Mercer's 2006 Retail Industry Benefits Survey found, for example, that retail organizations rely on defined contribution (DC) plans, such as 401(k) savings plans, more than all companies in the S&P 500 do when providing retirement benefits to rank-and-file employees. In fact, 41% of retail organizations provide retirement benefits solely through DC plans rather than traditional pensions, or defined benefit (DB) plans, compared with just 19% of the S&P 500 companies.

While fewer than half of the retail organizations surveyed sponsor DB plans for workers, those that do must balance the human capital advantages of these plans with their financial challenges, noted Mark Rowles, Mercer's retail industry team leader. "Recent accounting and funding rule changes may have particularly negative implications for retailers, whose pension plans are generally less well funded than those of other large employers. Accordingly, these employers will want to actively manage their plans' financial risk," Mr. Rowles said. The Mercer analysis also found that nonqualified DB plans for executives are offered by fewer than 20% of the retail companies surveyed compared to 50% in general industry.

"There is much more scrutiny of the level and accrual of retirement benefits for executives in light of new SEC disclosure requirements, media attention and general awareness by key stakeholders such as unions and shareholders. For this reason, many companies have opted to restructure their plans, particularly for future accruals," said Mr. Rowles.

With health care costs, in particular, increasing faster than they can raise prices, retailers are employing a full range of cost management measures, such as cost shifting and consumer-driven health plans, Mercer's survey found. Retail employers are more likely to offer "mini-med" programs that provide basic health care but limit total expenses for inpatient care and catastrophic coverage. Retailers are also far less likely to offer post-retirement medical benefits than other large employers.

As with most employers, PPO plans are the most prevalent plan offered within the retail industry. However, fewer retail firms offer HMO plans, probably due to the higher premiums required.

About the survey
Mercer's 2006 Retail Industry Benefits Survey is drawn from three survey databases:

• Mercer's Retirement Financial Management Survey, a survey of the retirement financial management practices of the 71 US-based publiccompanies of the STORES Top 100 Retailers.
• Mercer's Benefits Valuation and Prevalence Survey, a survey ofthe relative values of the health care and group benefits plans of the53 retailers in Mercer's BenefitsMonitor(tm) database.
  
• Mercer's Executive Retirement Benefits Survey, which tracksexecutive retirement benefits provided by the 41 retailers in Mercer's EBeRT(tm) database.

For more information about Mercer's 2006 Retail Industry Benefits Survey, please contact Mark A. Rowles, Principal, Retail Industry Team Leader, mark.rowles@mercer.com.