NU Online News Service, Feb. 20, 2004, 6:16 p.m. EST – Members of traditional pension plans and members of 401(k) plans have different retirement plan preferences.[@@]
Researchers from Mathew Greenwald & Associates, Washington, uncovered those differences in a major survey sponsored by the Society of Actuaries, Schaumburg, Ill., and the American Academy of Actuaries, Washington.
The researchers asked 390 members of defined benefit plans and 444 members of defined contribution plans about the importance of various retirement plan features.
“Provides you a guaranteed stream of income each month for life starting at retirement” was the top feature for members of defined benefit plans. The researchers found that 68% of the defined benefit plan said that feature was “very important,” compared with 51% of the defined contribution plan members.
For defined benefit plan members, the only other feature that was very important to more than half of the survey respondents was guaranteed, lifetime retirement income both for working spouses and their widows and widowers.
The top features for a defined contribution plan member was “provides the ability to save an amount of your choosing for retirement through automatic deductions from a paycheck.” The researchers found that 64% of the defined contribution plan members rated that feature very important.
Other features that were very important to more than half of the defined contribution plan members were portability of plan assets; guaranteed lifetime retirement income; guaranteed lifetime retirement income both for workers and their spouses; and a chance to choose investment options that offer different possible levels of risk and return.
Some employers and benefits consultants once promoted 401(k) plans and other defined contribution plans as vehicles for encouraging employees to invest in employer stock and align their interests with those of other company shareholders.
But only 9% of the defined benefit plan members said a chance to invest in employer stock was very important, and only 11% of the defined contribution plan members valued a chance to invest in employer stock. An opportunity to invest in employer stock was the least popular feature for both types of survey participants.
A full copy of the survey report is on the Web at http://www.soa.org/sections/Retirement/retirement_risk_report/PreferencesReport2-5_FINAL_V2.pdf