Retirement Plans Help Attract, Keep Key Workers
That was the result of Watson Wyatt’s Retirement Attitude Survey, which also found that a plan’s design and features can affect workers’ behavior which, in turn, can help an organization achieve a favorable bottom line.
Pensions can help an employer attract key workers, Watson Wyatt said. While the productivity effects have been associated mostly with defined benefit plans, recent research has shown that K plans exhibit similar effects in shaping workers’ behavior.
Watson Wyatt said that responding workers who considered their defined benefit plan highly important are over three times more likely to express a strong desire to stay at their current organization than other workers. Employees who consider their defined contribution plan very important are 2.5 times more likely to intend to stay put. In fact, for both plan types, more than half of respondents who value their retirement plans highly also indicate a good chance they won’t be entering the job market.
On the other hand, for employees who don’t think their defined benefit plan is that important, roughly equal numbers say the plan would (36.3%) or would not (37.1%) influence their decision to remain with their current employer. The situation is much the same for workers who assign a low value to their defined contribution plan.
Plan Satisfaction Factors
For defined benefit plans, employees’ overall satisfaction was determined by combining employee ratings of eight features:
- value of benefits as future income
- information about current value
- information about projected value
- form of benefit payout
- benefit availability age
- years of service before vesting
- ability to access funds before retirement
- how the plan compares with competitors’ plans.
For defined contribution plans, overall plan satisfaction also was determined by employees’ satisfaction with eight features:
- match rate
- type of matching funds
- contribution limits
- investment options
- information about balances
- education programs
- plan administration
- how the plan compares with competitors’ plans.
Employees who are most satisfied with their defined benefit plan are more than three times more likely than other employees to plan on staying in the same job until they stop working. The same thing is true for employees who are highly satisfied with their defined contribution plans. However, employees who don’t like their defined benefit and defined contribution plans are equally likely to plan on staying with their employer or not.
These trends can go to a company’s bottom line. Responding employees who consider their defined benefit plan very important tend to work for companies whose total returns to shareholders (TRS) averaged 26.7% from 1999 to 2003 – significantly better than the 21.8% TRS over the same period at companies whose employees value the plan the least.
The survey was completed by roughly 8,000 employees from a national panel in summer of 2003. All respondents are covered by a defined benefit plan or a defined contribution plan or both.
A Watson Wyatt report on the survey is here.