Jeff Kempker, CEBS, CRC
There is no doubt that retirement is a serious financial concern among Americans. Savings rates are low, financial literacy is lagging, and only half of workers in the private sector have access to a retirement plan through their employer.
But should an employer take any responsibility for their employees’ retirement security? Wouldn’t it be easier to simply pay an employee a salary and let them save for retirement on their own? Well of course, this is the easy route. But employers who don’t realize the benefits of offering a pension plan for their employees are truly missing out on all of the wonderful advantages.
Consider this: aging is inevitable. And at some point, age-related factors will contribute to a decline in productivity. When an employee’s productivity is not equal to his compensation due to age-related factors, then what?
If his employer has not provided a well-structured pension plan, the options include:
- Firing of the employee.
- Demoting the employee.
- Retaining the employee at the same salary and position and absorbing the productivity losses.
Firing or demoting senior employees will not contribute to a harmonious work environment and there are real costs to an employer when employees remain on the job past their optimum productivity age. Health care costs, increased sick leave, workers’ compensation claims, and productivity losses all mount up with an aging workforce.
And let’s not forget the intangible costs. Younger, talented workers, the ones the employer strives so desperately to retain, will become frustrated by the lack of upward advancement opportunities and move on to greener pastures. This ultimately leads to a lack of innovation. A workforce that does not replenish itself with new people to spawn new ideas runs the risk of living in the past.
Industry experts are starting to take notice of these trends. E. Heather Smiley, Chief Marketing Officer at MassMutual Retirement Services in Springfield, Massachusetts said is a recent article, “What we are starting to hear is, ‘I’ll retire when I’m unemployable.’ That very clearly articulates a shift from the feeling that you have control over those decisions, to saying, ‘I’m going to keep going until I can’t go any longer.’”
Not only are many workers feeling as though they have no control over when they can retire, but employers without pension plans cannot predict employee retirement patterns either.
Pensions matter to employees and employers because they can:
- Attract quality workers.
- Allow employees a dignified exit from the workforce.
- Increase morale and productivity.
- Reduce costs created by retaining less productive workers.
- Keep lines of promotion open so younger employees are encouraged to stay.
Pension plans like LAGERS help employers achieve these goals. LAGERS-participating employers are responsible for building and sustaining local communities in every corner of Missouri. This responsibility requires dedicated, experienced workers to get the job done. It also requires internal workforce mobility and innovation to best serve the needs of our hometowns.
Pensions matter to the people living in these communities because the services provided by experienced workers trickles down the citizens. Then, as the local public servants retire, they overwhelmingly remain in their hometowns and use their pension checks to purchase goods and services that help sustain the local economy. In fact, LAGERS paid $230 million in pension benefits last year, 94% of which stayed in Missouri.
Pensions, like LAGERS, are not just getting it right for the workers, but for the employers and taxpayers as well.
Jeff Kempker, Manager of Member Services