Remember when employees blamed you in part for their financial troubles? Well, don’t shoot the messenger, but maybe it is.
Not entirely, of course, but perhaps just a sliver. After all, new research from Towers Watson shows U.S. workers saw the value of their employer-sponsored retirement benefits — measured by percentage of pay — decline by double-digit levels over a 10-year period ending in 2008.
To be fair, the overall drop was driven by a decrease in the value of defined benefit plans and the rise of defined contribution plans helped stave off a much larger drop.
But still, from 1998 to 2008, the value of total retirement benefits provided to new, salaried employees across eight industries studied declined by 19%, from 7.88% to 6.36% of pay. TW defined total retirement benefits to include DB and DC plans, retiree medical and retiree life insurance plans.
The drop was most pronounced in the retail industry — among employees who likely can least afford to lose any savings advantage. However, with pay cuts/freezes and once dual-earner families enduring a spouse out of work, you could argue employees across all industries can ill-afford such benefit squeezes.
Of course, I’m not saying that doing away with DB plans is a bad strategy. However, to have retirement benefits overall decrease while retirement costs swiftly increase is not a good strategy either — for you or your workers.
This seems like one of those rock-and-hard-place scenarios. What do you think? Do you see a problem with the drop in retirement benefits? Is it completely up to employees to make up the difference, even now when times are particularly tight? Share your thoughts in the comments.
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