September 7, 2008
Retiring Boomers Spark Phased Retirement Interest
By Miller, Stephen
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 new survey by HR consultancy and outsourcing firm Hewitt Associates. Hewitt's survey of more than 140 mid-size and large U.S. employers shows that:* 61 percent have developed or will develop special programs to retain targeted, near-retirement employees.
* Just under half (47 percent) have some type of phased retirement arrangement available to their employees.
* Almost 40 percent expressed an interest in establishing a phased retirement program in the future.
* While just one in five (21 percent) believe that phased retirement is critical to their company's HR strategy today, that number nearly triples (61 percent) when employers look ahead five years.
"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," said 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.
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.
"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.
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.
"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."
Benefits Of Phased Retirement
Top benefits employers cited in phased retirement programs include:
72% Retaining the experience, knowledge and skills of older workers
52% Easing the difficulty of replacing key skills.
50% Helping with transfer of key skills from experienced to inexperienced workers.
Source: Hewitt Associates
Reprinted with the permission of Society for Human Resource Management (www.shrm.org), Alexandria, VA.
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