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5500 Preparer's Manual for 2012 Plan Years
The premier resource in the field of Form 5500 preparation, 5500 Preparer's Manual will help you handle the required annual Form 5500 filings for both pension benefits and welfare benefit plans.
With companies facing an unprecedented talent shortage, as 25 percent of the American workforce nears retirement age, an increasing number of firms are considering implementing phased retirement programs, according to a survey of mid-size and large employers by Hewitt Associates.
More than half of the companies surveyed (55 percent) have already evaluated the impact that potential retirements could have on their organization, and 61 percent have developed, or will develop, special programs to retain targeted, near-retirement employees. Although only 21 percent believe that phased retirement is critical to their company’s human resources strategy today, that number nearly triples (61 percent) when employers look ahead five years. According to Hewitt, 47 percent of companies said they have some type of phased retirement arrangement available to their employees, but very few (five percent) have actually formalized those programs. Almost 40 percent expressed an interest in establishing a phased retirement program in the future.
While employers are increasingly interested in adopting phased retirement programs, they are taking a number of steps to better understand how these programs can be structured as effective talent retention tools, including increasing information gathering, understanding drivers and barriers to effective retention programs, reconsidering rehire policies, and defining and measuring success.
Increasing information gathering. According to Hewitt, employers are ramping up their information-gathering efforts for potential phased retirement programs. In particular, they are significantly increasing their efforts to obtain information from employees nearing retirement eligibility. Of those companies that have begun gathering information, Hewitt found that 63 percent use general industry research and discussions with key business leaders and managers as a way to gather information on phased retirement programs. Slightly less than one-quarter (22 percent) currently gather formal input from near-retirement employees, but that number is expected to rise to 54 percent in the next few years.
“Working with senior management to determine how phased retirement programs will benefit both employers and employees is an important first step. However, in order to create a truly successful program, it’s critical that employers understand employees’ perspectives,” said Allen Steinberg, a principal at Hewitt. “Gathering formal input from employees through focus groups or other initiatives will enable companies to design programs that can truly help with retention needs—but do so in a cost efficient way. This is particularly important for employers concerned about workers in specific roles or with specialized skills that represent the greatest risk of loss to the organization.”
Understanding drivers and barriers to effective retention programs. Beyond information gathering, employers are trying to develop a more robust understanding of the types of initiatives that will effectively retain key groups, as well as better comprehend the barriers to the adoption of phased retirement programs. According to the Hewitt survey, almost three-quarters of employers (72 percent) said that retaining the experience, knowledge and skills of older workers was the most important benefit to them in offering phased retirement programs. Other important benefits to employers include easing the difficulty of replacing key skills (52 percent) and helping with transfer of key skills from experienced to inexperienced workers (50 percent).
In assessing the most successful ways to retain near-retirement workers, employers have determined that alternative work arrangements represent a critical component. Almost two-thirds (65 percent) suggested that offering part-time employment (on a year-round basis) represented one of the most effective ways of retaining near-retirement workers. In addition to part-time employment, 37 percent of employers noted that giving near-retirement employees access to retirement benefits would be effective in retaining talent.
While phased retirement programs benefit both employers and employees, the Hewitt survey found employers also face potential challenges as they consider adopting or expanding these arrangements. More than half (52 percent) believe there are significant legal and regulatory barriers. However, a variety of internal issues also represent many of the challenges they face, such as company culture (42%). In addition, concerns about costs (34 percent) and that phased retirement programs might accelerate the loss of talent (30 percent) were also cited.
“For many years, employers have focused on the perceived legal barriers to phased retirement, but changes made by Congress in 2006 reduced some of the legal constraints,” said Steinberg. “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.”
Reconsidering 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.
Defining and measuring success. Nearly all companies (92 percent) reported that retention of skills, knowledge and/or experience—cited by employers as the most important reasons for offering phased retirement programs—were also among the most important factors in determining the success of those programs. Three-fourths also cited employees’ desire to gradually transition into retirement as important, and nearly half (49 percent) said that employees’ ability to qualify for health care benefits was critical to the success of their phased retirement arrangements.
Of the companies that already have phased retirement arrangements in place, only about one third (32 percent) said they were satisfied with their programs. However, just 14 percent of companies said they are actually measuring the success of their programs. In fact, 70 percent said they have no measures in place and no plans to implement a measurement strategy in the future.
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