Retirement Plans Designed for Workers to Stay Put

September 29, 2005 ( - An article presented by the Department of Labor's (DoL) Bureau of Labor Statistics (BLS) points out the plan design features of retirement plans that may negatively impact today's mobile workforce.

As background in the article, the author William Wiatrowsky reveals that data from surveys show the median time workers had been with their current employer as of January 2004 was four years. He points out in the article that the percent of workers age 35 and over that have been with their current employer for 10 years or more is just over 30%.

According to the article, certain plan design features for both defined contribution and defined benefit plans can impact workers who change jobs in negative ways. The article points out the following:

  • Many plans impose eligibility requirements. Some plans require new employees to work a certain amount of time before being able to participate. Employees who switch jobs frequently may not be covered in retirement plans from some employers or may have gaps in their coverage.
  • Many plans impose a vesting schedule. While employees always have a non-forfeitable right to their own contributions, many plans impose a vesting schedule on employer monies.
  • In some plans, especially defined benefit plans, benefits accumulate based on years of service. The longer the employee is with an employer, the greater his/her retirement balance.

Wiatrowsky does point out that many plan sponsors encourage new employee participation and vesting quickly in order to pass the required discrimination testing, however.

The complete BLS article is here .