Future of Employee Benefits Debated
The nature of employee benefits is changing rapidly and the future isn't certain, according to participants at the Conference Board's Employee Benefits Conference in New York City. While some benefits specialists predicted defined-benefit plans, including traditional pensions, would be relegated to history's dust bin--along with rotary phones and typewriters--others asserted companies were mistaken in relying on defined-contribution plans, such as 401(k)s, to meet retiree needs. One thing, however, was clear: CPAs who advise businesses about benefit strategies will need to keep alert. "For better or for worse, cradle-to-grave job security is a thing of the past," said J. Randall MacDonald, vice-president for employee relations and organization development of GTE Corp. By the year 2000, he added, there will be a shift away from defined-benefit pension plans that promise to pay a specified amount to each retiree in favor of defined-contribution plans, which he termed less "paternalistic" because employees can choose how much income to set aside into their retirement accounts. "Companies will offer more plans with more choices for less money," MacDonald predicted. "There also will be more |outsourcing' as outside companies handle everything from plan design to administration." Paternalism defended. On the other hand, Dallas Salisbury, president of the Employee Benefits Research Institute, argued "that nasty word, paternalism," might not be such a bad thing after all. "Most employees don't start thinking seriously about putting retirement money away until their last child is out of college. At that point," he said. "it's too late to accumulate sufficient savings." Thus, there will be a continuing need for defined-benefit plans that ensure workers predictable income--even at the expense of some choice. The government, Salisbury added, was looking at the private sector's growing reliance on defined-contribution plans "with a tremendous amount of angst." This is because the principal government programs for retirees--Medicare and Social Security--also are being cut back. Debates have been taking place in congressional hallways, he said, about when (not if) the qualifying age for benefits should be raised to age 70, with benefits subject to tax and reductions made in the benefit formula. "By the year 2015 or 2020, government benefits for individual retirees will amount to only 7% or 8% income replacement," Salisbury warned. …