2012 Hot Topics in Retirement - Aon

Consulting/HR Outsourcing
Retirement
2012 Hot Topics in Retirement
Waning Confidence and the Need for Continued Innovation

About This Survey In October 2011, Aon Hewitt surveyed HR professionals throughout the U.S.
to learn what is likely to occur with retirement programs in the coming year.
The survey explored their focus and expected actions regarding the design,
management, and delivery of their retirement programs—including defined
contribution (DC), defined benefit (DB), and retiree medical plans as they
relate to active, salaried U.S. employees.
This year’s survey results show that employers are continuing to assess the
most e�ective way to deliver retirement benefits to their employees and keep
up with the evolving retirement landscape. Responses from more than 500
employers are included, covering over 12 million employees (the median
number of employees is 5,800, while the average is over 24,000).
Note: Percentages in this report are rounded to the nearest whole number;
therefore, totals may not equal exactly 100%. While the focus of the survey and
samples have changed from year to year, there remain many areas where
useful comparisons and trends over time can be examined.

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2012 Hot Topics in Retirement
Waning Confidence and the Need for Continued Innovation
Contents
Survey Highlights
Overview of Retirement Plans
Defined Contribution Plans
Defined Benefit Plans
Retiree Medical Plans
Participating Employer Information

Waning Confidence
and the Need for
Continued Innovation
4 Aon Hewitt
Five Key Trends
In recent years, with the move from defined benefit to defined contribution
plans, employee responsibility for retirement adequacy has grown. However
savings behaviors remain suboptimal. As a result of this and other challenges,
employer confidence in their ability to influence employee decisions and/or
actions has eroded. Consequently, many plan sponsors are enhancing and
refining their plan structures to better meet employer and employee retirement
goals. Building on the success of automatic features, employers continue to
learn, develop, and embrace a variety of innovative solutions.
Aon Hewitt received survey responses from more than 500 employers to
determine their current and future retirement benefits strategy.
Five key trends emerged for retirement programs in 2012:
1. Employers’ confidence in employees’ ability to succeed has dropped.
At the same time, employers are placing a greater emphasis on helping
participants understand the programs and resources available to help
them meet their goals.
2. Plan sponsors are trying to improve their employees’ results, recognizing
diversity in needs, particularly by o�ering tools and services such as
investment advisory and income solutions.
3. Organizations are carefully reviewing funds and fees in defined contribution
plans, and seeking external support to assist them in these e�orts.
4. Defined benefit plan sponsors are focused on managing financial,
compliance, and litigation risks.
5. Employers are decreasing retiree medical subsidies as well as expanding
cost management e�orts.

Enhanced Automation and
Individualized Solutions Viewed as Key
Employers Taking a More Holistic View
Looking Ahead
As defined contribution plans now serve as the main retirement vehicle for
many current and most future employees, automation is a proven solution to
help employees get on the right path to retirement. However, if not implemented
in the right way, the long-term costs to employees will be high. When considering
plan design and automation tactics, plan sponsors’ focus needs to expand to
include overall retirement readiness. By addressing issues such as how to better
include existing nonparticipants, how to incorporate stronger default elections,
and how to provide better support of the decumulation phase, plan sponsors
will greatly enhance the benefit derived from the plan—by both the employees
and the employer.
Further, we cannot forget about the majority of employees in the defined
contribution system who have not been subject to defaults—non-savers, those
who opted out, or participants who entered the plan prior to automation.
The concept of designing plans in a way that e�ectively balances simplicity
with enough depth and diversity is critical to ensure broad employee success.
Automatic enrollment and defaults address these challenges for the “average”
employee. However, we know that individuals, especially as they near
retirement, are increasingly heterogeneous and require more individualized
solutions. While improvements have been made, enhancements and additional
tools can help drive individual success.
Plan sponsors have the opportunity to leverage an increasing array of services
and support to assist them in designing, managing, and communicating their
retirement plans. A more holistic perspective is a necessity in reviewing
retirement programs by looking at measures such as retirement income
adequacy instead of just participation and savings levels. Through this
expanded view, employers can better assess the value of the plan design and
also communicate in a way that will resonate with employees.
The retirement system requires continuous examination and innovation to
ensure secure retirements for Americans. Many plan sponsors have recently
adjusted their defined benefit and/or defined contribution programs, but
this is an ongoing process. Retirement program success necessitates the
iterative process of identifying needs, implementing and embracing
innovative solutions, and measuring outcomes—and then making logical
adjustments as additional experience is accumulated.
The remainder of this summary reviews the key themes in each plan
design area, followed by perspectives on the current state of the retirement
marketplace.
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Broad Retirement Picture:
Increasing Focus on
Employee Usage and
Outcomes
6 Aon Hewitt
Although employers have taken many steps to enhance and refine their
retirement plans in recent years, there is a growing uneasiness about their
employees’ retirement readiness. In reaction to this, many employers are
reprioritizing and taking steps to reassess plans and features in 2012.
Employer confidence at an all-time low:
4% of respondents are very confident their employees will retire with
su�cient retirement assets, down from 30% in 2011
10% of plan sponsors feel very confident that their employees will take
accountability for their own retirement success
18% of employers feel very confident that workers will be able to manage
their income during retirement
Employers focused on plan usage, understanding, and outcomes:
60% of sponsors say they are placing a greater emphasis on helping
employees understand the employer-sponsored resources available
to them
52% of employers are focused on encouraging workers to take greater
accountability for their own retirement success
44% of plan sponsors rate helping employees retire with su�cient assets
as a top priority
Likely design initiatives:
36% of employers are very likely to assess their current retirement plan design
35% of plan sponsors are very likely to review the competitive position of
the plan
32% of plan sponsors are very likely to focus on the financial well-being
of employees

Defined Contribution
Plans: Increasing
Importance, Focus,
and Innovation
For more than three-quarters of newly hired employees, the defined
contribution plan is the vehicle available to help them save for retirement.
Looking ahead, employers continue to enhance their plan features. In 2012,
plan sponsors will continue to focus on automating the plan, expanding
savings choices by adding Roth, and o�ering participants more resources
like investment advisory services and retirement income solutions. Plan
sponsors also are focused on fees, driven in part by new Department of Labor
fee regulations.
Employers identified many priorities for managing their defined contribution
plans, but also felt constrained about their ability to influence employee
outcomes.
High priorities among plan sponsors to influence participant
behavior and outcomes:
56% driving participation rates
40% increasing savings rates
36% improving diversification of investments
32% increasing retirement readiness
Employers continue to enhance plan features:
39% of plans currently o�er their employees a Roth savings option;
29% likely to add in 2012
55% of employers automatically enroll employees; most of those
(63%) do so at a savings level below the full company match
16% of organizations now o�er an in-plan retirement income solution;
22% likely to adopt in 2012
Plan sponsors are focused on risk and fund management.
Recent activities include:
53% hired a third party to monitor or review fund options
36% have lowered costs by changing some or all funds from mutual
funds to institutional funds
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Defined Benefit Plans:
Managing Risk
8 Aon Hewitt
Employers’ slow migration from pension plans toward defined contribution
plans has persisted, in part because of the added risk that comes with pension
plans. Plan sponsors with defined benefit plans are focusing on managing
these financial, compliance, and litigation risks.
Pension plan sponsors continue to assess the appropriateness of their plan
design, but a vast majority of employers plan to make no changes in the year
ahead. Risk management remains a strong theme, with many strategies
planned for 2012.
Plan sponsors’ slow movement from defined benefit plans:
23% of employers provide an ongoing defined benefit plan with benefit
accruals to new employees
59% of employers carry a pension liability
Plan design changes planned for 2012:
69% of pension plan sponsors are very likely to continue their current plan
with no changes in 2012
14% of plan sponsors are likely to freeze accruals, and 18% are likely to
close their plan to new entrants
Financially, plan sponsors have felt the burden of their
pension plans:
86% of plans were underfunded as of January 1, 2011
42% of plans anticipate contributing more than the IRS required minimum
contribution in 2012
Actions and risk management strategies plan sponsors are
very likely to undertake during 2012:
67% to perform funding and accounting projections
32% to assess pension plan risks based on current strategies
31% to review funding strategy
23% to conduct asset liability study

Retiree Medical Plans:
Reducing Costs and
Managing Benefits
As we’ve seen in the past several years, retiree medical benefits continue
to decline. Sixty-one percent of respondents provide some type of
postretirement medical coverage to their current or future retirees. Many
of these plans are now focused on providing benefits only to current retirees
or currently active employees and not to future hires. While 85% of plans
o�er some subsidy to retirees and 98% provide access to retiree medical
coverage, these numbers drop to 23% and 60%, respectively, for future hires.
Retiree medical benefits continue to decline and will cost
retirees more:
23% o�er subsidized uncapped or capped retiree medical coverage to
new hires
78% currently o�er retiree health care benefits are likely to increase
retiree premiums
53% are likely to increase retiree plan design cost-sharing requirements
25% o�er a Health Savings Account (HSA)-compatible High Deductible
Health Plan (HDHP) to pre-65 retirees
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10 Aon Hewitt
Overview of
Retirement Plans
Types of Retirement Plans
O�ered to New Employees
For the vast majority of new employees to an organization, the defined
contribution plan will be o�ered (98%) and will be their primary employerprovided
vehicle to build wealth for the future. Only a few (23%) will find
an “open” defined benefit plan, meaning that new employees will be eligible
to accrue pension benefits, and only about one in five (23%) o�er subsidized
retiree medical plans to new hires.
Defined Contribution Plans
Yes
98%
No
2%
(n=501)
Defined Benefit Plans
Yes
23%
No
77%
(n=501)
Retiree Medical Plans
Yes
23%
No
77%
(n=501)

Defined Benefit Status —Among Sponsors O�ering
Defined Benefit Plan Status
(n ranges from 68 to 293)
Defined benefit sponsorship has continued to slowly decline. While only
23% of employers o�er defined benefit plans to new hires, 59% of employers
carry a pension liability on their books. Larger employers (with more than
10,000 employees) are far more likely to o�er a defined benefit plan. Among
defined benefit plan sponsors, the benefits can be categorized into one of
three statuses—open, closed, or frozen:
39% are open plans providing benefit accruals to new employees, and larger
plans are more likely to have open plans; this is slightly lower than in the
2011 and 2010 surveys (41% and 45%, respectively). Larger employers
were more likely to have open plans, with 47% of employers with 10,000
to 24,999 employees, and 53% of employers with more than
25,000 employees.
36% have been closed to new entrants, allowing some segments of their
employee population to accrue additional benefits but not new hires;
this is a slight increase from last year at 32%.
26% are frozen, where no participants are accruing additional benefits;
this is nearly unchanged from last year’s response of 27%, although
higher than the 24% reported in 2010.
Of all defined benefit plans—open, closed, or frozen—more than three-quarters
of plans (77%) provide benefits based on traditional formulas such as a final
average pay plan or career average pay plan. The remainder (23%) use hybrid
plan formulas, such as cash balance or pension equity formulas.
(Among Sponsors O�ering) All DB Plans Traditional DB Plans Hybrid DB Plans
Open Plan
Closed Plan
Frozen Plan
39%
36%
26%
35%
37%
28%
53%
31%
16%
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Employer Confidence in Program
Management and Prioritization
Confidence Level of Employers in E�ectively Managing Their
Retirement Program
Issues and Priorities in 2012
Retirement Program Issues
Competitive position of the plan
The influence of employee diversity and
inclusion on retirement benefit e�ectiveness
Employees’ understanding and knowledge of
the employer-sponsored resources they have
available
Employees taking accountability for their
own retirement success
The aging workforce and the impact
retirements could have on your business in
the next 5 to 10 years
Policies and procedures that appropriately
influence the patterns of employee retirements*
Employees retiring with su�cient retirement
assets
Employees’ ability to manage their retirement
income to last for the rest of their lifetime
(n ranges from 413 to 421)
*For example, phased retirement, early retirement subsidies
12 Aon Hewitt
The confidence employers have in their employees’ ability to retire with
su�cient assets fell o� sharply from 2011 to 2012. Last year, 30% of employers
felt “very confident” in their employees’ ability to retire with adequate income;
however, this year that percentage dropped to only 4%. In addition, in 2012
only 18% of employers feel very confident that workers will be able to manage
their income while in retirement, and only 10% of employers feel very
confident that their employees take accountability for their own retirement
success, down from 38% last year. Yet, in terms of prioritization, more than
half of respondents (52%) felt this was a high priority of the plan. Roughly
four in 10 (39%) continue to feel very confident in the competitive position
of their plan, which is consistent with prior years.
Smaller organizations (with fewer than 1,000 employees) are generally more
confident across nearly all types of retirement program issues.
Very
Confident
1
39%
18%
13%
10%
7%
Confidence Level
Not
Confident
at All
2 3 4 5 6
36% 18%
4%
32% 32% 12%
40% 33% 12%
23% 42% 19%
29% 37% 21%
3%
4%
2%
6%
6%
6% 25% 33% 22% 11%
4% 22% 35% 23% 15%
4% 14% 33% 28% 15%
0%
2%
0%
1%
0%
3%
3%
6%
High
Priority
1
48%
18%
60%
52%
36%
14%
44%
33%
Priority Level
Medium
Priority
2
41%
42%
36%
42%
41%
47%
46%
49%
Low
Priority
3
12%
41%
4%
7%
23%
39%
10%
18%

Retirement Plan Initiatives for 2012
Likely Initiatives for Retirement Plans in 2012
Initiative
Assess your current retirement
program design
Measure the competitive position of the
retirement program
Create or focus on financial well-being
of employees (packaging, resources,
messaging)
Measure/project the expected retirement
income adequacy of your employee
population
Analyze the influence of your current and
emerging demographics on retirement
designs, policies, and practices
Look at di�erences in retirement
behaviors and outcomes based on race
and ethnicity
Collect data on employee preferences
regarding the retirement program
Evaluate phased retirement alternatives
(n ranges from 415 to 417)
Employers are taking steps to review their retirement programs in 2012.
More than 60% of respondents state that they are very or somewhat likely to
assess the current retirement program design, and 73% are likely to measure
the competitive position of their retirement programs. One-half (50%) of plan
sponsors are likely to analyze the influence of their current and emerging
demographics on retirement designs, policies, and practices while 50%
intend to project employee retirement income adequacy. These results
indicate the continued focus and importance of retirement programs in 2012.
Very
Likely
36%
35%
32%
16%
15%
13%
9%
7%
Somewhat
Likely
25%
38%
42%
34%
35%
31%
28%
23%
Somewhat
Unlikely
22%
14%
20%
35%
36%
37%
39%
39%
Very
Unlikely
17%
13%
6%
15%
13%
19%
24%
30%
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14 Aon Hewitt
Defined Contribution
Plans
(n ranges from 366 to 388)
Management and Priority of
Participant Behavior
Defined contribution plans have experienced dramatic changes in recent
years. This stems from the fact that they have taken on greater importance as
a source for retirement income. Employers are looking to improve participant
behavior and find new ways to deliver value to participants in their defined
contribution plans.
Employers indicated their confidence in employees managing retirement
program issues, as well as the priority level of each behavior from a
management point of view. Participation rates in the defined contribution
plan are, by far, noted as the most confident area from employees, reported
by 71% of plans (as very or somewhat confident). Savings rates, diversification,
and retirement readiness were all noted as a high or medium priority among
employers; and at the same time, plan sponsors were less apt to feel confident
in these behaviors, especially on retirement readiness. Leakage out of the plan
was noted as a priority; however, fewer than one-in-four employers report that
they are very or somewhat confident in their e�ectiveness at managing their
participants’ behavior on this topic. Smaller employers (with fewer than
1,000 employees) were more confident in their management of the bulk of
these behaviors, except for retirement readiness.
Confidence Level of Employers in E�ectively Managing Retirement Program Participant Behaviors
and Priority of Each Behavior in 2012
Retirement Program Participant Behaviors
Participation rates: Eligible employees saving
in the plan
Savings rates: Participants contributing enough
to meet their future retirement needs
Diversification: Participants adequately
diversifying and taking “appropriate” risk
Leakage: Employees avoiding taking loans
and withdrawals from the plan
Retirement readiness: Participants are focused
on saving milestones or have a plan to reach their
retirement savings goals
Distributions: Terminated employees making
smart choices about what to do with their defined
contribution balances
Very
Confident
1
38%
12%
12%
Confidence Level
2 3 4 5
33% 20%
6%
25% 38% 17%
32% 36% 15%
2%
5%
5%
7% 18% 30% 26% 15%
6% 19% 33% 28% 12%
2% 16% 34% 26% 15%
Not
Confident
at All
6
1%
3%
1%
3%
3%
8%
High
Priority
1
56%
40%
36%
14%
32%
8%
Priority Level
Medium
Priority
2
36%
48%
52%
42%
50%
38%
Low
Priority
3
9%
12%
12%
44%
19%
54%

Employers understand the importance of defined contribution plans to their
employees’ futures. Seventy percent of organizations recommend that the
average U.S. worker should contribute at least 9% of his or her income into an
available defined contribution plan. While this strong sentiment acknowledges
the increasingly large importance of defined contribution plans, it is not
consistent with the current savings rate by most active employees. Additionally,
there’s a notable gap between where employers suggest a participant should
save versus the rate at which plan sponsors default many new hires into the
defined contribution plan under automatic enrollment.
Recommended Savings Rate
40%
35%
30%
25%
20%
15%
10%
5%
0%
(n=394)
2%
12%
16%
38%
11%
3%
12%
3%-4% 5%-6% 7%-8% 9%-10% 11%-12% 13%-14% 15% >15%
Savings Rate
6%
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16 Aon Hewitt
Automatic Enrollment
Automatic enrollment has been one of the hottest retirement trends in the
past few years with the percentage of plans using the feature growing
from 24% in 2006 to 55% in 2011. While the rate of increase in automatic
enrollment is slowing, there continues to be interest in adding the feature
among employers that do not currently employ it; 33% said they are
somewhat or very likely to add automatic enrollment to new hires in 2012.
Automatic Enrollment for New Hires—Usage and Plans for 2012
Current State
Already have
55%
Don’t have
45%
(n=430)
Future Direction
Very likely 14%
Somewhat likely 19%
Somewhat unlikely 23%
Very unlikely 43%
Respondents with either a closed or frozen defined benefit plan continue to
be significantly more likely to leverage automatic enrollment. Fifty-seven percent
of employers that o�er both a defined contribution and defined benefit
plan use automatic enrollment versus 40% of employers that only provide a
defined contribution plan. Automation appears to be a tool used to help
o�set the impact of a decrease in defined benefit plan value.
The concept of also defaulting existing nonparticipants has become increasingly
scrutinized with strong success seen among new hires. However, the
popularity of “backsweeping” remains low with only 18% of plans (that used
this approach) enrolling nonparticipants in addition to new hires, by defaulting
either one time or periodically. Further, only 19% claimed to be somewhat or
very likely to do so in 2012.
Similar to previous surveys, respondents with either a closed or frozen defined
benefit plan continue to be significantly more likely to have defined contribution
plans with automatic enrollment (65%) than respondents with an open
pension plan or no pension plan (44%). Automation appears to be a tool used
to help o�set the impact of a decrease in defined benefit plan value.

Initial Contribution Rate Default Under Automatic Enrollment
Nearly two-thirds of plan sponsors (63%) acknowledge that the initial default
contribution rate under automatic enrollment is below the employer matching
threshold. The most common match level is 3%. As participant behavior and
default bias have shown, this results in many defaulted employees missing out
on some of these matching dollars.
Initial Contribution Rate Default Under Automatic Enrollment
Above full match
4%
Equal to full match
33%
Below full match
63%
(n=215)
60%
50%
40%
30%
20%
10%
0%
(n=233)
6%
10%
50%
10%
1% 2% 3% 4%
Default Savings Rate
10% 10%
5% 6%
Nearly one-quarter of employers (24%) with automatic enrollment
acknowledge that they willl make modifications to the automatic enrollment
feature’s implementation during 2012. Among companies that plan on
changing their automatic enrollment design, the most common modifications
are applying automatic enrollment to existing nonparticipants (33%),
embedding contribution escalation in the default (33%), and increasing the
initial default contribution (32%).
3%
>7%
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18 Aon Hewitt
Changes Planned With Respect to Automatic Enrollment in 2012
Changes Planned
Apply automatic enrollment to existing
nonparticipants (i.e., backsweep either
one time or periodically)
Add contribution escalation as default
Increase initial default contribution rate
If already utilizing contribution escalation,
escalate participants to a higher target
savings rate
Apply automatic enrollment to
additional classifications of employees
(e.g., union employees or additional
business units)
(n=54; multiple responses)
Percentage of Plans
33%
33%
32%
24%
22%
Across employers that are not currently leveraging the automatic enrollment
feature, the largest barrier reported included concern about employees’
reaction to have deductions automatically taken from their paycheck (51%).
Other commonly cited di�culties were the cost of the employer match (37%)
and concern over the appropriateness of implementing automatic enrollment
in the current economic environment (35%).
Barriers to Implementing Automatic Enrollment in 2012
Barriers
Concern about employee reaction to pay
deductions
Cost of employer match
Concern over appropriateness in current
economic environment
Preference for active enrollment within
the plan
Cost/burden of administering an increased
number of small balances
Concern over fiduciary exposure
(n=258; multiple responses)
Percentage of Plans
51%
37%
35%
23%
15%
15%

Contribution Escalation Getting individuals to save more can have a significant impact on employees’
ability to accumulate su�cient retirement assets. Contribution escalation has
proven a robust tool that positively impacts savings rates gradually
over time.
A significant number of employers (40%) also now utilize contribution
escalation overall, although this trend is much stronger among larger plans,
as 54% of plans with more than 25,000 employees leverage automatic
escalation. Approximately one-third (31%) of all employers that currently
do not o�er this to employees are very or somewhat likely to add the
feature in 2012.
Contribution Escalation—Usage and Plans for 2012
Current State
Already have
40%
Don’t have
60%
(n=430)
Future Direction
Very likely 8%
Somewhat likely 23%
Somewhat unlikely 26%
Very unlikely 44%
Forty-six percent of plans employing automatic enrollment also default
employees into contribution escalation. When embedded within automatic
enrollment, plan sponsors must select not only the initial default savings rate,
but also the rate of escalation and the threshold or stopping point for the
escalation. Nearly all plans (97%) with contribution escalation increase
employee deferrals by 1% annually. In terms of the escalation threshold, 45%
of respondents indicated they escalate up to 6% of pay, while 42% escalate
to 10% or beyond.
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20 Aon Hewitt
Contribution Escalation Threshold Under Automatic Enrollment
50%
40%
30%
20%
10%
0%
(n=96)
Across plans that currently use automatic enrollment but have not yet also
embedded contribution escalation, the barriers reported are similar to those
that have implemented automatic enrollment. Sixty-three percent of plan
sponsors cite their concern over employee reactions and dissatisfaction as an
impediment, while 50% indicate concern over its appropriateness in the
current economic environment.
Barriers
Concern over employee reaction/dissatisfaction
Concern over appropriateness in current
economic environment
Preference for active contribution rate change
within the plan
Concern over fiduciary exposure
Default rate under automatic enrollment is
already substantial
Cost of employer match/expense
Other
4%
4% or less 5% 6% 7%-9%
Barriers to Embedding Contribution Escalation Into Automatic Enrollment
(n=64; multiple responses)
6%
45%
3%
Escalation Threshold
24%
10% >11%
Percentage of Plans
63%
50%
22%
20%
16%
14%
11%
18%

Roth
Most financial experts agree that a Roth savings feature can provide a
significant benefit to a variety of savers—from highly paid employees to
lower-income workers. Roth contributions were introduced beginning
January 1, 2006. At that time, plan sponsors were reluctant to implement
the feature given the infancy of the option as well as its possible expiration
in 2011. However, the Pension Protection Act of 2006 (PPA) established
the Roth feature as a viable long-term savings option in qualified plans
(including 401(k) and 403(b) plans) by removing the sunset provision.
Further, 457(b) plans were added to the list of plan types eligible to implement
Roth as part of the Small Business Jobs Act, e�ective January 1, 2011. While
Roth is a relatively new feature for most plans, to date, participant usage
has been significant, especially among newly enrolled employees.
Roth adoption has grown significantly in recent years, with today nearly
40% of plans o�ering Roth, up five percentage points from 2011. Additionally,
of those employers that do not yet o�er Roth, interest is also up, with 29%
stating that they are somewhat or very likely to add the feature during 2012.
Roth Usage and Plans for 2012
Current State
Already have
39%
Don’t have
61%
(n=429)
Future Direction
Very likely 8%
Somewhat likely 21%
Somewhat unlikely 27%
Very unlikely 45%
While the barriers to adding a Roth have decreased, among employers that
have not yet adopted, 40% of sponsors said that it must be clear that general
Roth participant usage will be significant enough to justify adding it to the
plan, and 30% of employers cited administrative complexity and/or the cost
of o�ering a Roth as barriers.
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22 Aon Hewitt
Requirements Needed to O�er Roth
Requirements
It must be clear that general Roth participant
usage will be significant enough to justify
adding it to the plan
Nothing—not interested in o�ering a Roth at
this time
The administrative complexity and/or cost of
o�ering a Roth must be reduced
Employees must ask for it
There must be access to better tools and
resources to e�ectively manage the complexity
of Roth communication
Interested in o�ering a Roth in the future,
but it is not a priority in 2012
Other
(n=159; multiple responses)
Percentage of Plans
40%
40%
30%
25%
23%
18%
New rules now allow the conversion from a qualified plan or a traditional IRA
to a Roth IRA without any income limits. Nearly half of employers (48%) with
the Roth feature allow for in-plan rollovers or conversions of before-tax and
after-tax balances into the Roth account.
In-Plan Rollovers/Conversions of Roth Contributions
Plans to adopt in the next year
10%
No plans to adopt
42%
Adopted
48%
(n=156)
4%

Employer Matching Contributions
Investment Advisory Solutions
and Features
Employer matching contributions have been top of mind amid the economic
downturn, as some employers reported temporary suspensions or reductions
in their matching contributions. Twenty-six percent of plans surveyed either
suspended or reduced company matching contributions in the past few
years. The good news for many employees is that these changes appear to
have been temporary. Of those employers that reduced or suspended the
match, only 15% reported that they have no plans to reinstate the match.
The remainder have either already reinstated the match (74%) or will do so
in 2012 (8%).
Company Matching Contribution Changes in the Past Few Years
Changes Made
Company matching contribution has not
changed and is not likely to
Company matching contribution was
suspended previously
Company matching contribution was
reduced previously
Company matching contribution is not
suspended, but we are likely to in 2012
Other
(n=364; multiple responses)
Percentage of Plans
74%
17%
11%
Most employers now have features in their defined contribution plans to
help participants select appropriate investments. The vast majority (79%)
now o�er target-date portfolios to simplify participants’ investment decision
making. Additionally, 59% of plans now o�er online investment guidance,
and nearly 40% o�er online investment advice and/or managed accounts.
In 2012, the prevalence of investment advisory solutions is expected to
expand, with more plan sponsors acknowledging the value of multiple
solutions to meet the varied needs of employees. Among plans that do not
currently provide online investment guidance, 37% of respondents are very
or somewhat likely to o�er it, while 26% are likely to adopt online advice in
2012. Additionally, 24% (of those not o�ering) noted that they were very
or somewhat likely to add managed accounts during 2012.
1%
1%
Aon Hewitt 23

Features to Help With Investment Selection O�erings—Usage and Plans for 2012
Already
O�er
79%
59%
39%
39%
39%
38%
24%
(n ranges from 267 to 412)
24 Aon Hewitt
Investment Selection O�erings
Target-date/lifecycle funds
(e.g., 2015, 2020)
Online investment guidance
(investment suggestions based
on asset classes only)
Target-risk/lifestyle funds
(e.g., conservative)
Online third-party investment
advisory services
Phone access to third-party
investment advisory services
(individual sessions with advisor)
Managed accounts
In-person, third-party investment
advisory services
How Likely to O�er in 2012
(Among Those Plans That Do Not Currently O�er)
Very
Likely
12%
14%
3%
8%
8%
10%
5%
Somewhat
Likely
17%
23%
13%
18%
18%
14%
18%
Somewhat
Unlikely
13%
27%
23%
27%
27%
28%
27%
Very
Unlikely
58%
37%
61%
47%
47%
48%
50%
Among employers o�ering target-date portfolio solutions, many sponsors
are planning to take action during 2012, likely in response to the increasing
importance of these products in defined contribution plans today. Sixty
percent of employers report that they are very or somewhat likely to perform
a comprehensive review of their fund manager, and 53% will perform a
comprehensive review of the fund glide path.
Currently, 15% of employers use a customized solution for their target-date
funds, and 7% are very or somewhat likely to take this step in 2012. These
results are not surprising, given an increasing focus on fees and the
consequence of creating robust solutions for employees.

Current and Future Actions on Target-Date Portfolios
Completed
Recently/
Not Needed Actions
37%
33%
18%
22%
15%
(n ranges from 185 to 295)
Perform a comprehensive review of
the fund manager
Perform a comprehensive review of
the fund glide path
Change fund managers
Move from a primarily active to a
primarily passive target-date fund
approach
Move to a customized solution for
target-date funds (glide path and/
or underlying investments)
Retirement Income
Solutions/Annuities
Likelihood of Action in 2012
(Among Plans That Have Not Completed Recently)
Very
Likely
24%
17%
4%
1%
1%
Somewhat
Likely
36%
36%
9%
6%
6%
Somewhat
Unlikely
20%
25%
28%
33%
25%
Very
Unlikely
21%
23%
60%
60%
68%
As employees increasingly depend on the defined contribution plan to fund
their future retirement income, the annuity gap left by defined benefit plans
has become a larger focus. To meet this need, over the past few years insurance
companies have introduced innovative and varied retirement income solutions
for the defined contribution industry that reside outside the plan, within the
plan, or alongside the plan. Most plan sponsors continue to monitor these
activities, while some are adopting in 2012.
Currently, 16% of plans o�er an “in-plan” solution, including either an insurance
product, a managed account with a drawdown feature, or a managed payout
fund. Additionally, among those plans not o�ering, 22% plan to adopt one of
these solutions during 2012. The most popular solution reported is managed
accounts with a drawdown feature.
Whether or not organizations o�er an in-plan retirement income solution
option, most are trying to help employees understand what they can spend
each year in retirement. Seventy-one percent of plans provide online
modeling tools for that purpose, and of those that do not provide modeling
tools today, 64% are very or somewhat likely to add these tools in the coming
year. Further, 42% of plans allow participants to elect an automatic payment
option from the plan over an extended period of time.
Aon Hewitt 25

Retirement Income Solutions/Annuities—Usage and Plans for 2012
Already
O�er Retirement Income Solutions
71%
42%
11%
10%
10%
9%
6%
(n ranges from 271 to 419)
26 Aon Hewitt
Online modeling tools to help
participants determine how much they
can spend each year in retirement
Distributions from plan/automatic
payment (participant elects an automatic
payment from the plan over an extended
period of time)
Within the plan; annuity or insurance
products (e.g., variable annuity features,
guaranteed minimum withdrawal
benefits, preservation of principal,
minimum annuity payout, other)
Within the plan; managed accounts with
drawdown feature (managed account
provider allocates participant assets as well
as manages the amount paid each year from
the plan)
Within the plan; managed payout funds
(funds with an allocation targeted at a
specific payout percentage each year with
no guarantees)
Facilitation of annuities outside the plan
as options for plan distributions
Ability to transfer assets to a defined
benefit plan in order to receive an
annuity
Likely to O�er in 2012
(Among Those Plans That Do Not Currently O�er)
Very
Likely
32%
6%
3%
5%
3%
5%
0%
Somewhat
Likely
32%
18%
13%
14%
14%
10%
4%
Somewhat
Unlikely
14%
36%
33%
35%
36%
32%
14%
Very
Unlikely
23%
40%
51%
46%
46%
54%
83%
Among employers that are unlikely to o�er participants an in-plan retirement
income solution in 2012, the barriers reported most often were fiduciary,
operational/administrative, or participant utilization and communication
concerns. Many plans sponsors (40%) indicated they are waiting to see how
the market evolves, while 57% acknowledge no interest
at this time.

Barriers to Adding Retirement Income Solutions/Annuities
Barriers
Not interested in o�ering insurance products
at this time
Fiduciary concerns
Waiting to see the market evolve more
Participant utilization or communication
concerns
Operational or administrative concerns
Portability concerns
Cost barriers
Preference for participants to leave the plan
at termination
Other
(n=308; multiple responses)
Percentage of Plans
Investment Fund O�erings Plan sponsor scrutiny of defined contribution fund operations and investments
is a continued priority in 2012. It is likely that regulatory disclosure
requirements and broad industry focus are contributing to this interest.
One-third of respondents state that they have completed an in-depth review
of operations recently. Out of the remaining two-thirds who have not, nearly
nine out of ten (89%) state that they are very or somewhat likely to do so
in 2012.
57%
43%
40%
39%
33%
18%
18%
Employers are also likely to perform a comprehensive review of the fund
o�erings. Forty percent of employers have completed this exercise recently,
and 85% of the remaining respondents indicated that they will do so
this year.Cost-cutting is also increasingly top of mind with employers.
Recently, one-third of all employers have changed or altered their fund
options to reduce the cost, while nearly half of the remaining plan sponsors
intend to do so in the next 12 months.
Finally, o�ering participants even more choice is planned for the coming year.
More employers have added funds for inflation protection, and many have
added (or plan to add) a tier of index funds to the design (typically meaning
the addition of at least a bond, large-cap equity, small-/mid-cap equity, and
international equity index options).
9%
3%
Aon Hewitt 27

Likely Actions on Investment Fund O�erings in 2012
Completed
Recently/
Not Needed Actions Related to Funds
40%
38%
33%
33%
31%
30%
27%
25%
24%
9%
(n ranges from 328 to 366)
28 Aon Hewitt
Perform a comprehensive review
of fund o�erings
Update investment policy statement
Review defined contribution fund
operations, including fund expenses
and revenue sharing
Change/alter fund options to
reduce costs of funds
Implement a self-directed
brokerage window
Add a money market fund
Change some or all funds from
actively managed to index funds
Add a tier of index options
Add funds designed for inflation
protection
Remove stable value fund
Likely to O�er in 2012
(Among Those Plans That Do Not Currently O�er)
Very
Likely
59%
31%
61%
18%
3%
2%
5%
4%
3%
1%
Somewhat
Likely
26%
33%
28%
32%
5%
5%
16%
14%
18%
4%
Somewhat
Unlikely
9%
20%
7%
34%
20%
24%
35%
38%
37%
21%
Very
Unlikely
7%
16%
5%
17%
73%
69%
44%
44%
42%
73%

Communication Initiatives Many employers use communication initiatives to educate and influence
behavior in the defined contribution plans. Among the more popular undertakings
that employers are focusing on in 2012 are a general understanding
and appreciation of the plan, plan participation, and contribution levels, as
well as retirement income adequacy.
Likely Defined Contribution Communication Initiatives in 2012
Initiatives
General understanding and appreciation
of plan
Plan and/or fund expenses
Plan participation
Participant contribution levels
Diversification/fund usage
Retirement income adequacy
Availability of resources to help with
retirement planning
Retirement income estimates and
retirement process
Defined contribution decision making
within a broader financial or total
benefits context
Broader financial education
Encourage new hires to roll 401(k) from
previous employer into your plan
Rolling over versus cashing out of plan
Loan-taking or in-service withdrawals
(n ranges from 362 to 369)
Of course, fees (plan and/or fund expenses) are also a focus for the
coming year with nearly half of sponsors listing this as a likely communication
initiative, compared with only 39% of sponsors in 2011. This is at least
partly attributable to regulatory requirements. Availability of resources that
participants can access is also a large focus for 2012 (78%), as many sponsors
have enhanced their plans in recent years.
Very
Likely
56%
49%
44%
41%
40%
40%
40%
28%
27%
20%
14%
13%
10%
Somewhat
Likely
33%
31%
36%
37%
40%
40%
38%
39%
42%
33%
25%
35%
25%
Somewhat
Unlikely
9%
15%
15%
17%
17%
16%
16%
26%
23%
33%
41%
38%
42%
Very
Unlikely
3%
5%
6%
5%
2%
4%
6%
7%
8%
14%
20%
14%
23%
Aon Hewitt 29

Communication and Education Vehicles
Initiatives
Online modeling tools
Articles posted to an intranet
or benefits site
Email correspondence
Targeted mailings
(based on employee behaviors)
In-person financial seminars
Features articles in internal newsletters
Webinars
Financial planning sessions with
independent third-party advisors
Micro-sites
Podcasts
Social media (e.g., Facebook, Twitter)
Text messages
(n ranges from 362 to 463)
30 Aon Hewitt
As technology evolves, so too does the method by which employers share
information and how they engage their employees. Electronic media continues
to be a popular and e�ective way to reach employees. Nearly 80%
of respondents use their intranet site, 67% use online modeling tools, and
64% use email blasts. In addition to online vehicles, popular communication
approaches include targeted mailings (73%), internal newsletters (47%), and
in-person financial seminars (46%). In terms of emerging methods, 6% are
extensively or selectively levering social media to reach employees.
Use
Extensively
42%
34%
33%
29%
24%
19%
13%
10%
7%
2%
1%
0%
Use
Selectively Rarely Use
42%
46%
49%
47%
40%
39%
35%
21%
17%
10%
5%
3%
10%
12%
12%
15%
23%
23%
30%
20%
20%
23%
18%
11%
Not at All
Used
6%
7%
6%
10%
14%
19%
21%
49%
56%
65%
76%
86%

Managing Risk and Plan Expenses Over the past few years, companies have been taking actions to manage risk
and plan expenses in their defined contribution plans, and 2012 appears
to be no exception. Six out of 10 respondents are likely to benchmark plan
administration and procedures to best practices. An almost equal number
(55%) are planning to review their plan governance structure, and more than
half of all respondents (53%) indicated that they have already hired a third
party to monitor or review their fund options.
Managing Risk in Defined Contribution Plans
Completed
Recently/
Not Needed Actions Related to Funds
53%
34%
28%
25%
22%
21%
20%
13%
(n ranges from 349 to 352)
Hire a third party to monitor or
review funds
Review plan governance structure
Benchmark plan administration and
procedures to best practices
O�er professional investment help
or management
Perform a compliance review
Increase the frequency or intensity
of fund monitoring
Increase the frequency and/or
intensity of the review of total plan
cost
Outsource fiduciary responsibility to
a third party
In 2012, DC-only plan sponsors are far more likely to be focused on plan
administration benchmarks (70% vs. 59% of sponsors o�ering both DC and
DB plans), compliance review (68% vs. 46% of sponsors o�ering both DC
and DB plans), and plan governance (63% vs. 52% of sponsors o�ering both
DC and DB plans).
Likely Actions in 2012 to Manage Risk in Defined Contribution
Plan Among Those Plans That Did Not Recently Complete
Very
Likely
12%
24%
24%
5%
23%
6%
17%
2%
Somewhat
Likely
14%
31%
36%
12%
28%
18%
29%
3%
Somewhat
Unlikely
22%
20%
22%
27%
26%
27%
25%
22%
Very
Unlikely
52%
25%
17%
56%
24%
49%
30%
73%
Aon Hewitt 31

Likely Action With Respect to Plan Expenses in 2012
Completed
Recently/
Not Needed Actions Related to Expenses
39%
36%
32%
22%
8%
7%
(n ranges from 355 to 361)
32 Aon Hewitt
Hire a third party to benchmark or
evaluate
Lower costs by changing some or
all funds from mutual funds to
institutional funds
Review the plan’s total cost
Restructure to allow administrative
fees to be assessed to participants in a
more equitable manner
Have participants share more
plan expenses
Supplement required fee disclosure
with additional communication details
Plan expenses are expected to be a continued and more significant focus of
attention in 2012. Nearly all employers (85%) indicated that they are very or
somewhat likely to review the plan’s total cost (including fund fees, recordkeeping
fees, trustee fees, etc.). In addition, sponsors are progressively moving
toward lower-cost fund alternatives with around one in four (24%) indicating
that they are likely to lower costs by changing some or all funds
from mutual funds to institutional funds.
Plan sponsors are also seeking outside help in evaluating their fee structures.
Nearly 40% of employers state that they have already hired a third party to
evaluate and benchmark costs. Thirty-five percent of the remaining employers
are likely to hire an outside company in 2012.
Likely to Do in 2012
(Among Those Plans That Have Not Recently Completed)
Very
Likely
19%
7%
64%
6%
4%
23%
Somewhat
Likely
16%
17%
21%
12%
6%
36%
Somewhat
Unlikely
14%
29%
9%
26%
22%
21%
Very
Unlikely
41%
47%
7%
56%
69%
20%

Defined Benefit Plans
Likely Changes in 2012
Likely Changes to Defined Benefit Plans in 2012
Changes
Nothing, continue with current open plan as is
If your plan is open to new entrants: close
participation and no longer allow new
employees to enter your defined benefit plan
If your plan has ongoing accruals: freeze
accruals and cease benefit accruals for
all/portion of participants
Reduce benefits but continue to o�er a defined
benefit plan to current and future employees
If you o�er a traditional plan: change to a
hybrid plan (cash balance or pension equity)
Extend participation to new hires (if plan
is closed) and/or restart benefit accruals
(if plan is frozen)
Terminate the plan and fully fund and
remove all company liability through
lump-sum payout to participants or
third-party annuity purchase
Change to other plan design (“fair value,”
“stable value,” “retirement shares,” or other
pension design)
(n ranges from 85 to 227)
This section of the report shows findings from employers that provide any
form of defined benefit plan, whether open, closed, or frozen. Depending
on the questions, results may be shown for a subset of these respondents,
as indicated.
Most defined benefit plan sponsors (80%) are very or somewhat likely to
continue with their current defined benefit plan and do not plan to change
the program design. This result is consistent with survey results from the past
several years. Employers that plan to make changes are likely to either freeze
future accruals for their current employees or close the plan to new entrants.
Very few sponsors are planning to change their defined benefit formula from
one form to another.
Very
Likely
69%
10%
5%
6%
2%
2%
1%
0%
Somewhat
Likely
11%
8%
12%
5%
2%
1%
3%
2%
Somewhat
Unlikely
5%
10%
10%
14%
7%
2%
7%
4%
Very
Unlikely
15%
72%
73%
75%
89%
95%
89%
94%
Aon Hewitt 33

34 Aon Hewitt
Plan sponsors continue to cite the expense of the pension plan (54%), cost
volatility (33%), and operational risk (33%) as the primary reasons for cutting
back on defined benefit plans.
Among respondents that are unlikely to make changes to their ongoing
defined benefit plans in 2012, the primary reason, reported by 14%, is the
belief that their plans fit the needs and/or preferences of their workforces. Fifteen
percent of respondents may evaluate the plan at a later date but have other
priorities for 2012, and 18% of employers reported that the plan already limits
future accruals to only a relatively small group of grandfathered employees.
Primary Reason Defined Benefit Employers Are Not
Making Changes in 2012
Reason
Plan is already frozen; no need to change
Plan already limits future accruals to small
group of grandfathered employees
Plan is an e�cient vehicle for delivering
retirement benefits
May evaluate plan at a later date but have
other priorities for 2012
Fits workforce needs and/or preferences
Plan is necessary to remain competitive
Plan is overfunded and costs little to nothing;
no reason to change
PPA and recent court ruling validate hybrid
plan design
Other
(n=180)
Percentage of Plans
22%
18%
16%
15%
14%
7%
2%
0%
7%

Likely Actions Planned in 2012
Risk Management
The most likely actions anticipated for defined benefit plan sponsors during
2012 include managing risk, reanalyzing their investment policy, changing
administration processes, and dealing with an expected increase in
retirement-eligible employees.
Similar to the defined contribution responses, pension plan sponsors are
focusing on risk-management strategies. Respondents are likely to perform
funding and accounting projections, review funding strategy, and assess
pension risks based on current strategies in 2012. These results are consistent
with last year’s survey. In addition, 29% of respondents are very likely to
conduct an asset-liability study, and nearly one-quarter (24%) will adjust
equity exposure and/or overall asset allocation.
Plan sponsors are less likely to allow in-service distributions as early as age 62,
as permitted by the PPA, or change to a mark-to-market accounting (i.e., by
eliminating gain/loss amortizations).
Aon Hewitt 35

Likely Actions Defined Benefit Plan Sponsors Will Take in 2012
Completed
Recently/
Not Needed Actions
29%
24%
22%
19%
17%
15%
14%
10%
9%
7%
7%
5%
4%
3%
3%
(n ranges from 229 to 237)
36 Aon Hewitt
Conduct an asset-liability study
Adjust equity exposure and/or
overall asset allocation
Adjust plan investments to better
match the characteristics of the plan’s
liabilities (e.g., liability-driven investing,
or LDI)
Review funding strategy
Perform funding and accounting
projections
Assess the risks (financial and
nonfinancial) that the pension plan is
running based on current strategies
Add or liberalize a lump-sum option
O�er lump sums to terminated vested
participants to decrease liabilities
and risk
Allow in-service distributions as early
as age 62 as permitted by the PPA
Change to mark-to-market accounting
Contribute more than the IRS
minimum required contribution
Purchase annuities for retirees
Transfer the plan (both assets and
liabilities) to another party to reduce
risk exposure
Transfer excess pension assets into a
health benefits account under Code
section 420
Use a buy-o�ering (e.g., entering an
agreement to transfer risk to a third party)
Likely to Do in 2012
(Among Those Plans That Have Not Recently Completed)
Very
Likely
23%
27%
17%
31%
67%
32%
6%
14%
1%
2%
19%
2%
2%
0%
1%
Somewhat
Likely
31%
31%
32%
45%
22%
31%
13%
21%
6%
9%
23%
4%
4%
0%
2%
Somewhat
Unlikely
20%
25%
24%
12%
3%
12%
16%
19%
18%
24%
18%
17%
9%
4%
11%
Very
Unlikely
26%
18%
27%
12%
8%
26%
65%
47%
74%
65%
40%
76%
85%
96%
86%

Confidence and Priority Level of Risks in Defined Benefit Plans and Priorities
Risk Management Topic
Compliance risk
Fiduciary risk
Diversification risk
Litigation risk
Investment risk
Plan design risk (aspects of the plan
design, such as lump sums or final average
pay provisions)
Interest rate risk
Demographic risk (changes in participant
demographics, such as retirement patterns)
Longevity risk
(n ranges from 233 to 235)
Plan sponsors felt the most confident in their ability to handle compliance and
fiduciary risk, but felt the least confident that they could e�ectively manage
demographic and longevity risk. Three-quarters of all respondents indicated
that investment risk is a high priority of risk management, followed by interest
rate risk, which was cited by 63% of employers.
Very
Confident
1
43%
42%
38%
38%
37%
36%
31%
30%
Confidence Level
43%
2 3 4 5
9%
43% 10%
44% 13%
42% 13%
46% 13%
42% 14%
40% 22%
40% 19%
2%
3%
3%
4%
5%
5%
6%
9%
26% 34%
25% 12%
1%
1%
2%
3%
0%
2%
1%
2%
2%
Not
Confident
at All
6
1%
0%
0%
0%
0%
0%
0%
0%
1%
High
Priority
1
49%
45%
40%
27%
75%
22%
63%
20%
17%
Priority Level
Medium
Priority
2
34%
39%
43%
37%
21%
46%
28%
42%
43%
Low
Priority
3
17%
16%
17%
36%
4%
33%
9%
38%
40%
Aon Hewitt 37

27%
27%
14%
14%
12%
(n ranges from 163 to 195)
Investment Policy Twenty-seven percent of employers intend to change their pension plan
investment policy in 2012 to reduce potential volatility in the future; this is
similar to 2011 results.
Dealing With Increase in
Retirement-Eligibles
Plans to Change Pension Plan Investment Policy in 2012
Yes
27%
No
73%
(n=234)
Increasing the level of automation,
self-service, and/or Web access to
pension plan participants
Outsourcing additional services to an
outside party
Nothing; we do not anticipate any
demographic changes impacting
our plan
Increasing communication about the
retirement process
Nothing; we are well equipped to deal
with the demographic changes
While many defined benefit plan sponsors indicate that they are
well equipped to deal with expected demographic changes or that they do
not anticipate any demographic changes to impact their plan, one in four
plan sponsors are very likely to increase communication with plan participants
as they approach retirement. Nearly one in five also intend to outsource
additional services to an outside party.
Action Plan to Deal With Increase in Number of Retirement-Eligible Participants
Completed
Recently/
Not Needed Actions
38 Aon Hewitt
Likely to O�er in 2012
(Among Those Plans That Do Not Currently O�er)
Very
Likely
16%
8%
29%
25%
33%
Somewhat
Likely
27%
10%
21%
39%
28%
Somewhat
Unlikely
22%
16%
16%
19%
14%
Very
Unlikely
35%
66%
34%
18%
25%

Pension Plan Funded Status With historically low interest rates, pension liabilities have escalated. As a
result, fewer than 15% of companies reported their pension plans to be
generally fully funded as of January 1, 2011.
Funded Status as of January 1, 2011
40%
35%
30%
25%
20%
15%
10%
5%
0%
(n=235)
7%
70% or less
16%
71%-80%
36%
81%-90%
27%
Funded Status of Pension Plan
14%
91%-100% >100%
Defined benefit plan sponsors are most concerned about cash contribution
requirements of the pension plan and the impact of large pension expenses.
Despite the participant benefit restrictions that may be triggered by a low
pension funded status, only 10% of employers are very concerned about the
participant impact of their plan’s funded status.
Aon Hewitt 39

Concern Reported About Pension Plan Funded Status
Concern
Increased contribution requirements
Increased pension expense as reported on
company’s income statement
Financial position as reported on company’s
balance sheet
Impact on participant benefits
(n ranges from 235 to 236)
Pension Calculation Administration
40 Aon Hewitt
Very
Concerned
37%
37%
23%
10%
Somewhat
Concerned
41%
37%
40%
30%
Somewhat
Unconcerned
13%
15%
23%
35%
Completely
Unconcerned
10%
10%
14%
25%
Currently, nearly 60% of plans have their calculations fully outsourced,
another 25% use a co-sourced solution, and 18% are performed in-house.
In the next two years, however, plan sponsors are expected to outsource
more of the calculations.
Current Calculations
In-House
18%
Co-Sourced
25%
Outsourced
57%
(n=240)
Likely Calculations in Two Years
In-House
15%
Co-Sourced
20%
Outsourced
65%
(n=162)

Funding Policy One-half of respondents state that they are planning to contribute to their
defined benefit plan only the necessary amount as defined by the regulations.
Nonetheless, a sizable number (26%) are planning to conduct an asset
liability study or assess the contribution volatility under di�erent deterministic
scenarios (25%). While only a handful of plans (4%) are considering immediately
de-risking their plans this year, more than one-third of plan sponsors
(36%) are going to consider a longer-term option for de-risking.
Funding Policy Considerations in 2012
Policy Consideration
Contribute the amount necessary as defined
by the regulations
No change because we already employ an
asset/liability-driven investment strategy
Considering options for de-risking strategies
over a period of time
Conduct an asset/liability modeling study
Assess contribution volatility under various
deterministic scenarios
Establish a formal funding strategy based on
company’s financial goals
Settling liabilities through annuity purchase
or lump-sum payments
Immediately de-risking to eliminate risk
No change because we are expecting the
market to turn around
Increased exposure to higher-risk investments
Other
(n=213; multiple responses)
Percentage of Plans
50%
36%
36%
26%
25%
15%
12%
4%
3%
3%
1%
Aon Hewitt 41

Retiree Medical Plans
Types of Plans
This section examines employers’ likely changes to retiree medical plans in
2012. Sixty-one percent of employers o�er postretirement medical coverage
to some or all current or future retirees. Some provide access to medical
coverage, and some o�er a subsidy for retiree medical benefits. The coverage
levels can vary depending on retirement date or hire date, with current retirees
being more likely to have subsidized coverage (or any coverage at all) than
new hires.
Among those employers that o�er any retiree medical coverage, we find that
access to coverage is far more common than a subsidy for retiree medical.
For current retirees, 98% o�er access to retiree medical while only 85% of
employers provide a subsidy for retiree medical. These numbers decrease
substantially when you look at new hires, with only 60% of employers
providing access to coverage and only 23% o�ering a retiree medical subsidy.
About half of all employers that provide retirement medical subsidies have a
specified cap on their provided subsidy from the plan. Of the sponsors who
have a pre-65 cap, nearly 60% reported that they have already reached the
subsidy ceiling, and another 16% are expecting to reach the maximum in the
next one to three years. For post-65 subsidies, only about half of plans (53%)
have already reached the subsidy cap, but another 21% expect to reach it in
the next one to three years.
Type of Retiree Medical Coverage O�ered in 2012 Among Those Providing Postretirement Coverage
Type of Coverage
Subsidized and uncapped through a company-sponsored
group program
Subsidized and capped through a company-sponsored
group program
Subsidized to some extent but without access to
company-sponsored program
Access-only through a company-sponsored group program
No retiree medical subsidy or access
O�er subsidy for retiree medical coverage
O�er access to retiree medical coverage
42 Aon Hewitt
Current
Retirees
34%
48%
3%
13%
2%
85%
98%
Current
Actives
26%
40%
3%
20%
11%
69%
89%
New
Hires
13%
9%
1%
37%
40%
23%
60%
(n=211) (n=153) (n=141)

Percentage of Employers With a Pre-65 Premium Subsidy Cap
Yes
47%
No
53%
(n=201)
Percentage of Employers With a Post-65 Premium Subsidy Cap
Yes
48%
No
52%
(n=305)
Status Relative to Subsidy Cap
Response
Already reached the cap
Anticipate reaching the cap in the next
1–3 years
Anticipate reaching the cap in the next
3–5 years
Do not anticipate reaching the cap in
the near future
(n=82)
Percentage
of Plans
Pre-65
58%
16%
8%
19%
Percentage
of Plans
Post-65
53%
21%
7%
19%
Aon Hewitt 43

44 Aon Hewitt
Prescription Drug Coverage Filing for the Medicare Part D Retiree Drug Subsidy (RDS) is still the most
popular prescription drug coverage strategy, but employers are continuing to
move away from it. For 2012, 57% of respondents reported that they will use
this approach—down from 65% a year ago. In addition, only 40% stated that
they anticipate using this approach in 2013.
2012 and Projected 2013 Medicare Rx Strategy
for the Largest Age 65+ Plan
Strategy
O�er Rx coverage and file for the 28% RDS
Contract with a Medicare Rx plan (PD/EGWP)
to provide at least Part D Rx coverage
Supplement or wrap-around individual
Medicare Rx Part D coverage through the
group program
Discontinue group-based Rx coverage with
no employer subsidy
Discontinue group-based Rx coverage but
provide an employer subsidy and source
coverage through the individual market
File with CMS to become a Medicare Rx
Part D plan
Actual
2012
57%
16%
15%
4%
6%
3%
Projected
2013
40%
28%
13%
8%
9%
2%
(n=196) (n=187)
HSA-Compatible One health care reform provision is an excise tax on high-value health plans.
This may have employers looking to new strategies for providing pre-65 retiree
medical coverage. One possible strategy is to o�er early retirees a program that
combines a high-deductible health plan (HDHP) with a health savings account
(HSA). About one-quarter of employers o�ering health care to pre-65 retirees
currently o�er an HSA-compatible HDHP. Note: The excise tax does
not go into e�ect until 2018.

Changes to Benefits From
2011 to 2012
Percentage of Employers O�ering HSA-Compatible HDHP
Yes
24%
No
76%
(n=219)
Examining actual changes in retiree medical benefits that were made from
2011 to 2012, around three-fourths of all employers asked their retirees to
increase their premiums for pre-65 coverage.
Changes to Pre-65 Retiree Health Benefits From 2011 to 2012
Pre-65 Changes
Increased retiree contributions to premiums
Increased retiree plan design cost-sharing
requirements
Tightened restrictions on new retiree eligibility
Introduced an HSA-compatible HDHP
(high-deductible health plan)
Terminated subsidized benefits for some or
all future retirees
Introduced a new premium subsidy cap for a
group that was previously uncapped
Terminated subsidized benefits for some or
all current retirees
Moved to a pure defined contribution subsidy
approach through a health reimbursement
arrangement (HRA)
Facilitated retiree purchase of individual
medical insurance
Other
(n=131; multiple responses)
Percentage of Plans
73%
34%
12%
12%
11%
6%
5%
2%
3%
5%
Aon Hewitt 45

46 Aon Hewitt
Likely Changes Projected
in 2013
Actual changes to post-65 retiree health benefits from 2011 to 2012 are very
similar to the above changes for pre-65 retirees and include increased retiree
contributions to premiums, retiree plan design cost-sharing requirements, and
termination of subsidized benefits for some or all future retirees.
Changes to Pre-65 Retiree Health Benefits From 2011 to 2012
Post-65 Changes
Increased retiree contributions to premiums
Increased retiree plan design cost-sharing
requirements
Terminated subsidized benefits for some or
all future retirees
Tightened restrictions on new retiree eligibility
Facilitated retiree purchase of individual
medical insurance
Introduced Medicare Advantage plans
Terminated subsidized benefits for some or
all current retirees
Introduced a new premium subsidy cap for
a group that was previously uncapped
Moved to a pure defined contribution subsidy
approach through a health reimbursement
arrangement (HRA)
Terminated Medicare Advantage plans
Other
(n=110; multiple responses)
Percentage of Plans
75%
31%
14%
11%
When asked about projected changes to retiree health benefits in 2013, more
than three-quarters of survey respondents said that they were very or somewhat
likely to increase retiree contributions to premiums. Also, over half said
that they were likely to increase retiree plan design cost-sharing requirements.
Four out of 10 said that they would change their Medicare Part D strategy.
9%
6%
6%
5%
4%
2%
3%

Likely Changes to Retiree Health Benefits Projected in 2013
Likely Changes in 2013
Increase retiree contributions to premiums
Change Medicare Rx/Part D strategy
Increase retiree plan design cost-sharing
requirements
Facilitate retiree purchase of individual
medical insurance
Tighten restrictions on new retiree
eligibility
Introduce Medicare Advantage plans
Terminate subsidized benefits for some/all
future retirees
Introduce HSA-compatible HDHP
(high-deductible health plan)
Move to a pure defined contribution
subsidy approach through a health
reimbursement arrangement (HRA)
Introduce a new premium subsidy cap for
a group that was previously uncapped
Terminate Medicare Advantage plans
Terminate subsidized benefits for some or
all current retirees
(n ranges from 77 to 177)
Very
Likely
43%
26%
21%
9%
9%
7%
6%
6%
5%
3%
3%
3%
Somewhat
Likely
35%
16%
32%
21%
11%
15%
10%
16%
10%
9%
3%
6%
Somewhat
Unlikely
7%
22%
20%
22%
18%
19%
15%
16%
21%
21%
21%
12%
Very
Unlikely
15%
47%
28%
48%
62%
59%
69%
62%
65%
67%
74%
79%
Aon Hewitt 47

Respondents by Size of Employee Base
Under 1,000
1,000–4,999
5,000–9,999
10,000–24,999
25,000 or more
(n=501)
Participating Employer
Information
Range of Employees
Respondents by Industry
Industry
Aerospace and Defense
Associations, Foundations, and
Charitable Organizations
Automobiles and Components
Banks
Building Products, Construction,
and Machinery
Chemicals
Consumer & Professional Services
Consumer Durables and Apparel
Consumer Services
Diversified Financials and Real Estate
Education
Energy
Food, Beverage, and Tobaccos
(n=501)
48 Aon Hewitt
Nearly 40% of respondents have 10,000 or more employees. The median
number of U.S. employees is 5,800, and the average is 24,323. Forty-eight
percent of respondents have publicly traded stock.
Percentage of Plans
19%
26%
16%
18%
21%
Percentage of Plans
2%
6%
2%
5%
4%
3%
4%
2%
2%
7%
6%
4%
7%
Industry
Government: Federal
Healthcare Equipment & Services
Information Technology
Insurance
Media
Metals, Mining, Paper Products
Other/Conglomerates
Pharmaceuticals
Retail
Telecommunications Services
Transportation
Utilities
Percentage of Plans
3%
11%
5%
6%
2%
4%
1%
2%
4%
2%
3%
3%

About Aon Hewitt
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The company partners with organizations to solve their most complex benefits, talent
and related financial challenges, and improve business performance. Aon Hewitt designs,
implements, communicates and administers a wide range of human capital, retirement,
investment management, health care, compensation and talent management strategies.
With more than 29,000 professionals in 90 countries, Aon Hewitt makes the world a
better place to work for clients and their employees. For more information on Aon Hewitt,
please visit www.aonhewitt.com.
Contact Information
Pamela Hess, CFA
Director of Retirement Research
Aon Hewitt
+1.847.295.5000
pam.hess@aonhewitt.com
Barbara Hogg, FSA
Retirement Communication Leader
Aon Hewitt
+1.847.295.5000
barb.hogg@aonhewitt.com
Rob Reiskytl
Practice Leader of Retirement Strategy and Design
Aon Hewitt
+1.612.339.7501
rob.reiskytl@aonhewitt.com
Copyright Aon Corporation 2012