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CCH® PENSION AND BENEFITS — 12/03/08

Economic worries spur employees to hold fewer equities, take more loans, Watson Wyatt finds

The turmoil in the financial markets is leading employees to change the investments in their 401(k) plans, according to a survey by Watson Wyatt of 248 employers representing a broad cross-section of U.S. companies. “Employees are obviously concerned about the impact of the financial crisis as well, especially in relation to their 401(k) plans,” said Kathryn Yates, global director of communication consulting at Watson Wyatt.

Justifying their concern, Watson Wyatt noted that more than half of the employers surveyed, 53%, reported that their employees were moving their 401(k) investments out of equities. Nearly a fifth, 19%, of employers reported that more employees were taking out plan loans, while 15% reported an increase in hardship withdrawals. “Employers are still sorting out the impact of the economic crisis, but changes are clearly in the wind,” said Paul Platten, global practice director of Watson Wyatt’s human capital group.

Other findings of the survey include:

- Roughly one-quarter of employers are planning layoffs (26%), hiring freezes (25%), or increasing the employee contributions to their health care plans;

- More than one-third of the companies surveyed are planning to increase their corporate communications around pay and benefits, and many have already done so; and

- Few employers expect to reduce or freeze salaries, reduce their 401(k) matches, or freeze or close their pension plan.

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