Consider a Phased Retirement Program for Your Employees
Most employers believe their employees expect to work past age 65. A recent survey by the Transamerica Center for Retirement Studies states that one reason for staying on the job longer is that so many older workers experience a shortfall of retirement savings. Another is that many employees don’t want to go “cold turkey” on the social interaction, stimulation, and sense of accomplishment they get from work.
More than 80% of surveyed employers say they support the idea of employees working past 65. But only about a third of them allow staff members to downshift from full- to part-time status ― also known as “phased retirement.” This may change as employers recognize the need to keep experienced workers on-board longer.
Employees who welcome the opportunity to switch to part-time work may be even more productive after the change. In addition, employers can benefit greatly by having these seasoned employees available to transfer their skills and job knowledge to the younger workers who come after them.
Labor shortages in certain fields and geographic regions also play a role in the changing retirement landscape. The Government Accountability Office (GAO) recently issued a study on phased retirement programs, noting that “Industries with skilled workers or labor shortages are motivated to offer phased retirement because their workers are hard to replace.”
The GAO study also cited data from the Society for Human Resource Executives (SHRM). A member survey stated that phased retirement programs are common among employers with technical and professional workforces. Overall, 5% of SHRM members offer such programs.
While some employers examined by the GAO had to clear a few regulatory hurdles — specifically structuring benefits in a way that doesn’t violate ERISA anti-discrimination regulations — employers “were able to address various design and operational challenges,” according to the report.
Variety of Models
The study found an assortment of approaches that employers are taking. Here are examples of phased retirement programs used by four unidentified companies:
Example 1: Workers work 80% of full-time for 80% of full-time pay.
Example 2: Workers and managers develop a structured plan to transfer knowledge and transition to retirement within two years.
Example 3: Phased retirement program is available to workers in units that have implemented the program.
Example 4: Workers must transition into full retirement within three years.
These examples illustrate some of the diversity of existing phased retirement programs. If you’re not sure how beneficial such a program would be for your business, perhaps launch one on a trial basis and then assess the results. Also, keep in mind that navigating the legal and regulatory implications of implementing such a program ― particularly with respect to employee benefits ― requires guidance from a qualified attorney.
If you have any questions or would like more information about phased retirement programs, contact us.