How a Retirement Benefits Package Decreases Employee Turnover Rate

The population is aging, and the instability and uncertainty of the nation's economy makes people, especially as they near retirement age, think about their futures, wondering whether they have savings or investments that will support them once they no longer work.

While young people may not think about retirement when they enter the work force, or when thinking about accepting a job with a particular company, it is an important enough benefit to make employees want to stay at a company.

As the North Carolina Department of the State Treasurer says in quoting the Towers Watson consulting firm, “In general, retirement plans do a better job of retaining workers than attracting workers.” The company goes on to explain that there is stronger evidence to support a relationship between a pension plan's characteristics and overall employee retention.

How Employer-Sponsored or Employer-Provided Pension Plans Work

Investopedia defines a pension plan as a “company-sponsored fund” designed to give employees a livable income once they retire. There are different types of pension plans: Defined-Benefit and Defined-Contribution.

Regardless of the type of retirement plan a company offers employees, the message is the same: the company is telling its workers that they value them and the important contributions employees make to the company's bottom-line.

With Defined Benefit Plans, the company has a complex method that an actuarial uses to figure out based on salary and length of employment, how much an employee gets. The advantage here is that on retirement, an employee knows exactly how much money their pension is worth.

Defined-Benefit Pension Plans

It is safe to say that Defined-Benefits packages are less common today than they were in the past. The reason is simple: with defined benefits packages, the employer retains responsibility for investments by managing the fund and administering it. That also means that if the investments don't do well, the employer has to pay employees their retirement benefits out of the company's pocket. Companies are moving away from this type of benefit package for obvious reasons: they can't afford to offer benefits and shoulder all financial responsibility for them at the same time.

Defined-Contribution Plans

Defined-Contribution Plans are different in that the employer and employee share the burden of contributing to the fund. Companies put away a certain amount of money per year to be put into the company pension fund. That money is called the Pension Benefit Obligation, the amount of money the company needs, taking current dollar-value into consideration, to fund the plan.

Both employers and employees are eligible for tax breaks on their contributions, depending on how the employer choses to dispense their part of the contributions.

Some 401K plans may be transferable if an employee leaves the company, and data cited in a report entitled “The Effect of Pension Plans on Job Attraction and Employee Retention” from U.S. Census Survey of Income and Program Participation is correct, then the move from defined-benefit plans to defined-contribution plans may have some impact on employee employment tenure.

Given today's economic uncertainty, however, employees are more likely going to be grateful to have jobs that offer employer-sponsored pension or any other type of benefits plans, even if employers contribute to plans like 401Ks that are managed by professional investment companies. Contact us today!

Need insurance for You, Your Family or Your Business?
We can match you to a qualified, local insurance expert!
Further Reading
As a grocery store employee, you expect to get a regular paycheck. However, you may also be eligible for a variety of employee benefits for grocery stores employees. Here's a partial list. Healthcare Access a variety of healthcare options, incl...
Insurance is one of the most important benefits in an employee benefits package. As you look for your next job, consider the healthcare insurance options your potential employer could offer. Medical The types of medical coverage offered in an e...
Working as an independent contractor rather than an employee is attractive for many reasons. There are a variety of benefits, but be aware of the risks, too. Benefits of Working as an Independent Contractor Work for yourself. As an independe...
The impact of the lingering recession, combined with skyrocketing health care costs, is leading to a dramatic and rapid shift from standard single-offering Employee Benefits plans to a wide variety of choice-based programs tailored to the needs of b...
Attracting top leadership talent for your company is essential since good leaders grow businesses, increase productivity and motivate employees. However, many companies cannot afford to offer competitive benefits plans to the leaders who can guide th...