Purchase, N.Y. -- According to a recently-released survey, Diversified Investment Advisors' Report on Retirement Plans, 40 percent of large manufacturers devote the equivalent of more than 7.5 fulltime human resources employees to the administration of their defined benefit (DB) plans such as traditional pension plans, cash balance plans, or pension-equity plans, despite the fact that they spend significant amounts for plan provider services. Diversified Investment Advisors conducted the survey.
"Many manufacturing firms are using their human resources department to perform functions that their defined benefit or defined contribution plan provider can do," says Eric Henon, a Vice President at Diversified. "Employers may be missing opportunities to optimize internal resources and save valuable time and money."
Manufacturing firms are more likely than others to rely on the corporate human resources department to perform defined benefit plan functions such as projecting retirement income, calculating actual benefits at retirement, and processing benefit payments.
Manufacturing firms are also more likely to have a dedicated investment review committee to select and monitor investment managers. The majority of these firms say the ultimate responsibility for establishing the plan's investment objectives and strategic asset allocation policy lies with the human resources department, rather than the finance department or an outside entity.
According to Diversified's survey, however, manufacturers' human resources departments spend far less staff time to administer their defined contribution plans: only 18 percent say they spend the equivalent of 7.5 or more full-time employees to administer the defined contribution plan; the majority (52 percent) indicate that the administration of the defined contribution plan requires one full-time employee equivalent or less of human resources staff. Yet, manufacturing firms indicate that they are more likely to rely on an outside consultant or a bundled provider to approve payment of DB plan benefits.
Diversified Investment Advisors' Report on Retirement Plans was conducted by Diversified Investment Advisors and administered by LIMRA International and FGI Research, Inc. among U.S. companies with at least 1,000 employees, including 122 publicly traded and 84 privately owned firms. The survey featured responses from more than 200 individuals responsible for the administration of retirement benefits in their firm. Of the companies surveyed, 192 offer a defined contribution plan; 132 offer a defined benefit plan to non-union employees.