• No results found



Academic year: 2021


Show more ( Page)

Full text




DECEMBER 11,2014

Arthur L. Noonan Senior Partner



Determining Optimal Plan Design

• Retirement program designs are usually viewed through the lens of finance • Accordingly, decisions are made on the basis of:

– Expense and contributions – Liability and Risk

• But it is labor productivity that drives true labor cost

• And it is workforce alignment that ultimately determines the contribution of an organization’s workforce to business value

• And, as we all know, the retirement decision is ultimately an individual one • Assessing plan design options, therefore, requires an analysis of:

– Cost (as has been traditionally performed)

– Workforce impact (including recognition that desired impact may vary with respect to different employee groups)

– Ability to address individuality




The Unintended Consequences of Retirement Program Changes

Measurement is Power Delayed Retirements Early/Mid- Career Turnover Intangible Damage Legal Risk High Potential/ Top Performer Loss Higher Health Care Cost Higher Labor Cost 2 © 2014, Mercer




• Large, branded company facing slow growth, almost all of which is driven by emerging markets, looks to develop a people strategy that fosters greater customer knowledge, faster, better innovation and stronger workforce diversity

• The company has traditionally built its talent from within, successfully relying on a premium rewards and employment package, to get talent to come and stay

• The company closed its DB plan in the late 1990s

Presenting Problems

• Company experiencing significant back-up in its talent flows as more senior employees delay retirement due to erosion of wealth in retirement plans and high uncertainty about their ability to supplement retirement income from work in a weak economy.

• Absent business growth, this back-up in retirements blocks progression of more junior talent, stalling our careers and generating incentives for higher performers or the more marketable among them to leave prematurely.


• Low “velocity” of movement, created in part by the existing retirement program is antithetical to successful realization of the company’s “Build” strategy with serious negative consequences to their business

• In this instance, a retirement program that delivered incentives for retirement eligible employees to leave, would outperform one whose incentives are completely disconnected from tenure

Case Example 1: Confronting the Adverse Impact of a Loss of Incentives to Retire at a Global Consumer Products Company




Limited Incentives to Retire - In the Context of Low Growth and a “Build” Talent Strategy - Result in Low Internal Labor Market Velocity, Significant Career Choke Points, and a Serious Drain of Top Talent

“Build Organization”

Ratio of new hires to promotees drops

below 1

“Build” Organization:

Ratio of new hires to promotees drops

below 1 Career “choke points” have materialized at

these levels

Velocity of Talent Movement is low beyond the professional

level Level 1 Level 2 Level 3 Level 4 Level 5 Level 6 Level 7 Level 8





• Each delay in retirement can block 5+ jobs.

• 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


• This means 1000 employees would experience promotion delays in a 10,000 employee firm.

The Unintended Consequences of an Ineffective Retirement Program

Each figure represents 50 employees Employees experiencing career blockage Retirement eligible employees Retirement eligible

employees working past Normal Retirement Age


with Blockage

Retirement Eligible


Copyright 2014 Mercer Human Resource Consulting LLC




Two Approaches to Identifying the Factors that Influence Retirement

Decisions at Your Organization – One Relying on What Employees SAY,

the Other Relying on What They DO



MERCER Im p o rt an ce S co re 0 50 100 150 200 250 300 350 400

Importance scores are scaled so that the average score is 100.

While access to company-sponsored medical

coverage is the single most important factor

influencing the choice to retire ….

Many Factors Can Influence the Choice to Retire – Hypothetical SAY Example

Identifying the Factors that Actually Influence Retirement Decisions is Essential to Designing the Right Solutions for “On Time” Retirement

Average importance … Career considerations – upward mobility, level,

span of influence – also are driving that choice



MERCER -10% -4% 3% -2% 4% 9% -6% 3% -22% -8% -51% -30% -18% 8% 55% -60% -40% -20% 0% 20% 40% 60%

Training: General Skills Training: Firm-specific Skills Higher Promotion Rate in Group (+10%) Higher Turnover Rate in Group (+2%) More Tenured Group (+2.5 years) Highly Rated Supervisor More Tenured Supervisor Supervisor with Higher Span of Control (31+) Higher Total Compensation (+$8500) Higher Base Pay Growth (+3%) Higher Total Compensation Growth (+6%) Received Overtime Pay Higher Overtime Pay (+$7500) Received Education Allowance Education Allowance (+$10,000) Received Home Loan Received Higher "Benefits Pay" (+$2000) Received Relocation Allowance

Percentage difference in probability of early retirement

More likely to retire Less likely to retire

This Global Company Statistically Estimated the Drivers of Actual Decisions

to Retire Early – an Actual DO Example

Education, training, pay growth and overtime helped delay retirement whereas higher compensation/security generally fostered it

The models on which these results are based control for individual attributes and organizational factors. All effects are significant at the 5% level unless otherwise noted.





Stuff Happens

Expected Retirement Age • Retirement happens at a different

age than “the plan”

• Workforce exit is for a reason other than retirement – Health – Family – Economic conditions – Retirement of peers 9 © 2014, Mercer



Finding the Optimal Design for On-Time Retirements

Answer three key questions:

1. What is the true cost of delayed/early retirement for the organization? 2. What is the value of tenure to the business(es)?

3. Is the value of tenure to employees properly aligned with its value to the business(es)?

And use that information coupled with data on actual retirement choices to resolve the third question:

4. What is the optimal design of inducements for “on-time” exits from the workforce?

With strong workforce analytics, you can bring innovative approaches to solution design and implementation, to best serve your organization’s business interests




Related documents

Registered pension plans, group registered retirement savings plans and other types of employer-sponsored retirement plans are a convenient and disciplined way to top up the

The SAP S/4HANA system contains an embedded analytical engine, which is the key component that enables the consumption of the CDS views in analytical tools like SAP Analytics Cloud

The first aim of the research, undertaken by The Architecture of Rapid Change and Scarce Resources (ARCSR), was to understand the local physical and cultural topography around

This substantiates that the “ systemic trade risk ” indicator TradeRisk is indeed “ systemic ” in the sense that the results are not driven by contributions to price volatilities

Since the proposed two-stage learning system is dependent on both the GMM and SVM algorithms which each have different advantages and disadvantages, the performance was found to

including: Cost to Value of Plan Fees; Service Team Responsiveness and Knowledge; Plan Design Flexibility; Legislative/Regulatory Updates; Form 5500 Processing; Participant

Assume that an ESOP company loses 85% percent of its value and that the majority of the retirement portfolios (the total retirement assets held in all plans sponsored by the employer)

The three nucleosome interaction platforms (i) histone tails, (ii) DNA and (iii) the octamer disc surfaces (McGinty and Tan, 2015) contribute to very different extents to the

The Enhanced Attendance Reporting software allows the user to create Templates that can be used in the SmartLock Pro Plus* software to set up Tasks, allowing for scheduled,

If it provided a profit-sharing plan as part of a Section 401(k) plan, it would ask employees to contribute to the plan as well. Shane believes that asking employees to invest in

TriStar requests the distribution from the fund company, where your assets are held, and the funds will be delivered to the participant within 10 business days of TriStar

Any employee who retires from one of the school system’s retirement plans (the Virginia Retirement System or the Arlington County Employees Supplemental

Full service wealth management, investment advisory and brokerage, fi nancial planning, retirement plan- ning, cash and liability management services, and business retirement

Given the turbulence facing retirement plans at smaller companies, our concern is whether companies see the relevance of retirement plans to human resource management. For

In order to achieve the main objective the project developed an Internet system that provides cross-border multi-lingual access to ground water spatial data sets stored in

been practically freed of insects by fumigation may be rapidly rein- fested by the movement into them of tobaccos that are infested by the cigarette beetle and the tobacco

• Any retirement asset (excluding Social Security): includes non-employer retirement plans, employer- sponsored retirement plans through current job, employer-sponsored retirement

In contrast, early in your career, the Freedom Index Funds start you off primarily in stocks with some bonds for balance and then as you head towards retirement, the fund

The ability to purchase real estate in a retirement plan includes ALL retirement plans.. This means that the following retirement plans can own real

Your Stifel Financial Advisor will periodically review your plan provisions, services, fees, as well as the performance of your investment options, to determine if changes should

Retirement System (VaLORS) and the Judicial Retirement System (JRS); the VRS Hybrid Retirement Plan; defined contribution plans, including optional retirement plans for

2 shows the proposed research framework for our urban simulation system.This system requires three types of input data: (i) atmospheric data, (ii) terrain data, and (iii) city