Many Employees Fail to Use Pension Plans Fully : Retirement: Study finds that participation in company programs by baby boomers is ‘distressingly low.’

Workers at large companies are throwing away money by failing to take advantage of the growing number of pension plans available to them, according to a study released Tuesday.

The study by accountants KPMG Peat Marwick calls employee participation in some retirement plans “distressingly low”--a growing concern as baby boomers get older.

In the random survey of 993 companies with more than 200 employees, 401(k) retirement plans proved to be the most frequently offered to workers.

Only 61% of eligible employees participated in 401(K) plans, the same number as last year, the survey shows.

Yet the number of firms that offer retirement benefits including 401(k)s rose to 89% from 78% in that period.

“A significant amount of employees are throwing away tax-deferred money by not using 401(k),” Martha Priddy Patterson, head of employee benefits policy at Peat Marwick, said at a news conference.

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Under-using the 401(k) option could spell “big problems when people get to retirement age,” she said.

A typical 401(k) plan asks employees to set aside a part of their annual income for retirement, with the employer contributing half as much. There are several investment options, and taxes are deferred until retirement.

Other employees are covered by so-called defined benefit plans, which do not require workers to make contributions but provide far less income at retirement age.

There are other trouble spots, Patterson said.

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Employees often opt for investment strategies under 401(k)s that are too conservative to meet their retirement needs.

They contribute on average only half of the total amount allowed, and they may be saving far less than their lifestyle requires, Patterson said.

Currently, workers who have spent their whole life in one company receive only a little over half their annual income when they retire, she said.

“Basically, when you retire, your expenses don’t change much,” Patterson cautioned. She suggested that workers aim for having at least as much money when they retire as they earned when working.

Though employers are offering more retirement options to workers than they were a year ago, they are failing to convey the importance of retirement planning, she said.

“Very few employers regularly provide any kind of retirement savings advice,” Patterson said. “That’s really quite frightening.”