Data & Research April 5, 2010

One in Four Employers Cut Retirement Plan Contributions in 2009

Recent research found that one-fourth (26%) of employers have either scaled back their retirement plan contributions or eliminated the company match altogether in an effort to reduce costs.
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Some employers are in no hurry to reinstitute previous benefits, according to the sixth annual Retirement Plan Survey conducted by Grant Thornton LLP, Drinker Biddle & Reath LLP, and Plan Sponsor Advisors. Among those who have scaled back or eliminated contributions, 53% have not yet decided whether to return to previous levels in 2010, and 33% have no plans to do so. 

In addition, one-third (33%) of plan sponsors indicated that participants decreased their contributions, while 56% say they have seen increases in loan requests, and 34% of plans have had increased hardship withdrawals. However, only 7% of plan sponsors reported large increases in loan requests, and just 3% of plan sponsors reported significant increases in hardship withdrawals. 

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“Our survey shows some interesting changes in contribution patterns among plan participants.  Yet even in times such as these, it seems that the majority are staying the course and leaving their retirement accounts alone,” said Dave Wolfe, partner in the Employee Benefits and Executive Compensation practice at Drinker Biddle & Reath, in a press release. 

Other survey findings included:

  • Forty-three percent of respondents said they had experienced a reduction in force, and 16% said they had instituted a hiring freeze. However, approximately 34% of respondents experienced no change in the level of their workforce.
  • Forty-nine percent of respondents instituted salary freezes, and 17% capped the rate of salary increases.
  • Nineteen percent said the rates of bonuses were reduced, and 11% froze bonuses.
  • Nearly one-third (31%) of respondents indicated that they did not see a change in compensation practices during 2009.

A copy of the Retirement Plan Survey 2010 can be downloaded at www.gt.com/retirementsurvey.

In Practice April 5, 2010

The Hartford Realigns to Be More Customer-Centric

At its investor meeting last week in New York City, The Hartford Financial Services Group, Inc., announced a new organizational structure the firm said would help to execute on key customer growth opportunities.
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The three business segments are:

  • Commercial Markets: Led by Juan Andrade, president of Commercial Markets, this unit provides risk protection and benefits for businesses, offering small commercial, middle market and specialty property and casualty, and group benefits, with a growth focus on small and mid-sized businesses.
  • Wealth Management: This unit provides solutions for the retirement savings, income, and estate planning needs of consumers and small business owners, led by John Walters, president of Wealth Management.
  • Consumer Markets: Through this business, the company will continue to grow its AARP auto and homeowners insurance program through independent agents and direct distribution, and grow its non-AARP business, with an initial focus on customers age 40 and over, through independent agents. In the future, the company said it intends to use its expertise to pursue additional affinity relationships and targeted customer segments. The Hartford is conducting an internal and external search for a Consumer Markets leader.

This realignment of the company is “much more of a customer-centric strategy,” according to John Walters, Hartford Life president and CEO, who spoke to PLANADVISER about how the reorganization will affect the company’s retirement plan business.

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Walters said he believes there is an opportunity for the company to expand its retirement plans business through other relationships the company already has. Specifically, he explained, the company is looking to gather retirement assets from many of its Property and Casualty and Group Benefits clients.

“The overlap of clients with group benefits and P&C is very low,” Walters noted. This is why the company believes there are opportunities across the franchise to leverage relationships.

The Hartford has about 35,000 retirement plan clients, with the bulk of the business in plans with $5 million or less in assets, and about 500,000 Property and Casualty clients with under 100 lives, Walters said. Although Walters did not comment about what number of plans the company was trying to pick up from the P&C business, “if we could make a dent in [the Property and Casualty client group], that’d be a significant addition to the retirement plans business,” he commented.

Walters also said The Hartford plans another initiative in which it will try to move upmarket and gather more assets in the $5 million to $50 million space.

As for how these internal changes will affect current clients, Walters explained, “if we do this right, [clients] don’t see any change at all on their end.” As for personnel, Walters said Jamie Ohl, SVP and director of The Hartford’s Retirement Plans Group, and Jim Davey, executive vice president and director of the investment and retirement division, are “very much in place.”

Across all these initiatives, The Hartford will continue to have a big focus on financial advisers and third-party administrators, “as we have in the past,” Walters noted.

Under Davey, Walters said, there will also be a new initiative surrounding the retirement plans and annuities business to examine how to best capture assets as they leave retirement plans. Walters said there are many income-planning options and products available today, but that he doesn’t believe The Hartford is getting enough of the market share. Therefore, he wants to see whether there is a better way to capture those assets.

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