Middle Market Executives Say Benefits Costs Outweigh Economic Conditions as the Leading Factor Impacting Compensation Decisions, Verisight and McGladrey Survey Finds

WALNUT CREEK, Calif., Dec. 15, 2011 /PRNewswire/ -- Sixty-five percent of middle market executives say benefits costs are the leading factor impacting compensation decisions, largely outweighing a mere four percent of survey respondents who say economic conditions/financial performance is the leading factor, according to the Verisight and McGladrey 2011/2012 Compensation, Retirement and Benefits Trends Survey. The survey also found that the vast majority (61%) of retirement plan sponsors do not feel prepared for new fee disclosure rules.

"Business leaders are challenged by rising healthcare and benefits costs, heightened government oversight, and new regulation. At the same time, the importance of fee transparency, fiduciary responsibility, and participant education cannot be overlooked," said Greg Tschider, CEO of Verisight, Inc. "Our survey highlights the challenges employers face in balancing new priorities. Devising a strategic approach is always important, but is especially critical now as the industry prepares for more changes."

Regulatory Wake-up Call

Effective April 1, 2012, a new retirement plan fee disclosure rule mandated by the Employee Retirement Income Security Act (ERISA) will require all 401(k) retirement plan service providers to begin providing increased fee disclosure to sponsors and plan fiduciaries. Additionally, on May 31, 2012, new participant fee disclosures rules from the Department of Labor will go into effect. However, the survey indicates that as many as 61 percent of companies do not feel prepared to respond to these new fee disclosure regulations. Furthermore, executives believe that only 3 percent of employees fully understand the cost of their retirement plan.

Further confusion exists around fiduciary standards. While a whopping 87 percent of employers use an external or third-party investment advisor, a third (34%) are unsure what their advisor's fiduciary responsibility means and 27 percent work with advisors that are not fiduciaries. 

Additional findings from the Verisight and McGladrey Survey include:

When evaluating compensation decisions, employers take the following into account:

• Challenge of retaining key employees (52%)
• Desire to incent employee performance (48%)
• Challenge of attracting talent (43%)

When deciding what is most important in evaluating a retirement offering:

• Fifty-nine percent consider the costs of investments and also quality and level of service
• Only 32 percent care about the reputation of the provider
• Only 24 percent care about the availability of specific investment options

Despite economic conditions, employers remained quite generous in 2011 even as they sought measures to further reduce associated costs. Only:

• Thirty-five percent reduced overtime pay  
• Twenty-five percent cut staff  
• Twenty-four percent increased employee share of health/welfare costs
• Eighteen percent instituted a hiring freeze
• Eleven percent reduced/suspended 401(k) retirement plan matching contributions

"Success throughout the recession has meant focusing on efficiency, savings, and the bottom line," Tschider continued. "The middle market has taken difficult measures to reduce costs, and today, the sector is strong and poised for growth. New regulations, globalization, and continued economic uncertainty bring fresh challenges and opportunities. Now is the time for middle market executives to re-visit their strategic plans for compensation and benefits to ensure they are still feasible."

A Look Ahead

In the next 12 months, cost control strategies will stay top of mind for middle market executives. However, measures will focus more on increasing employees' share of health/welfare costs (37%) than tactics that have already been widely pursued. Only six percent are considering reducing/suspending 401(k) matches, only 11 percent will institute a hiring freeze, and only 11 percent are considering staff reductions. Compared to 2011, the middle market will also lower their emphasis on overtime reduction (15 percent compared to 35 percent).

About the Verisight and McGladrey Compensation, Retirement and Benefits Trends Survey

Conducted online in September-October 2011, the survey polled more than 850 organizations drawn from a national sample. The majority of participants were mid-sized, private and non-profit companies. Survey participants reflected a wide range of industry types including manufacturing, healthcare, real estate/construction, finance/banking, distribution and services industries. Verisight and McGladrey have maintained a strategic relationship through a joint marketing agreement since Verisight's acquisition of RSM McGladrey's Human Capital Services practice in June 2011.

About Verisight, Inc.

Founded in 1985 and headquartered in Walnut Creek, California, Verisight is a privately-held, national corporation that offers comprehensive retirement plan services and consulting solutions for a wide range of clients, including employers, plan sponsors, advisors, financial intermediaries, and HR administrators. As a recognized leader servicing a wide range of companies with more than $13 billion in retirement plan assets, Verisight is a client-centric company with industry-focused consulting expertise in financial institutions, healthcare, manufacturing and distribution, not-for-profit and professional services. Verisight maintains complete investment independence and fee transparency. For more information, visit the Verisight website at www.verisightgroup.com.

About McGladrey

McGladrey & Pullen, LLP operates under the McGladrey brand as the fifth largest U.S. provider of assurance, tax and consulting services, with nearly 6,500 professionals and associates in more than 70 offices nationwide. McGladrey & Pullen is a licensed CPA firm, and is a member of RSM International, the sixth largest global network of independent accounting, tax and consulting firms. For more information, visit www.mcgladrey.com, join our Facebook fan page at McGladrey News, follow us on Twitter @McGladrey and/or connect with us on LinkedIn.

SOURCE Verisight, Inc.