It’s obvious why participants have a vested interest (literally) in the retirement income — the outcome, really — of their retirement savings plans. Here are four reasons why plan sponsors should care about outcomes.
You want your employees to appreciate your benefit plan(s).
If you’re responsible for benefit plans in your organization, you have a very real interest in how your workforce (and management team) view those benefits. Plan sponsors have long used participation rate as the plan success metric — after all, what better measure of success in plan design, education and communication than the objective data as to how many employees have chosen to participate.
But in a time when a growing number of plans have adopted automatic enrollment — well, while credit is certainly due plan sponsors who have taken that step, the resulting bump in participation rates owe more to the inertia of human behavior than innovative plan design.
There is, however, little question that the better your plan performs on an individual basis — positive growth in account balances, a resulting more robust projection of retirement income — the better workers will feel about the benefit plans that helped provide that result.
You don’t want your employees worrying about their finances at work.
Any number of workplace surveys bear out the impact that external concerns — particularly external financial concerns — have on morale and productivity at work (see “Finance Distractions Take Toll on Productivity, Benefit Satisfaction”) and “Study Finds Link Between Financial and Physical Wellness.”) Those concerns don’t even touch on the vulnerability to theft and/or misuse of organizational resources that can tempt financially vulnerable workers.
A robust retirement savings balance at work isn’t a cure for all financial ills, of course, but it can be a source of solace, as well as a resource in time of true financial need.
You want your employees to retire on time.
Workers who think they can’t afford to retire are likely to try and extend their working career — potentially complicating succession planning and your ability to attract (and/or retain) new talent. Data from benefits consultant Mercer notes that each delay in retirement can block 5+ jobs, and that if 4% of your population is retirement eligible and half of those people choose to delay retirement, 10% of your employee population would experience promotion blockage.
As an employer, those trends can also result in higher labor costs, and safety and productive concerns (see “Plan Sponsors Waking up to Costs of Older Workers who Can’t Retire.”)
You want your plan to ‘work.’
There are employers who only offer a workplace retirement plan because everybody else does, who are willing to just “set it and forget it,” who, hearing that workers aren’t taking advantage of the benefit they worked so hard to set up, shrug and say “it’s up to them.”
But that’s not you. Is it?
- Nevin E. Adams, JD
Note: You can find some interesting perspectives on various aspects of plan and participant outcomes at our Participant Outcomes resource page.