How can employers ensure that they are getting the most value from their retirement plans?

In light of a heightened regulatory environment, potential risk, spiraling costs and increased scrutiny by employees and the public, global HR outsourcing and consulting firm Hewitt Associates is urging employers to re-evaluate their retirement program design. Look at cost and operations to identify areas of concern and opportunities for change, size up risks and costs involved, and develop an action plan to ensure that the retirement plan is in order. Featured below are Hewitt's top 10 action items for employers.

1. Develop Your Retirement Plan Objectives. Document your retirement plan objectives. Regularly measure progress against set, quantifiable goals, and modify or update them as appropriate. Knowing your retirement objectives prevents knee-jerk, shortsighted changes that may not be appropriate in the long-term.

2. Review Your Retirement Program Design-Is it Out of Date? Don't be afraid to change the plan design to maximize its value. With escalating plan costs and increased scrutiny due to market losses and diversification issues, it's never been more critical for employers to focus on retirement program design.

3. Understand Current and Future Pension Plan Costs. Dramatic changes in retirement plan costs can adversely impact a company's stock price. With the end of contribution holidays and pension surpluses, companies must reassess their cash situation, especially as costs will continue to increase in the coming years as prior years' asset losses must be phased in over time.

4. Revisit Asset Allocation Strategies-Optimize Your Investment Strategy. Consider modeling the cash flow and expense requirements to help determine your company's optimal investment strategy. Review 401(k) investment choices by analyzing current options as well as new alternatives such as increasingly popular brokerage accounts.

5. Examine Actuarial Assumptions-Do They Reflect Your Current Best Estimates of the Future? Evaluate your actuarial assumptions to ensure that they reflect longer life spans and high retiree medical costs. Include consideration of short-term termination rates that differ from long-term expectations. Don't forget to add revised investment returns and inflation outlook. And review recent compensation and bonus amounts against current expectations.

6. Review Your Retirement Plan Committee Roles and Responsibilities. Examine the role and structure of the plan committee and the procedures it uses to make decisions about the plan's investments. Study the committee's track record on asset allocation, performance and plan responsibilities to better manage risk.

7. Manage Plans Globally-Remove Cross-Border Inconsistency. Create a financial reporting system that includes global assumption verification to increase the quality of financial reporting. Doing so can help you reduce costs and ensure alignment with business goals, such as developing special programs for internationally mobile employees, looking for opportunities with multinational pools, or creating a global investment strategy focusing on all retirement assets.

8. Review Your Administrative Practices and Procedures. Make certain that the retirement plan is legally up to date, that its administration follows plan language, and that its calculation process works properly to minimize the risk of errors and over/underpayments. Don't wait for an IRS or DOL audit to uncover problems with administrative practices or procedures. The effort involved in fixing an error may be as onerous as the actual economic impact of the error itself. And, don't overlook compliance issues.

9. Evaluate Your Delivery System-Is it Working? If you calculate benefits manually or are using outdated systems, your delivery of retirement benefits is ineffective. Bad data can heighten the risk of errors and can seriously restrict your ability to implement important plan changes. Hewitt research has shown that the value employees place on their plans is greatly influenced by the way those plans are delivered and communicated.

10. Boost the Perceived Value of Plans Among Employees. It's more important than ever to communicate how your plans will help employees build retirement income. With the recent stock market downturn and volatility, communication campaigns and self-service tools are ways to raise visibility and create awareness of your plans.

Source:Hewitt Associates, www.hewitt.com