Retiring Boomers Prompt Increased Employer Interest in Phased Retirement Programs

More than half (55%) of mid-size and large employers have already evaluated the impact that potential retirements could have on their organization, and 61% have developed or will develop special programs to retain targeted, near-retirement employees. While just one-in-five (21%) believe that phased retirement is critical to their company's human-resources strategy today, that number nearly triples (61%) when employers look ahead five years.

According to Hewitt Associates, 47% of companies said they have some type of phased retirement arrangement available to their employees, but few (5%) have formalized those programs. Almost 40% expressed an interest in establishing a phased retirement program in the future.

Hewitt's surveyed of more than 140 mid-size and large employers to develop the findings.

"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," explained 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, we believe phased retirement programs will continue to become more attractive options for both employers and employees—they provide employers with new ways to retain critical talent and, at the same time, help employees meet their needs."

While employers are increasingly interested in adopting phased retirement programs, they are taking a number of steps to better understand how these programs can be structured as effective talent retention tools, including the following.

Of the companies that already have phased retirement arrangements in place, about one third (32%) said they were satisfied with their programs. 14% said they actually measure the success of their programs. In fact, nearly three-quarters (70%) said they have no measures in place and no plans to implement a measurement strategy in the future.

"Measuring the success or shortcomings of a phased retirement program is the key to ensuring that both companies and employees are getting the maximum benefit from the arrangement," said Steinberg.

An upcoming WorldatWork Journal paper discusses phased retirement as one of the issues to retain senior workers. In the paper, “Issues and Strategies to Employ and Retain Senior Workers in the United States,” three authors from The Urban Institute write: “Some business practices facilitate phased retirement. These include age-neutral pension plans, pension arrangements under traditional DB (defined benefits) plans enabling employees to continue working without losing pension benefits, formal plans by companies to transition their older employees to part-time work, and use of former employees as contractors.&rdquo The authors also note: “Many employers are also learning how to design phased retirement arrangements, either formal or informal, that can survive legal challenges. These trends will provide more opportunities for employees to take phased retirement in the future.”

The paper will appear in the Third Quarter Journal and is authored by Lauren Eyster, Richard W. Johnson and Eric Toder. The paper is based on research by The Urban Institute.