Helping Employees to Be Ready for Retirement

Many factors have mitigated the ability of employees to retire secure in the knowledge that they have sufficient financial resources in store. A recent report offers ideas on how a plan and an employer can help employees better prepare to finance their retirement.

In “Are Your Employees Retirement-Ready?” an article by Alan Vorchheimer and Cynthia Zaleta of Buck Consultants appearing in the first quarter 2016 issue of Benefits Quarterly, argue that the hollowing out of retirement account balances due to the Great Recession, higher Medicare premiums and the drop in employers offering retiree health coverage heighten the importance of helping employees save for retirement.

Vorchheimer and Zaleta suggest the following strategies.

Rethink Encouraging Employees to Leave the Plan at Departure. It is common for employees to be encouraged to move their funds from a former employer’s plan to an IRA. But the researchers question this conventional wisdom, argue that retirees remaining in their erstwhile employer’s plan has several advantages:

• oversight by an employer’s plan sponsor will benefit former employee participants;

• an employer plan may make lower-cost funds available to former employees than individually run plans or arrangements; and

• stable value and fixed account funds are available through employer-sponsored plans, but not outside them.

Make Plans More Friendly to Baby Boomers. Vorchheimer and Zaleta think this can be accomplished by doing the following:

• allow former employees to repay loans taken against their retirement accounts after leaving the employer;

• customize target date fund glidepaths based on plan demographics; and

• offer more flexible distribution options.

Add Social Security Claim Modeling Tools to Recordkeeping Platforms. The report argues that the best online benefit calculators a plan can offer are those that help participants in deciding whether to draw from retirement plan assets or start claiming Social Security benefits.

Offer Impartial Advice. Vorchheimer and Zaleta posit that while it’s helpful, it’s not enough for a plan to be satisfied that FINRA provides agents who will answer questions. They argue that it is good for a firm to make impartial advice and programs available as well.

Facilitate Purchase of Voluntary Benefits. The researchers suggest that employers consider making voluntary benefits — such as life, dental and vision insurance, legal advice or travel services — available to former employees at the same rates they make them available to current employees.