Over the last five years, there has been great progress in the employee benefits arena for new employees entering the workforce.
Auto enrollment into a DC (defined contribution) retirement plan has increased from 32 percent back in 2007 to 41 percent in 2011. The number of companies offering the Roth 401(k) option has doubled since 2007, from 16 percent to 31 percent, and this feature usually is most beneficial to the younger workforce who most certainly may face higher tax brackets in the future.
And for those companies that offer high deductible health plans, 1 in 5 now offer an employer contribution, up from only 1 in 10 in 2007. These are all positive movements highlighted in the 2011 SHRM Employee Benefits Study when looking back at the trends from 2007 compared to today.
However, the group of employees who seemed to get the shorter end of the stick these past five years are those employees who are nearing retirement.
Benefit reductions as retirement approaches
We’ve seen a significant reduction in the availability of a group long term care (LTC) plan, with only 29 percent of employers currently offering access, compared to 46 percent back in 2007. This drastic drop isn’t much of a surprise, since we have seen the recent departure of big insurance carriers like MetLife, John Hancock, and the Guardian over the past year in the group LTC market.
The access to a group Retiree Medical Plan has also taken a hit, with only 25 percent of employers surveyed still offering a Retiree Medical Plan, compared to 35 percent just five years ago — not to mention the drop in active defined benefit pension plans, down to just 22 percent this year.
What I have been hearing a lot lately from the boomers who are hitting their late 50s is that they would love to be able to continue working, but perhaps gradually ratcheting down their hours and responsibilities instead of just having an instant end to their career. But employers have a different viewpoint, and even less are offering a formal phased retirement program than just five years ago, down from 12 percent to only 5 percent, currently who offer the ability to gradually slide into retirement.
There are so many boomers on the cusp of retirement, that I would think this concept of a phased retirement should be an increasing trend, not the drop we have seen. Same with having a mentoring program in place, to share the wealth of knowledge and experience these pre-retirees have with the on-boarding of the Millennial generation. Sadly, employers who reported a formal mentoring program in place, dropped from 26 percent to only 17 percent in the past five years.
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Consider phased retirement
So, in an era when Congress touts “creating new jobs” as a way out of our economic mess, lend a hand by reversing these trends and consider adding a formal phased retirement plan for your experienced workforce, and encourage them to mentor those taking their place as they gradually transition to a full retirement.
To supplement these two initiatives, make sure to provide Retirement Readiness education so your pre-retirees can glide into retirement both financially and emotionally prepared as they phase into their next chapter of life.
Now that I’ve looked back at trends over the past five years, it got me thinking about many cutting edge trends that are being anticipated to rise over the next few years. I’ll will tackle these new trends next week.
This was originally published on the Financial Finesse blog for Workplace Financial Planning and Education.