According to Towers Watson's industry-specific analysis — including defined benefit (DB) and defined contribution (DC) plans, as well as retiree medical and life insurance plans — the value, as measured by percentage of pay, of total retirement benefits for U.S. workers dropped 19% between 1998 and 2008. A decrease in the value of DB plans propelled the overall drop, which was offset to some extent by an increase in DC plan value.
During the 10-year period, the deepest decline in total retirement benefits occurred in the retail and wholesale industry: a drop of 33% (from 5.72% to 3.82% of pay). Among the eight industries and 642 companies analyzed in the study:
Total retirement benefits ranged from 9.3% (pharmaceutical industry) to 3.8% of pay (retail).
Only service industry workers saw their retirement benefit value increase: a gain of 3% (from 4.16% to 4.30% of pay).
The largest decline occurred in the retail sector: a drop of 33%.
The gas/energy/natural resources/electric industry had the highest level of DB benefits in 2008: 4% of pay.
The retail industry had the lowest level of DB benefits in 2008: 0.4% of pay.
The pharmaceutical industry had the highest level of DC benefits in 2008: 5.7% of pay.
The health care industry had the lowest level of DC benefits in 2008: 2.9% of pay.
During the past decade, many companies replaced traditional DB plans with DC and other account-based retirement programs for new workers. The financial crisis and the Pension Protection Act of 2006 contributed to a shift in retirement plan strategies, as well as a reevaluation of 401(k) plans as employee balances plummeted.
Virtually all employers were under pressure to reduce the cost and risk of their company-sponsored retirement benefits during the years analyzed; however, just how much they changed their programs and what level of support they could provide varied significantly based on industry-specific factors such as talent supply, cost structure and globalization.
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