A recent article in U.S. News & World Report discusses the anticipated changes that will occur this year regarding retirement benefits. In “9 Retirement Benefit Changes Coming in 2011,” Emily Brandon says that around 70% of employers surveyed said they were looking to make some type of changes to their retirement benefits. Adding 401k annuities to retirement plans has become more popular in the past few years and the popularity is expected to increase this year. Approximately 19% of employers currently have a 401k annuity to offer their employees. This lifetime income stream is very valuable for paying living expenses in retirement. Thirteen percent of employers said they were looking to add 401k annuities to their plans this year. Additionally, 13% of employers help their employees with an annuity purchase separate from their retirement plan.
There are 8 other trends that the article suggests are likely to happen with retirement plans this year as well. There will be more automatic features when it comes to 401k planning including enrollment, increases, and rebalancing. With 1/3 of employers currently offering a Roth 401k, expect close to 40% more companies to start offering one this year. Although many companies already offer target-date funds as an investment option for 401ks, even more companies will begin to offer them in 2011.
Employees can expect more options for their investments as employers look for fund options with lower costs and turn to managed accounts more often. Many companies took away all or part of their 401k matching with the economic downturn, but employees can expect to see 401k matching gradually returning this year. Employees will have less input into their 401k plans because employers are less interested in what employees think than what competitors offer. Traditional pensions will continue their decline as they are offered less and less. Medical benefits for retirees are probably going to become more expensive as well. Employees will be happy with some changes and may dislike others, but 401k changes are abundant in 2011.