Corporate America Playing Larger Role in Employee Retirement Readiness Says New Study from Schwab and CFO Research

Senior Finance Execs See 401(k) Plans Linked to Corporate Success

Monday, August 11, 2008 6:00 am PDT



Public Company Information:


SAN FRANCISCO--(BUSINESS WIRE)--Charles Schwab, in collaboration with CFO Research Services, today released the details of a new study, A Shared Benefit: Employer Views on the Value of 401(k) Plans, revealing that the majority of senior finance executives view 401(k) plans as a significant tool for strengthening both their workforces and their companies. The study also finds that employers are playing an increasingly important role in helping employees make the most of their 401(k) plan.

More than 200 senior finance executives from large companies across a variety of industries nationwide were questioned about their perceptions of 401(k) plans and the role companies should play in helping their employees plan for retirement. Key findings include:

  • 84 percent agree that a 401(k) plan is necessary for recruiting and retaining a high-quality workforce
  • 67 percent believe that offering a 401(k) plan to their employees enhances the companys corporate reputation
  • More than half (58 percent) feel that a 401(k) contributes to the long-term financial success of a company

Finance executives also acknowledge that retirement planning is increasing in importance. Sixty percent report that they are committing more resources to 401(k) plans today compared to five years ago, and a majority of them (55 percent) expect to devote even more resources to these plans in the coming years.

As the 401(k) and other employer-sponsored plans play a greater role in Americans financial futures, we are seeing more companies look for ways to provide greater service and support for their employees, says Jim McCool, executive vice president of Schwab Corporate & Retirement Services. But it is also interesting to see the number of senior finance executives who view their corporate retirement plan as highly beneficial to their companys image and financial success.

Countering the commonly held view that 401(k) plans are seen as an administrative expense, 70 percent of respondents believe that offering a 401(k) is the right thing to do for employees and mirrors their companys values.

Facing the Challenges Ahead

Although employers recognize the value of 401(k) plans, they say that a number of challenges still exist. Employers in the study cite current economic conditions (48 percent) and increased risk of fiduciary or legal liability on the part of the employer (44 percent) as the top challenges they face when offering a 401(k) plan. Just 16 percent of executives surveyed report that the cost to the company of administering the 401(k) plan is a significant obstacle.

The study found that varied levels of employee financial literacy (80 percent) and competing financial demands felt by employees (76 percent), such as paying off debt, buying a home or saving for college are seen as the top impediments to future growth in 401(k) plan participation

A Balancing Act between Employer and Employee

The study also reveals that finance executives are striving to find the right balance of responsibilities between their company and their employees when it comes to the activation and management of 401(k) plans. According to the study, senior finance executives view enrollment in 401(k) plans as a shared responsibility between employer and employee but feel it is incumbent on the employer to educate employees about the benefits of the plan, features, restrictions and costs.

Respondents say their employees should be taking the reins when it comes to ongoing management of their 401(k) accounts, increasing their savings rates and tackling other financial issues such as debt management and financial planning beyond a 401(k). But McCool adds, There was overwhelming agreement that employees shouldnt have to go it alone.

Nearly nine out of 10 (87 percent) of those surveyed feel it is important to provide employees with investment advice to help them make at least some of these decisions.

More employers are realizing that providing employees with advice and professionally managed investments in their 401(k) plans improves both returns and savings rates. Employers who focus on providing tools that drive results will be the most effective in helping their employees reach their retirement goals, adds McCool.

In addition to advice, respondents ranked the following plan features as the most important for an effective workplace retirement plan offer:

  • Employer matching contribution (96 percent)
  • Availability of target date funds (81 percent)
  • Automatic enrollment (79 percent)

The full study is available at

About the Study A Shared Benefit: Employer Views on the Value of 401(k) Plans

In June 2008, CFO Research Services conducted an online survey and gathered a total of 208 responses from senior finance executives at companies ranging from $100 million to more than $10 billion in revenue. Respondents work for companies in a broad cross-section of industries, with the manufacturing and wholesale/retail trade industries particularly well represented. More than half of the respondents worked for companies with more than 1,000 employees eligible for participation in their 401(k) plans.

About CFO Research

CFO Research Services is the sponsored research group within CFO Publishing Corporation, which produces CFO magazine in the United States, Europe, Asia, and China. CFO Publishing is part of The Economist Group.

About Schwab Corporate & Retirement Services

Schwab Corporate & Retirement Services provides a broad range of investing services through the workplace, including employer-sponsored retirement plans direct to corporations or through a nationwide network of more than 300 retirement Third Party Administrators (TPAs). The division also offers the Schwab Personal Choice Retirement Account® and provides employee equity compensation plan services and corporate brokerage services, in addition to a range of recordkeeping, custodial and trustee services, which are available through Charles Schwab Trust Company, a division of Charles Schwab Bank. Schwab Corporate & Retirement Services also includes Charles Schwab Clearing Services (CSCS), which provides mutual fund trading, settlement, and related clearing services to a small number of banks, brokerage firms and trust companies. As of June 30, 2008, assets held in Schwab Corporate & Retirement Services stood at $230.9 billion.

About Charles Schwab

The Charles Schwab Corporation (Nasdaq:SCHW) is a leading provider of financial services, with more than 300 offices and 7.3 million client brokerage accounts, 1.3 million corporate retirement plan participants, 355,000 banking accounts, and $1.4 trillion in client assets. Through its operating subsidiaries, the company provides a full range of securities brokerage, banking, money management and financial advisory services to individual investors and independent investment advisors. Its broker-dealer subsidiary, Charles Schwab & Co., Inc. (member SIPC,, and affiliates offer a complete range of investment services and products including an extensive selection of mutual funds; financial planning and investment advice; retirement plan and equity compensation plan services; referrals to independent fee-based investment advisors; and custodial, operational and trading support for independent, fee-based investment advisors through its Schwab Institutional division. The Charles Schwab Bank (member FDIC) provides banking and mortgage services and products. More information is available at (0808-8108)


Charles Schwab
Michael Cianfrocca, 415-667-3252
Beth Leri, 212-754-5415

Multimedia Files:

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Jim D. McCool, executive vice president, Schwab Corporate and Retirement Services (Photo: Business Wire)
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"Financial literacy" of employees remains a top concern for finance executives. Source: "A Shared Benefit: Employer Views on the Value of 401(k) Plans," CFO Research/Charles Schwab (2008). (Graphic: Business Wire)

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