The coronavirus pandemic has completely changed the way Americans work and live. Some employers have been on the front lines fighting the virus head-on, while others have been forced to close their doors temporarily or perhaps permanently.
If your company is one of the “essential” businesses with “essential” personnel—for example, in the healthcare industry—you may be immediately looking to increase the workforce to address the demand. Your older, more experienced employees, who may now be more critical than ever to your workforce, may struggle with the need to access retirement income and remain employed if hardship withdrawals from a defined contribution (DC) plan are not enough. Leverage your defined benefit (DB) plan to retain essential talent. Consider these strategies:
- Offer in-service distributions: The Setting Every Community Up for Retirement Enhancement (SECURE) Act recently allowed for in-service distributions as early as age 59½. Amending the DB plan to allow for this could help retain key talent who might be tempted to leave just to get their pension benefits.
- Waive suspension of benefits for rehired retirees: Rehiring retired professionals can be easier if you allow them to continue to collect their pension benefits. Amending the plan to temporarily waive the suspension of their benefits during reemployment could make returning to work very attractive.
- Increase Normal Retirement Age: Amending the plan to increase Normal Retirement Age from 65 to 67 could help retain more experienced, needed talent at work. This change would be consistent with moves in other retirement ages to reflect longer life expectancies (Social Security Retirement Age and, more recently, the Minimum Required Distribution Age).
Your DB plan can be an important tool in your kit as you respond to this crisis and work to retain key talent. Don’t forget to emphasize the advantages to your employees as you communicate the improvements. Working longer will increase DB plans for people who are accruing longer. And, if overtime, shift pay, or other forms of pay that are not base pay are included in pensionable compensation, pension benefits will reflect this additional pay.
For more details on how you can leverage your DB plan to even more effectively manage your workforce, contact your Milliman consultant.
This blog post is the first of a three-part series on workforce management during the coronavirus pandemic.