Employer Commitment to Workers' Retirement Plans Has Declined Over Last Decade, Watson Wyatt Analysis Finds

Employer Commitment to Workers' Retirement Plans Has Declined Over Last
Decade, Watson Wyatt Analysis Finds

WASHINGTON, Oct. 21 /PRNewswire-FirstCall/ -- Corporate America's commitment
to workers' retirement plans, measured by benefit values as a percentage of
pay, has dropped consistently over the last decade, according to research by
Watson Wyatt, a leading global consulting firm. The research found that
companies that shifted from defined benefit (DB) plans to defined contribution
(DC) plans had the steepest drops, whereas companies that had only DC plans
actually had small increases in benefit value, albeit from lower levels.

A Watson Wyatt analysis of 183 employers found that the total retirement
benefits -- DB, DC and retiree health plans -- provided to employees decreased
from 7.8 percent of pay in 2002 to 6.9 percent of pay in 2008. For the 79
companies that maintained DB plans throughout this period, the value of the
overall benefits declined from 9.4 percent to 8.6 percent of pay, mostly due
to a significant cut in postretirement health benefits. In the same time
period, the 61 companies that provided only a DC plan saw a small increase in
overall benefits value -- from 5.3 percent to 5.6 percent of pay -- due to
enhanced employer contributions.

The remaining 43 companies in the sample of 183 transitioned from DB to
DC-only coverage between 2002 and 2008. Although these companies increased
their DC benefit values by an average of 2.7 percentage points, this gain
covered only approximately half of the DB value loss that was incurred by
closing or freezing plans. For these companies, overall commitment fell
substantially, from 8.7 percent of pay in 2002 to 5.5 percent of pay in 2008.

"The tumult of the last decade, with its market bubbles and crashes, two
recessions, rising health care expenses and compensation pressures, has caused
employers to scramble to look for savings," said Jim Shaddy, North America
retirement practice director at Watson Wyatt. "As a result, a number of
employers have pushed some of the risk and cost in their retirement plans onto
employees' shoulders."

An analysis of a larger data set of more than 600 companies found that some
industries -- manufacturing, transportation (including the airline sector) and
communications -- experienced declines greater than 30 percent in their
retirement plan values from 1998 to 2008. Other more profitable industries,
such as chemicals, drugs and pharmaceuticals, had a smaller decrease in the
same time frame, or in some cases (e.g., the health care sector) even a small
increase, although from a lower level.

"In difficult times, when employers are under pressure to alleviate escalating
costs and displace risk, reducing retirement benefits can be seen as the easy
solution since it is comfortably far off," said Kevin Wagner, senior
retirement consultant for Watson Wyatt. "However, companies can benefit from
considering the impact of their actions on the retirement adequacy of their
workers' benefit plans while also thinking about new solutions, such as hybrid
plans, which can provide secure retirement income as well as lower risk for
employers."

For more information, please visit: www.watsonwyatt.com/employercommitment

About Watson Wyatt
Watson Wyatt (NYSE, Nasdaq: WW) is the trusted business partner to the world's
leading organizations on people and financial issues. The firm's global
services include: managing the cost and effectiveness of employee benefit
programs; developing attraction, retention and reward strategies; advising
pension plan sponsors and other institutions on optimal investment strategies;
providing strategic and financial advice to insurance and financial services
companies; and delivering related technology, outsourcing and data services.
Watson Wyatt has 7,700 associates in 33 countries and is located on the Web at
www.watsonwyatt.com.

SOURCE Watson Wyatt

Ed Emerman for Watson Wyatt, +1-609-275-5162, eemerman@eaglepr.com; or Steve
Arnoff of Watson Wyatt, +1-703-258-7634, steven.arnoff@watsonwyatt.com