What is the cost of older employees not able to retire on-time?
In a Plan Sponsor University (TPSU) program at Manhattanville College in Purchase, N.Y., Tom Foster of MassMutual delivered a keynote speech that should be part of every corporate benefit training curriculum. In his speech, Foster spoke about the reasons companies need to offer a retirement solution like a defined contribution (DC) plan (401k) to ensure the viability of their company. Viability is a key focus of MassMutual and so his delivery was well-received by the 20 plus companies in attendance.
In addition to making your company more attractive to quality hires, a well-run DC plan can help ensure the viability and continuity of your company that can deliver measurable and profound value in real cash terms.
Consider the costs of not having a well-defined and well-run plan to help employees retire on time:
- Lower productivity – Older workers who have put a long commitment into your company and have not saved for retirement may be forced to stay on your payroll beyond retirement age. Advanced age may result in lower productivity in many industries and this can affect the bottom line in a significant way.
- Higher healthcare costs – on average, healthcare costs and premiums paid by employers for older workers are higher than for younger workers
- Workers compensation cost – similar to healthcare, worker’s compensation rates may be higher for an older population
- Higher salary costs – tenured, seasoned employees are likely to have significantly higher compensation than newer staff members
- Unexpected turnover – younger workers who cannot advance within the company because older workers do not retire (making room at the senior level) may be more likely to seek advancement in another company. Turnover of experienced personnel is extremely costly and disruptive to companies.
- Financial wellness – studies show that employees who are financially stressed are inclined to miss more days (call in sick) and work at a slower pace.
A viable DC plan is not only good for employees, it is vital for companies as well.
