Study Finds Employers not Addressing Retirement Challenges

June 23, 2009 ( - New research by the Center for Retirement Research at Boston College (CRR) suggests employers have been slow to recognize the personnel management implications of the shift away from traditional pension programs, and their interest in retirement-related initiatives is still driven by their value in attracting and retaining employees.

In its latest Issue Brief, CRR said “the presence of a significant ‘retirement challenge’ – either a large number of unprepared employees or a large number of employ­ees wanting to stay on the job well past the traditional retirement age – has no significant effect on the encouragement of retirement saving.” Of four retirement-related initiatives suggested, employers said they were most likely to increase their encourage­ment of retirement saving. On the likelihood scale from one to 10, the median response was an eight and nearly 30% responded 10.

However, two characteris­tics – the employer’s expected rate of employment growth and the size of the employer – not the retirement challenge – have a statisti­cally significant positive effect on the encouragement of retirement saving, according to the report. The strong association with expected employment growth indicates that employers see the encourage­ment of retirement saving as an “employee benefit” useful in attracting and retaining workers, the researchers contend.

Employers in the study are generally lukewarm about creating employment opportunities for even half the employees they expect will want to stay on the job two or more years past the traditional retirement age. According to the report, a need to attract and retain workers and the value employers see in older workers makes them more receptive to creating opportunities for workers to stay past their traditional retirement age.

Employers that expect rapid employ­ment growth, and thus need to attract and retain more workers, and employers that have a relatively old workforce that could soon be depleted by retirements or that see older workers as making a positive contribution to the organization’s knowledge base are more likely to create such opportuni­ties. Not surprisingly, employers are less likely to do so if they view older workers as costly or if the older employees in question are rank-and-file as opposed to white-collar workers.

Having a rela­tively large number of employees wanting to stay on has no significant effect on the likelihood an em­ployer would create opportunities for them. “Neither their employees’ need to work longer (the employees’ retirement challenge) nor potential disruptions to the retirement process (the employer’s retirement chal­lenge) had any significant effect,” the report said.

CRR’s findings also sug­gest employers primarily view individual retire­ment planning as a tool for retaining, not retiring, employees. Employers with a relatively large share of employees wanting to stay past the traditional retirement age are less likely to adopt such a program. The researchers contend that this suggests that staffing issues, not a disruption of the employer’s retirement process, underlies their interest in this initiative.

Unlike the other three retirement-related policies, tightening performance reviews “to im­prove decisions on whether to retain or dismiss” older workers is not designed to retain or attract employees. The analysis identified two characteristics as having a significant effect on the likelihood an employer would adopt the policy – a low pace of technological change and an older average retirement age.

The CRR Issue Brief is here .