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 NEW YORK, Sept. 8 /PRNewswire/ -- Pension plans are alive and well in America, but how much money these programs will give retirees is not well understood by employers and workers. The findings were revealed in a KPMG Peat Marwick survey of 1,198 employers with 200 or more workers.
 According to the firm's survey, 78 percent of employers offer one or more retirement benefits plans. Most employees, however, are under utilizing these programs and running the risk of saving too little for their retirement.
 Roy Oliver, the partner in charge of KPMG Peat Marwick's Compensation and Benefits practice says, "Most employees receive very little advice on how to invest and save for retirement and may not understand or accept full responsibility for investing in their future.
 "Our study confirms that workers need to increase their investments in employer pension plans, supplement these programs with personal savings, and set goals for how much income each savings plan will replace."
 KPMG Peat Marwick's survey, "Retirement Benefits in the 1990s," shows that employees who participate in 401(k) plans grossly under- utilize the benefit. Most 401(k) programs permit employees to defer up to 13 percent of their compensation into the plan. Employees -- on average -- place only five percent of their income into these plans.
 Keep a Goal in Mind
 Specific wage replacement goals allow companies and workers to be certain that their pension plans provide employees an adequate portion of their retirement income; yet, only 12 percent of employers design retirement benefit programs with a goal to replace a specific percentage of worker's paycheck.
 Employers whose pension plans are designed with a certain retirement income in mind believe these programs need to be supplemented. Eighty- four percent of employers agreed that retirement income should come from three sources: employer provided benefits, Social Security and individual savings.
 As an example, Oliver points out that Social Security replaces approximately 20 percent of an individual's income if they earn $60,000 a year and about 40 percent of the paycheck for an employee making $30,000 annually. According to the survey, most employer pension plans with wage replacement goals -- include social security benefits -- and are designed to replace 60 to 65 percent of final pre-retirement income.
 Controlling Costs
 Employers -- like their employees -- may also be losing money by not incorporating specific wage replacement goals into pension plans. "Starting with a wage replacement goal permits employers to review different retirement plan designs to find the program that meets their benefits objectives at the lowest cost," says Oliver.
 "Employers continue to be battered by a soft economy and rising health care costs. This increases the pressure on controlling all benefits expenses, including retirement benefits. Our survey shows that six to seven percent of payroll costs go toward retirement benefits. This looks like a real bargain when compared to the 10 percent and more of payroll spent on health care benefits."
 As the wave of baby boomers moves toward their 40s and 50s, Oliver points out that there will be increasing concern about employer-provided benefits. Businesses whose pension plans have a specific and well understood wage replacement goal are likely to see less pressure or need to increase their programs costs.
 Added Anxiety
 Frequent changes in the law and their effect on defined benefit plans add to the costs and decrease the understanding of pension plans. Employers participating in the study ranked changing laws as the most troublesome aspect of administering pension programs. No other factor, including the cost of the plans and actual legal compliance by the plans, came close to this ranking for trouble.
 Changing laws, like those recently enacted in the federal budget bill, require administrators to change payroll records and pension plan philosophies, re-educate management and employees, and add costs to administering plans.
 While no one plan design is truly typical of all retirement plans, the survey data revealed the most common characteristics of various plans:
 -- Sixty-eight percent of employees covered in the survey are offered defined benefit pension plans. This retirement benefit is most commonly based on the employee's final average compensation times years of service with the employer.
 -- The typical 401(k) plan has a participation rate of 61 percent of eligible employees and is offered by 58 percent of the survey participants. Loans and hardship withdrawals are usually permitted.
 -- Profit-Sharing plans provide a contribution that represent 8 percent of payroll. Unlike the 401(k) plan, they not typically permit loans or hardship withdrawals.
 KPMG Peat Marwick is the U.S. practice of the world's largest professional services firm with more than $6 billion in annual revenues. The Global Leader in providing accounting and consulting services, KPMG has more than 6,000 partners and 70,000 professional serving clients through 800 offices in 125 countries.
 KPMG provides clients with comprehensive employee compensation and benefits program design services. The firm's study, "Retirement Benefits in the 1990s," reports findings of KPMG Peat Marwick's nationwide retirement benefits survey of employers with 200 or more employees. This latest cost and design data on employer-provided retirement benefits give employers a benchmark for evaluating their own retirement benefit programs. Copies of the report are available through local KPMG Peat Marwick offices.
 -0- 9/8/93
 /CONTACT: Kevin T. Kelly of KPMG Peat Marwick, 212-909-5108/

CO: KPMG Peat Marwick ST: New York IN: FIN SU:

TM-LD -- NY007 -- 9693 09/08/93 10:01 EDT
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Publication:PR Newswire
Date:Sep 8, 1993

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