Ensuring Retirement Security

As more baby boomers reach retirement age, state governments face the likelihood of higher workforce turnover. For example, in Missouri, more than 25 percent of all active state employees will be eligible to retire by 2016. Such large numbers of retirees threaten the continuity, membership and institutional histories of the state government workforce, according to Angela Curl, assistant professor in the University of Missouri School of Social Work.

Curl has been with the University of Missouri since 2007 and discussed with Diversity Executive the implications of states restructuring retirement incentives. Her edited responses are below.

Why should states restructure deferred retirement incentives to encourage more employees to remain on the job longer and minimize the disruption to government operations?
States might choose to provide incentives to delay retirement if they expect a large percentage of their employees to become eligible for retirement at the same time. In these cases, staggering the turnover over time would be helpful to reduce disruption to operations and to maintain institutional memory. States that have trouble recruiting qualified applicants, those with hiring freezes and those with high turnover rates in general would also benefit from retaining the employees they already have.

How can organizations create a solid, reliable retention program?
For an organization, the first step to creating a strong retention program would be to determine the ages of its employees and the typical amount of time that employees stay with the organization. Then, the organization can forecast turnover rates among employees in various positions within the organization. Incentives could be offered for all employees, or targeted at retaining valuable employees (i.e., those with significant program/policy/technical knowledge, employees with specific credentials, employees in positions difficult to replace due to a shortage of skilled applicants). Ideally, any retention plan would be evaluated by an auditor for its projected costs and savings to the organization prior to implementation. Nonfinancial incentives could also be offered, such as a phased retirement program that allows some work to be done from home or reduced hours or responsibility.

What threatens a solid retention program?
Perceptions that the retention program is more costly than hiring new workers, unfairly hurts career opportunities for younger workers or retains undesirable workers — these can all threaten the viability of a retention program. Also, incentives for delayed retirement should be based on the anticipated cost savings accrued from not having to recruit or train new workers, so that it is more sustainable long-term.

What is the best process for re-evaluating a retirement plan?
Organizations that are re-evaluating their retirement plans should carefully examine whether they have unintentionally provided incentives for early (rather than delayed) retirement. For example, plans that cap retirement benefits based on a combination of age and years of service may provide employees with an incentive to “retire” from that organization and receive retirement benefits while going to work for another employer. Organizations should also examine the demographics and the retirement trends of their employees. Is there high turnover? This could suggest that the incentives to remain with the organization may need to be increased or modified. Are a large percentage of the employees over age 50 staying with the organization until they retire at full eligibility for Social Security? This likely suggests that retention incentives are working well. Current employees can also be surveyed about what types of program incentives would motivate them or help them stay with the organization longer.

Eric Short is an editorial intern at Diversity Executive magazine. He can be reached at editor@diversity-executive.com.