Data & Research December 2, 2008

More Companies Go Match-less

A Las Vegas casino company and one of Utah’s largest employers are the latest to cut 401(k) employer match contributions in an effort to reduce costs.
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Station Casinos announced last week it is suspending its 401(k) matching contributions, according to the Las Vegas Review-Journal. The casino company said the cut was forced by the struggling economy.

Station Casinos’ executives are taking pay cuts and will not be getting bonuses this year, according to the news report. No other local gaming company indicated that it is changing its 401(k) policies.

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In addition, MGM Mirage terminated its supplemental executive retirement plan in November and has stopped matching funds for its employees’ deferred compensation program, but spokesman Alan Feldman said the company has not discussed changing its 401(k) plan.

Meanwhile, one of Utah’s largest employers, Intermountain Healthcare, has told its 28,000 employees it will not contribute its share to their 401(k) retirement funds next year. According to the Salt Lake Tribune, the company told employees about the cutback in its contributions in an e-mail newsletter last week, citing “the difficult economic times we’re facing.”

Spokesman Daron Cowley told the Tribune Intermountain’s decision on 401(k) contributions is only for 2009, and no decisions have been made beyond that. The organization will continue contributions to the company’s fixed pension plan and employees will get raises.

The U.S. recession continues to affect retirement investments, as companies such as General Motors, newspaper publisher Lee Enterprises, and rental car company Dollar Thrifty Automobile Group previously announced they have suspended their contributions to 401(k) plans (see Tightening Economy Squeezes 401(k) Match Suspensions).

Products December 2, 2008

White Paper Urges Focus on Retirement Income

Plan designs should evolve beyond their focus on helping employees accumulate an adequate amount of retirement savings to a focus on encouraging participants to secure lifetime income during retirement, according to the Institutional Retirement Income Research Council (IRIRC).
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In its first white paper, “Institutional Retirement Income Solutions: A Call to Action,” the IRIRC (supported by Prudential Retirement) discusses why defined contribution (DC) plan sponsors should consider adding retirement income solutions to their plans. Noting that defined contribution plan assets are projected to be the primary source of retirement income for future retirees, and in the 12-month period through October, research has found that 401(k) plans and individual retirement accounts dropped in value by $2 trillion due to market volatility, Martha Spano, IRIRC co-chair and West Division Practice Leader for Watson Wyatt, commented in a press release: “The current economic crisis has exposed the flaws in the existing retirement system.”

The white paper contends that employers’ roles are evolving and they are in a unique position to have the greatest impact in helping plan participants become more successful through the emergence of automatic enrollment, automatic deferral increases, and qualified default investment alternatives as plan features. The council also suggests that success of a DC plan should be based on whether the plan facilitates adequate retirement income and not on participation rates.

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“The only way to quell the increasing public angst around the ability of Americans to retire in the future is for stakeholders from all areas of the retirement industry to come together and encourage plan sponsors to implement optimal retirement income solutions that address many of the problems retirees face in generating secure lifetime income,’ said Spano.

The white paper is available through www.irirc.com.

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