Despite signs of economic recovery, most U.S. companies are not planning to restore executive pay cuts or freezes made during the economic crisis in the next six months.
A survey by Watson Wyatt found that the number of companies that use target-date or lifecycle funds as their default investment option has increased sharply in the last few years, from 38 percent in 2006* to 62 percent today.
A vast majority of employers anticipate that health care reform, if enacted, will lead to higher health care costs and weaken their role in providing coverage to workers.
Total assets of the world’s largest 300 pension funds fell by 13 percent in 2008 to $10.4 trillion, down from $11.9 trillion last year, according to Pensions & Investments and Watson Wyatt research.
Despite recent increases in asset values and regulatory relief from the Internal Revenue Service (IRS), U.S. employers will be required to contribute $89 billion into their defined benefit (DB) plans in 2010 and more than $146 billion in 2011 unless they receive funding relief from the federal government.
Corporate pension funds have been making numerous changes to their investment programs in response to the economic crisis, including significantly reducing their target equity allocations and shaking up their fund manager lineup.
With some employers feeling optimistic about the prospect of improved business results, the number of employers planning to reverse salary cuts and freezes has increased in the past two months.
Many elements of corporate executive pay programs believed to cause excessive risk taking actually encourage executives to reduce risk, according to experts at Watson Wyatt.
In today’s unpredictable market environment, even the “safest” investments such as stable value funds carry considerable risks for plan sponsors and participants.
Pay raises for U.S. workers are expected to rebound in 2010, following a year in which many companies slashed raises in the wake of the recession.
The number of Fortune 1000 firms that have a frozen pension plan increased again this year as companies continue to look for ways to control their retirement benefit expenses.
A Watson Wyatt analysis has found that freezing pensions does not have a positive effect on companies’ market value.
With signs that an economic recovery may be nearing, a majority of U.S. employers plan to reinstate some, but not all, of the changes they’ve been making to their pay, benefits and other HR programs.
Workers with defined benefit plans are much more positive about their retirement prospects than those who participate only in a defined contribution plan.
For the first time, the majority of Fortune 100 companies now offer new salaried employees only a defined contribution plan, such as a 401(k).
Chief executive officers at many of the nation’s largest corporations saw portions of their financial fortunes drop sharply last year as the financial crisis and slumping stock market resulted in smaller annual bonus payouts, diminished ownership values and reduced value for equity holdings.
A majority of directors who serve on corporate boards believe that the executive pay programs of U.S. companies need to change as a result of the financial crisis.
With Congress scrutinizing target-date funds (TDFs), the time is right for fund managers to take a closer look at the risks inherent in their funds and help employers communicate these risks to their employees.
U.S. employers' efforts to battle the recession through cost-cutting actions such as layoffs, hiring freezes and salary freezes may have finally peaked, according to a Watson Wyatt survey of 141 large U.S. employers conducted in April 2009.
At the end of 2008 pension plan funding levels at large U.S. companies reached historically low levels.
Pension funds that used liability-driven investment (LDI) strategies outperformed funds with traditional asset allocations in 2008 by a significant margin.
With the recession in full swing and health care cost increases continuing to rise at 6 percent per year, many companies are looking for new ways to contain their health care benefit costs.
Fund managers have a generally optimistic outlook for 2009 according to a Watson Wyatt survey conducted at the end of 2008.
U.S. employers will be required to contribute more than $108 billion into their defined benefit plans this year.
Due to the recession, the number of companies implementing cost-cutting measures, including layoffs and hiring and salary freezes, has risen sharply in just two months, according to a new survey by Watson Wyatt.
With the recession showing no end in sight and the continuing spotlight on executive pay, many U.S. companies are cutting back on the annual bonuses and long-term incentives they pay their executives, according to Watson Wyatt’s survey of 264 companies.
As companies begin to feel the effects of the economic slowdown, they are ramping up activities around workforce planning, according to a new survey from Watson Wyatt.
In the midst of an economic crisis, rising health costs are leading an increasing number of U.S. workers to take steps to lower their medical costs, according to a new survey by Watson Wyatt.
Due to current market conditions and unprecedented changes in the regulatory landscape, many hedge funds will be forced to close. Watson Wyatt also expects there will be significant consolidation among the funds that remain.
The private equity managers that remain disciplined throughout this uncertain period and carefully complete transactions, while avoiding strategy drift, will prove to be the most successful in the future. According to experts at Watson Wyatt, these managers will also succeed if it is understood that financial engineering has become a commodity and that multiple expansion is no longer a return driver that private equity managers can rely on to generate returns.
As the impact of the global economic crisis is felt, a quarter of U.S. employers expect to make layoffs in the next 12 months; however, most companies are focusing on increased employee communication and smaller cost-saving measures.
The use of derivatives by U.S. pension funds to hedge risk will likely slow down because of the ongoing credit crisis. According to experts at Watson Wyatt, since the start of the credit crisis last year, the execution of derivatives-based liability hedging strategies has been losing pace. This is mainly due to more onerous legal conditions. Additionally, at certain points during the year, available yields were not considered attractive.
Despite new restrictions in the recently passed congressional bailout bill, compensation committees will not need to overhaul their core pay-for-performance programs. However, as the law might be expanded to cover all companies, they should assess and reconsider the necessity of their existing severance and change-in-control provisions in light of other compensation elements.
The economic crisis is shining a bright light on pension accounting, just as the U.S. Securities and Exchange Commission has voted to move U.S. companies toward adopting international accounting standards. Further complicating matters, the International Accounting Standards Board (IASB) is considering changes to its pension accounting rules, making it difficult to assess the impact of moving to international standards.
Before the credit crisis, experts at Watson Wyatt were predicting the growing complexity of investment products, the “short-termism” of financial markets and the increasing likelihood of extreme market events.
The financial crisis starkly highlights the relative pros and cons of defined benefit pensions and 401(k) plans. The predictable, mainly guaranteed income of pensions (including hybrid plans such as cash balance) contrasts sharply with the day-to-day fluctuation of 401(k) account values.
The pace of retirement plan changes among FORTUNE 100 companies is stabilizing, and a majority still offer pension plans to their new employees.
Demand for alternative assets continues to be strong, as pension funds around the world seek to diversify their portfolios and capture alpha through absolute return strategies.
Rates of return for defined benefit (DB) pension plans outpaced those for employee-directed 401(k) plans during the most recent bull market from 2003 to 2006.
Despite a slumping economy, U.S. companies are planning to keep pay raises steady next year. Employers expect to give workers merit increases that will average 3.5 percent in 2009. This is the same salary increase, on average, that workers received this year and is just slightly lower than the 2007 average of 3.6 percent.
Many companies that shift from traditional defined benefit (DB) pension plans to defined contribution (DC) plans, such as 401(k)s, are enhancing contributions to their DC plans. However, the overall retirement value delivered by employers that provide only DC plans is generally less than what is provided by companies with a combined DB and DC approach.
Employers continue to selectively outsource their HR technology and functions rather than rely exclusively on a single provider.
Recent events and public statements from various accounting constituencies suggest that International Financial Reporting Standards (IFRS) might be adopted in the United States within the next several years.
Although target-date funds are designed to automatically shift investors’ portfolios to less-risky assets as they age, some funds are more heavily weighted toward equities than might be optimal.
High health costs and a renewed focus on worker productivity have led an increasing number of companies to open onsite health centers in recent years. According to a recent Watson Wyatt study of 84 companies with centers, reducing medical costs was the chief reason 70 percent of companies have opened onsite health centers since 2000 (recent adopters).
The number of companies offering consumer-directed health plans (CDHPs) is growing, along with the number of workers enrolling in them. Health cost increases for companies with high enrollment in CDHPs are roughly half those of companies offering traditional health coverage.
More U.S. companies disclosed the specific goals used in their executive compensation plans in their 2008 proxies than in 2007. However, one-third of companies still did not provide this information.
The number of employers offering workers financial incentives to better manage their health is expected to jump sharply next year, according to a survey by Watson Wyatt Worldwide and the National Business Group on Health.
Efforts by the Securities and Exchange Commission (SEC) to encourage more disclosure of executive compensation are not making inroads with employers on one significant issue. A Watson Wyatt poll of 135 large U.S. companies shows most are reluctant to disclose performance goals for executive pay programs in their 2008 proxy statement.
While the average U.S. household invests about 55 percent of its 401(k) or other defined contribution plan assets in common stocks, many Americans are investing all or nothing in equities. A host of factors, including education level and marital status, is contributing to these decisions, a new analysis of government data by Watson Wyatt has found.
Institutional pension fund assets in the 11 countries with the largest workplace retirement systems grew by about 9 percent during 2007 to more than $25 trillion. However, challenging market conditions in 2008 suggest many funds are now seeing values decline.
For sales professionals, shifting two hours of administrative tasks per week to time with customers can be worth as much as $225 million in additional expected revenue for a company with 1,800 new-business developers, a recent Watson Wyatt study has found.
Executives at high-performing companies realize greater compensation than counterparts at underperforming companies. Further, they receive long-term incentive (LTI) award payouts that are more than 50 percent above targeted goals.
Corporate directors and institutional investors disagree over whether the U.S. executive pay model is changing for the better and whether it has helped corporate performance.
Good governance practices make a big difference in the market value that institutional investors are able to capture, a new study finds.
More companies are planning to offer workers financial incentives for adopting healthy lifestyles in the next two years, a new study finds. Those companies that are best at controlling costs and increasing productivity are integrating a broad array of health management programs.
The market for property and casualty insurance will stay soft in 2008, as premiums are expected to either decline or remain flat, according to actuarial and risk management experts at Watson Wyatt.
Companies with the most effective employee communication programs provided a 91 percent total return to shareholders from 2002 to 2006, a recent Watson Wyatt study has found. The return was only 62 percent for firms that communicated least effectively. Moreover, a significant improvement in communication effectiveness is associated with a 15.7 percent increase in market value.
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