Report: Employers Still Wrestling with Phased Retirement Issues

February 13, 2008 ( - With the pending wave of Baby Boomer retirements, nearly a third of respondents to Ernst & Young's 2007 Aging US Workforce Survey say they are considering phased retirement programs.

However, as the resulting Ernst & Young research report pointed out, that raises a host of HR and benefits issues with solutions that researchers admitted are still unclear.

For example, 83% of respondents said none of their employees could begin taking pension distributions while still an active worker while only 9% said they do permit a phased retirement.

Allowing a more gradual transition between an employee’s active worklife and a more traditional retirement does not “ come with black-letter instructions regarding what is and is not allowed from a tax and regulatory perspective,” the Ernst & Young researchers wrote. “The 9% of respondents who say they do allow phased retirement will be the primary source for leading practices and knowledge transfer on how they’ve managed such a plan and what success rate they’ve achieved.”

Other survey results included:

  • In terms of what benefits changes have been considered or undertaken in light of the phased retirement issues, 54% of respondents mentioned increases in health insurance co-pays, 39% cited going from a defined benefit to a defined contribution plan, 33% introduced more Baby Boomer benefits (long-term insurance, financial and retirement planning/education), and 29% cut back or eliminated postretirement benefits. The DB to DC shift is more of a consideration for large employers (71%) than smaller ones (17%).
  • 22% of respondents said volatility of annual pension expense would be most likely to cause them to freeze their DB plans; 44% of companies with more than 100,000 employees gave the same answer. “What isn’t clear from the responses is whether these large organizations are facing a different set of issues or have a different perception of the issues that all companies are facing,” the researchers noted.
  • Half of respondents said the financial reporting dictates of FAS 158 are a concern to their company’s executives while 20% said they were not.
  • More than 50% of respondents say that they have looked into their plan’s distribution requirements based on changes included in the Pension Protection Act while 23% say they have not (See IRS Lends Helping Hand on Plan Retirement Age Changes ).

The report can be ordered here .