Survey Shows Innovative 401k Plan Designs Taking Hold

MINNEAPOLIS, MN, September 6, 2006 -- A new national survey from Wells Fargo's employee benefits consulting group, BPS&M, shows more evidence of the trend away from pension plans in favor of 401k plans, while many employers are making their 401k plans more innovative. The survey also found that employers' greatest concern is that employees are not saving adequately for retirement.

The 2006 Best Practices in Retirement Plans Survey, which included responses from more than 450 employers nationwide, found that nearly all (93 percent) respondents sponsor a 401k or other similar plan, and four out of five employers view it as the primary vehicle for their employees' retirement security. One-third of respondents provide a defined benefit or traditional pension plan to their employees. That figure is likely to decline as one in five companies with such a plan report they plan to close it to new employees, 14 percent plan to replace their pension plan with a 401k or similar plan, 13 percent plan to freeze current benefits in the pension plan and 5 percent plan to terminate their pension plan within the next 12 months.

"Clearly, employers expect workers to accept greater responsibility for their long-term financial security," said Laurie Nordquist, head of Wells Fargo Institutional Trust Services. "The good news, though, is that employers are trying to help their employees achieve their retirement goals through innovative retirement plan design. These efforts, along with the recently signed into law Pension Protection Act, are creating the next generation of 401k plans, which have the potential to help many more Americans save adequately for retirement."

Employers' greatest concern about the retirement plans they offer is that their employees are not saving enough for retirement, cited by 43 percent of respondents. Employers are reacting to their concerns about workers' lack of retirement readiness by adding features to their 401k plans designed to get more employees on track financially for retirement.

• Automatic Enrollment. One-quarter of employers (26 percent) report automatically enrolling workers in 401k plans, and 10 percent plan to add that feature in the next year.
• Target Funds. Nearly half of all companies in the survey (48 percent) offer target date or target risk funds, which are investment options managed to a particular risk tolerance and/or retirement date.
• Managed Accounts and Advice. Many employees are looking to receive more hands-on advice about how to invest for retirement. Employers are responding to these requests as more than two-thirds of respondents (69 percent) already provide some form of investment advising or education resource to employees.
• Roth 401k Contributions. Only 3 percent of survey respondents currently offer a Roth 401k contributions feature, but 16 percent plan to add such a feature within the next 12 months.

Pension Plan Management

Of the one-third of survey respondents that offer a defined benefit pension plan, the employers' greatest concern was the increasing cost of providing retirement plans (43 percent).

"The costs of pension plans, particularly the variable nature of the costs, is weighing on the minds of employers that offer pension plans, and the survey shows that employers are taking steps to make these expenses more predictable and manageable," said Kathie Tange-duPre, director of surveys and publications for Wells Fargo's benefits consulting group, Bryan, Pendleton, Swats & McAllister (BPS&M), which conducted and analyzed the survey.

The majority of employers with pension plans (76 percent) reported already taking some steps to better manage plan costs. These actions include one or more of the following top four strategies:

• changes in actuarial assumptions (45 percent);
• changes to portfolio mix (35 percent);
• strategic plan changes, including amendments or plan freezes (34 percent), and
• asset liability forecasts (30 percent).

A frequent complaint employers have about their pension plans is that their employees do not appreciate the benefit the company is providing. However, most employers (72 percent) provide only a summary plan description about the pension plan to their employees.

About the Survey

The 2006 Best Practices in Retirement Plans Survey was conducted by BPS&M, the employee benefits consulting group of Wells Fargo Institutional Trust Services, from mid-March to early June 2006. The survey was conducted prior to the enactment of the Pension Protection Act, though both houses of Congress had passed variations of the legislation at the time. Respondents to the survey included more than 450 employers of all sizes and regions of the U.S., with a concentration among private employers with between 500 and 10,000 employees. A copy of the survey results can be requested by contacting BPS&M at 615-665-5335.

About Wells Fargo

Wells Fargo Institutional Trust Services (ITS) is a national leader in providing investment solutions, total retirement management, trust and custody solutions, and benefits consulting for institutional clients. ITS offers service to more than 5,000 clients and 1.4 million retirement plan participants across the country.

###

Click here for more material dealing with current trends, opinion, news, legislative action, investments, marketing, sales, consulting, and legal issues on 401k plans.

This is a press release provided by the company or its representatives. 401khelpcenter.com, LLC is not the author of this release and is not associated or affiliated with any firm or organization mentioned unless otherwise noted. Use of any information obtained from this release is voluntary, and reliance on it should only be undertaken after an independent review of its accuracy, completeness, efficacy, and timeliness. Reference to any specific commercial product, process, or service by trade name, trademark, service mark, manufacturer, or otherwise does not constitute or imply endorsement, recommendation, or favoring by 401khelpcenter.com, LLC.