A new survey from the American Institute of Certified Public Accountants (AICPA) indicates that the vast majority of CPA’s in executive positions, such as corporate chief executive officers (CEOs), chief financial officers (CFOs) and Controllers, believe American companies can’t continue providing pensions that adequately cover their employees’ retirement years. Further, many of the CPAs surveyed also believe reductions in pension benefits pose a threat to a company’s ability to attract and retain the talent they need to compete.
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“These findings are a wake-up call,” John Morrow, Vice President of the AICPA’s division for CPAs in business and industry, commented in the statement announcing the survey results. “The traditional system of rewarding employees with pensions after long years of service is on its way out, because companies simply cannot bear the cost. Therefore, employees will have to find alternate methods of funding their retirement.”
This is further bad news for Generation X workers, most of whom indicated they plan to rely on savings and investments to carry them through their retirement, according to another study from the AICPA. Generation X, or Gen-X as it is often referred to, represents more than 29 million adults born between 1964 and 1980. According to that study which was released earlier this month, 65 percent of Gen-Xers surveyed don’t expect social Security to be a retirement option and even more, 68 percent, don’t see a pension as a safety net, either.
“The message is getting through to Generation X consumers about taking control of their own financial futures,” said Carl George, CPA Chair of the AICPA’s National CPA Financil Literacy Commission and CEO of Clifton Gunderson LLP, in a statement about the Gen-X survey. “As a result, they intend to draw on personal savings and investments for retirement, unlike many of their baby boomer elders.”
Virtually all the respondents in the executive survey indicated that their companies offer some type of retirement benefits today, with the majority (65.6 percent) offering a 401(k) plan with matching contributions. Less than 5 percent said their companies offer no retirement plan at all.
When asked if U.S. companies could continue providing employees with pensions that adequately cover their retirement years, nearly three in four (74 percent) of the 3,100 AICPA members in business and industry participating in the executive survey said no; more than half, or 54 percent, indicated that the erosion of these benefits would hurt recruiting and retention efforts. A slightly higher number, 57 percent, believe rising healthcare costs are the biggest barrier to a company’s ability to offer pension benefits; nearly 30 percent said pressures to compete in the marketplace outweighed the pressures to provide retirement benefits.
“American workers have to understand the pension safety net will probably not be there for them and that planning for retirement is their personal responsibility,” George said in a prepared statement. “Americans must recognize that unless they take a more active role in their own retirement planning, they may find themselves working far longer than they had intended.”