Leveraging Retirement Benefits to Retain Employees
Many things changed through COVID in our society, including how people view the world around them. Remote work is now much more popular (though debated), how we view employment (resulting in the Great Resignation of 2022) and wondering if we are going to be able to get a product at the store (though, thankfully, that seems to be returning to normal). One surprising change I have found is indications that employees value their benefit package more than ever. SHRM’s 2023 Employee Benefits Survey Executive Summary shows that employees value their top six benefits more today than they did in 2019, and all of the increases are significant.
Retirement Savings, Tied for Second Most Important Benefits to Current Employees
Most of the increases, such as health-related or family care benefits, make sense. I understand how a pandemic gave us a higher priority on those and on flexible work and leave benefits. But the one that surprises me is retirement savings—it, too, has a significant increase in importance. Even though it dropped during the lockdowns, it has bounced back up enough to be tied now for their survey’s second most popular benefit (with leave benefits, behind health care).
Some additional surprising information came from the 2022 TIAA Employee Retention Survey, which shows that younger people (ages 25 to 39) indicated that retirement savings education was more helpful than those surveyed that were older. After spending over 30 years in the financial service world, I found this shocking. But the data was consistent with other studies that I found. Multiple studies showed that retirement education is more valued today than it was in prior years and is more popular today among young adults than I anticipated.
Your People Want Help with Retirement
Several studies highlight that of all employee benefits, they want the most help with retirement. This may be surprising initially, but there are at least a few reasons for it. First, we often learn the best by interacting with something, but retirement is the one benefit that most people have the least interaction with. Compare it with vacation days—most everyone knows how vacation works because they take time off. But with retirement, it is fully deferred, and no one interacts with the policy. Most people do not even start thinking about it until later in their careers.
Confusing Jargon and the Damage it Causes
Another reason for a lack of understanding is the language in the industry. Financial advisors use a lot of jargon to describe what they are working with. John Sullivan, the chief editor of the American Retirement Association (which has over 30,000 members), speaks about the damage industry jargon does to 401(k) participants and then adds, “[Jargon] might make the advisor sound smart while making the client anxious and overwhelmed, and some argue it’s intentional.”
Pension plan documents and support personnel often suffer from the same problem. The Teachers’ Knowledge and Preparedness for Retirement survey from 2019 states, “Benefit handbooks are oftentimes bogged down in the minutiae of so-called service credit, designating beneficiaries, and divorce… Teachers may not develop a satisfactory understanding of their employer-sponsored retirement plans until they near the retirement eligibility age…”. Earlier this year, my company ran a couple of focus groups with school personnel where we heard the same frustration from the group. They shared that the information they got when they called the state’s pension help desk did not help them understand their retirement. This may not be the case in every state, but as I have shared that story with others, people from various states resonated with the frustration. As it turns out, the same problem affecting financial advisors (which many people are aware of) also affects the pension systems as well.
Excellent Benefits, No Understanding
When it comes to retirement education, it is more than discussing retirement savings, Social Security, or the pension plan individually. Getting a good understanding of the pension plan does not give someone a good understanding of retirement. Retirement education integrates one’s retirement income resources to understand how they fund the required income in retirement. It is an integrated benefit analysis, helping someone understand how all the pieces fit together.
An opportunity is lost when public employers have a pension system that provides excellent benefits, but the employee does not understand the benefit. When an employee only vaguely understands what their pension provides, the purposes of the benefit (which can include financial wellness and employee retention) are, at least, partially lost. That is the bad news.
The Solution is Proactive Education
The good news is that fixing this problem does not require another significant expense. But being proactive about getting the education to your employees is important. One way is to engage any financial advisors working with the district and let them know what your needs are. Request that they avoid jargon (this will be difficult for them) and provide an integrated benefit analysis for their clients that works for your district. I recently talked to a prior school employee who said her advisor did this for her every year, and she said she looked forward to seeing it every year. Also, providing a survey to teachers asking them who their advisors are, how they are doing on these requests, and possibly giving them the ability to score their advisor. This will let you know which advisors are doing a good job helping you leverage your pension plan.
The societal shift towards more employees valuing retirement benefits at a younger age provides a unique opportunity for employers with pension plans. However, leveraging this benefit to recruit and retain employees will require changes in employee benefits education. Making these changes is a low-cost investment that will take advantage of an employer’s current investment in pension plans to recruit better employees and help ensure they remain in their positions for longer, saving companies time and money.