid plans, according to a recent survey from Towers Perrin. Another 29 percent have eliminated defined benefit pensions for new hires, and 27 percent have reduced or frozen their defined benefit plans.
Medical coverage is also receiving the scalpel from employers; 41 percent of more than 365 human resource executive and benefit directors representing 340 similarly sized companies said they have already reduced retiree medical subsidies for future retirees. Another 35 percent said they are likely to do so, and 69 percent said they have increased their current retirees’ share of medical plan costs via such steps as higher co-payments, deductibles, and coinsurance.
None of this comes as much of a surprise to the rank and file.
In a separate survey of more than 2,000 employees working full-time at midsize and large U.S. companies, 78 percent said they expect to continue working in some capacity well into their retirement years. While 43 percent of that group said they would work mostly to stay involved and active, more than one-third said they would do so for financial reasons.
One reason might be that many employees don’t expect company and government retirement programs to provide lifetime financial security. A majority of employees expect their employers to reduce their defined benefit coverage; 36 percent expect to have only savings-type retirement plans in the future; and 62 percent expect that they’ll need to carry a greater share of the cost of retiree medical coverage.
Fully 28 percent expect that Social Security will be discontinued altogether.
Another worrisome statistic: Most of these individuals are not sure how much they’ll need for retirement. On average, employees who responded to the survey believe they will need only 62 percent of their pre-retirement income to meet retirement financial needs — a figure many experts deem too low.