Are Retirement Plans Important to Employees?

Many employers may be weighing the pros and cons of establishing a retirement. It’s often cited as a recruitment tool, but do employees really care about potential retirement benefits? According to professional services company Towers Watson, the answer is “yes.” Towers Watson’s 2013/2014 Global Benefits Survey asked 5,070 U.S. respondents how important retirement security is to them. 56% reported that retirement security has become a more important issue for them over the last two or three years.

Employees are also saving for retirement primarily through programs offered by their employers, with 74% reporting that their employer plans are the primary way they save for retirement. When asked to rank various forms of compensation, employees ranked pay as number one, but retirement benefits ranked number two, even higher than health care or time off.

Attracting and Retaining Employees

The survey went on to ask whether retirement plans attract and retain employees. Predictably, companies with defined benefit plans (pensions) have a stronger appeal for workers, but those types of plans are becoming very scarce. For companies offering defined contribution (DC) retirement plans like 401(k) plans, the plans do play a significant role in attracting and retaining all employees. The importance of defined contribution plans increases for older and more highly compensated employees.

For those younger than 40, 22% said the DC retirement plan was an important reason for choosing their current employer, increasing to 27% for workers age 40-49 and 28% for workers 50 and older. Of those employees under 40, 33% said their DC retirement plan was an important reason they will stay with their current employers, increasing to 41% for those age 40-49 and 44% for those 50 and older.

A Solid Retirement Benefit

Clearly, retirement benefits are a critical element of attracting, developing, and retaining a top-notch workforce. As the U.S. unemployment rate decreases, offering a retirement plan may be the edge your company needs to recruit the best talent. The Participant Effect^SM can help your company design a retirement plan that addresses the needs of your employees and your company. We leverage the power of our program to help you understand your employees’ retirement goals and how you can structure a strong plan that will help you retain your current employees and attract new ones. For more information, call us at 888-968-9168, or contact us online.

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This information was developed as a general guide to educate plan sponsors but is not intended as authoritative guidance or tax or legal advice. Each plan has unique requirements, and you should consult your attorney or tax advisor for guidance on your specific situation. In no way does advisor assure that, by using the information provided, the plan sponsor will be in compliance with ERISA regulations.