Is it Your Problem if Your Employees Can’t Retire?

April 23, 2013 ( – Is it your problem if your employees can’t retire? For many employers, the answer has been “no.”

They’ve established a solid defined contribution (DC) plan, offered some level of matching contributions, and provided access to financial education and retirement tools. They reason that if employees don’t take advantage of these resources to plan for their retirement, it’s not the employer’s problem. Some employers have even found solace in a familiar phrase, “you can lead a horse to water, but you can’t make it drink.”    

Unfortunately, that approach may no longer be enough and can even prove risky for a company’s future profitability.    

The economy, financial market, job market, and other macro trends have negatively impacted retirement preparation and delayed retirement dates for millions of Americans.  Research and surveys show that individuals will spend more years in the workforce than at any other time in history. According to the 2013 EBRI Retirement Confidence Survey, 46% of workers have only less than $10,000 saved for retirement.  The powerful demographic wave of baby boomers combined with the lack in retirement preparation could come crashing down on employers.    

What can this mean for employers?  Rising costs are all but certain.  As employees age, health care and disability costs increase at a very predictable rate.  In addition, workers’ compensation claims and related medical costs rise significantly:    

Higher workers’ compensation costs 

  • Claim duration is 25% longer and benefit payments are 56% higher 
  • Medical costs from claims are 50% higher 


Higher benefits costs 

  • Health care premiums are nearly four times higher 
  • Disability premiums are 15 times higher 


Increase in disability instances 

  • 42% among workers ages 65 and older 

Preparing for the Business Impact of an Aging Workforce  

Despite the abundant information and numerous studies around the aging workforce, many companies have still done nothing to prepare for it.  In a recent Lockton Companies poll of human resources professionals, more than 80% believe an aging workforce poses a risk to their business, yet less than 20% have taken steps to manage the business impact and mitigate this risk for their companies.    

What can employers do?  The first step is to evaluate their workforce.  For some companies, an aging workforce may not present a risk today or in the near future.  However, for others, the risks are already significant.  The most effective way to assess the risks of an aging workforce is to conduct a workforce risk management assessment comprised of a series of analyses, including: 

  • Demographic Overview  
  • Departmental/Job Classification Study 
  • Workers’ Compensation Claims Analysis 
  • Health, Pharmacy and Disability Program Review 
  • Retirement Plan Health Evaluation 


Some information will be easily accessible internally, while other studies or analyses will take preparation and might involve consultation with outside parties. With this information in hand, a management team should be able to identify key risk factors within their workforce, such as high ratios (+30%) of workers older than 55 and above average instances of diabetes or obesity.  

If the workforce risk management assessmentindicates enough risks to warrant further action, the next steps are to identify, manage and reduce specific areas of risk.  This process begins with a financial analysis to better understand and evaluate the business outcomes of either staying on the same course or taking action.  

  • Financial Modeling– What is the cost of doing nothing and continuing with business as usual? Employers must understand the current and future business impact of delayed retirement dates on costs related to salary, employee benefits, workers’ compensation, productivity and other related items.    
  • Program Structure– Based upon a risk assessment and results of the financial analysis, how are employee benefits, retirement, workers’ compensation, employment practices and other programs set up to manage risks and estimated financial impact?  What design changes, new programs and other measures can be introduced to mitigate risks going forward?   
  • Employee Engagement– Once a program has been developed, employers need to effectively engage employees by providing education that will modify behavior and positively impact their future.   


Employers should take the time with their management team to conduct a workforce risk management assessment to help determine the risks within their organizations.  Those with well-constructed plans will be better positioned to discover opportunities and benefits by having a successful strategy in place.  

Demographic trends and employee data paint a clear picture that people will be spending more years in the workforce than ever before.  This growing trend presents employers with both challenges and opportunities to manage cost, risk and productivity.  However, the benefits are not solely for the employer. Through analysis, planning and adaptation, employers can engage their aging workforce in a way that will help them lead healthier, safer and more financially secure lives.   


Rick Unser is a partner in the Retirement Services practice of Lockton.  He is an expert who has dedicated his practice on bringing the retirement readiness conversation to C-suite and HR executives.  

Securities offered through Lockton Financial Advisors, LLC a registered broker-dealer and member FINRA, SIPC. Investment advisory services offered through Lockton Investment Advisors, LLC, a SEC registered investment advisor. For California, Lockton Financial Advisors, LLC, d.b.a. Lockton Insurance Services, LLC, license number 0G13569.  






Bureau of Labor Statistics. (2012, January).  Labor force projections to 2020: a more slowly growing workforce (Monthly Labor Review).  Retrieved April 12, 2013, from the BLS Website:  

Bruyère, S., Tishman, F., and Van Looy, S. (2012, March) Employer Strategies for Responding to an Aging Workforce.  The NTAR Leadership Center Report.  Retrieved April 12, 2013, from the DOL Website:  

Helman, R., Adams, N., Copeland, Craig, and VanDerhei, J., (2013, March) The 2013 Retirement Confidence Survey: Perceived Savings Needs Outpace Reality for Many. (EBRI Issues Brief, No. 384).  

Restrepo, T. and Shuford, H. (2011, December) Workers Compensation and an Aging Workforce.  National Council on Compensation Insurance Research Brief. 

Reported by
Please contact the PLANSPONSOR Reprint Manager, Michelle Judkins.