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Looming talent shortage, concerns about retirement income, make programs more attractive
As 25 percent of the U.S. workforce nears retirement age, more companies are considering phased retirement programs to address skills shortages and to help employees transition to an easier and more affordable retirement, according to a survey by HR consultancy Hewitt Associates.
Hewitt’s survey of more than 140 mid-size and large U.S. employers shows that:
“With the rising tide of boomer retirees, employers will be losing key talent at a time when attracting and retaining skilled workers will be more important than ever,” explains Allen Steinberg, a principal at Hewitt Associates. “At the same time, rising medical costs, lengthening life spans and the declining prevalence of traditional pension and retiree medical benefits mean that employees will either have to work longer, save more or live with significantly less than they are accustomed to.”
As these trends converge, Steinberg notes, phased retirement programs will continue to become more attractive options for both employers and employees.
SHRM Video:Benefits for Phased RetirementModified pension plans may not be as effective at spurring phased retirement as 401(k) options and flexible scheduling, says Allen Steinberg of Hewitt Associates.•View this video
Increase Information Gathering
Employers are ramping up their information-gathering efforts for potential phased retirement programs and, in particular, are increasing their efforts to obtain information from employees nearing retirement eligibility. Of those companies that have begun gathering information, their approaches include:
“It’s critical that employers understand employees’ perspectives,” advises Steinberg, who suggests gathering formal input from employees through focus groups or other initiatives. This can prove especially helpful in determining the types of initiatives that will effectively retain workers in specific roles, or with specialized skills that represent the greatest risk of loss to the organization.
“One of the easiest—and most cost-effective—ways to determine what will be most beneficial to near-retirement employees is to simply ask them what type of arrangement would be most effective,” he notes.
Benefits of Phased RetirementTop benefits employers cited in offering phased retirement programs include:
Retaining the experience, knowledge and skills of older workers.
72% of respondents
Easing the difficulty of replacing key skills.
Helping with transfer of key skills from experienced to inexperienced workers.
Source: Hewitt Associates
Adapt Flexible Arrangements
In assessing ways to retain near-retirement workers, employers said that:
“What many companies find is that their existing flexible work arrangements may be easily adaptable to their retirement-eligible employees,” says Steinberg.
Re-evaluate Rehire Policies
In addition to retaining current employees, employers are reconsidering their policies toward rehiring retirees. While almost half of employers (45 percent) indicated they currently have policies in place that limit the ability to rehire retirees, a significant portion (46 percent) said they were likely to review their rehiring policies in the future.
Legal Barriers Diminish
For many years, employers focused on the perceived legal barriers to phased retirement, but changes made by Congress in the Pension Protection Act of 2006 reduced some of the legal constraints (see Pension Law Eases Way for Phased Retirement Plans). “More importantly, as employers really dig into the design of phased retirement programs, they realize that the legal barriers may not be nearly as significant as internal—or primarily cultural—obstacles,” Steinberg says. “These can be overcome—but only if the organization believes the effort involved is worth the reward.”
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