Data & Research December 7, 2011

Data Shows Dominance of DC Plans in Private Industry

The U.S. Bureau of Labor Statistics (BLS) found that 2% of compensation costs for private industry employers go toward defined contribution benefits. 
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The data clearly show that defined contribution retirement plans are the dominant retirement benefit in private industry, and defined benefit plans are the dominant retirement benefit for state and local government workers.  

Employer costs for employee compensation averaged $30.11 per hour worked in September 2011; wages and salaries averaged $20.91 per hour worked and accounted for 69.4% of these costs, while benefits averaged $9.21 and accounted for the remaining 30.6%Total employer compensation costs for private industry workers averaged $28.24 per hour worked in September 2011. Of that cost, benefits accounted for 29.5%. Private industry employers spent 2% of compensation costs on defined contribution retirement benefits, while state and local government employers spent only 0.8% of compensation costs on DC benefits.    

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On the other hand, defined benefit retirement benefits accounted for 1.6% of private industry employers’ costs, but accounted for 7.6% of state and local government compensation costs.  

The data also showed that health benefits accounted for 7.6% of compensation costs in private industry and 11.6% of costs in state and local government.  

According to the BLS report, state and local government employers spent an average of $40.76 per hour worked for employee compensation in September 2011. Wages and salaries averaged $26.57 per hour and 65.2% of compensation costs, while benefits averaged $14.19 per hour worked and accounted for the remaining 34.8%.  

The BLS report is available at http://www.bls.gov/news.release/pdf/ecec.pdf.  

Data & Research December 7, 2011

Americans Plan to Double Savings in 2012

A Fidelity Investments study found 46% of Americans are considering a financial resolution in 2012. 
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Among these individuals planning on a financial resolution for 2012, “saving more” is their top priority, with a median annual target of $2,400 for long- and short-term goals, double last year’s goal of $1,200.

For the third consecutive year, the top two resolutions continue to be saving more (46%) and spending less (21%). However, paying off debt jumped into the top three with 19% considering this goal for 2012—replacing making a budget. Paying off debt was the seventh most popular resolution last year, with 8% of those with financial resolutions considering it. Based on the survey findings, Americans are already taking this resolution seriously, with nearly one-third (29%) saying they are in less debt today compared with the same time last year.

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In a year-over-year comparison, respondents continue to say saving for long-term goals (62%) outweighs short-term goals (34%). The top long-term goal cited was saving more for retirement in an individual retirement account (IRA) or workplace savings plan (52%). This goal was followed by saving for college (45%) and retiree healthcare costs (37%).

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Key short-term savings goals shifted from last year, showing a change in priorities for many respondents. The biggest increases were seen in saving for a household upgrade or repair (up to 45% from 26% last year), building an emergency fund (up to 65% from 50% last year) and saving for a home (up to 32% from 22% last year). Significant decreases were found in saving for a vehicle purchase (down to 35% from 57% last year) or a luxury item (down to 5% from 19% last year). 

With 84% of respondents saying the economy is already in or likely to suffer a double-dip recession, investor confidence has been shaken. In fact, nearly four-in-10 (39%) say they are not confident in their ability to make the right investment decisions given the current economy and market volatility.

On the other hand, market conditions are also having a positive effect on many Americans. More than eight-in-10 (85%) Americans who are resolved to save more say their current savings behavior is likely to continue as the economy recovers. This is up from 80% last year. Additionally, the majority (66%) of those considering a financial resolution say the economic events of the past year will help them stick with the resolutions made in 2011.

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