Employers Prepare For Higher Benefit Costs From Older Workers

Planning to Control the Costs of Retaining Experience

Employers Prepare For Higher Benefit Costs From Older Workers
March 1, 2016

The baby boomer generation may be approaching their retirement years, but many continue to work instead of choosing a traditional retirement path. Some have not saved enough for retirement and cannot afford to stop working, while others simply enjoy their jobs and see no reason to retire based on age alone.

Employers generally value the experience that senior workers bring to their enterprises. Too many retirements in a short time can drain companies of useful knowledge and resources. However, employers have to plan for an aging work force in several ways, including the costs of providing benefits to older workers. According to a recent report by LIMRA, a majority of employers are doing just that.

The LIMRA Secure Retirement institute found that 73% of employers have planned for the increased benefits required to handle older workers within their companies. LIMRA also confirmed the need for employers to do so, finding in a separate study that 30% of pre-retirees (defined as workers within ten years of their full retirement age) plan to work until age 66, while 20% plan to work until seventy or beyond. Only 5% of workers felt that they were "extremely well prepared" for retirement.

Employers overwhelmingly understand the benefits of retaining their older, more experienced workers. The survey showed that 90% of employers believe retaining older employees is good for business. 80% agreed that companies lose "experience, leadership, and institutional knowledge" when older workers leave their workforce. 70% of respondents would like advice from their plan providers on the best ways to transition their older workers into retirement smoothly.

Employers also understand that higher costs are inevitable with an older workforce through higher salaries and other employee benefits such as increased vacation time and potentially higher healthcare costs. LIMRA found varied responses regarding plans to deal with those costs. Almost half (49%) of the companies will attempt to absorb these extra costs within the business, but 41% responded that they would pass the cost increases on to their employees.

Other companies were looking to balance the costs by reducing it elsewhere, including decreasing healthcare benefits (33%), their employer contribution to employee's retirement plans (28%), other benefits such as life and disability insurance (24%), or reducing workforce costs in more traditional ways through slowing salary growth/reducing salaries and lowering the overall number of employees (30%). Only 5% of employers plan to do nothing.

A shift toward an older workforce affects both ends of the age spectrum, and almost half of the companies surveyed said that they are struggling to balance the needs of workers on either end of their careers. Fewer annual retirements mean fewer opportunities for younger workers to advance up the ladder or to be hired into the company to replace those who are promoted. LIMRA found that 60% of employees are concerned about the effects of delayed retirements on the career paths of younger workers.

We wonder why that number is not 100%. You cannot attract the best employees if they feel that their path for advancement is throttled by very slow advancement.

The LIMRA survey verifies that most employers have at least analyzed retirement issues and are making some plans to deal with it, but professional assistance would be helpful in their efforts. If your company is one of the few not making any plans, you may want to talk with your Human Resources group before your retirement day arrives.

Photo ©iStock.com/Yuri

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Erin | 03.01.16 @ 15:14
I'm glad some companies are starting to address these issues, but I don't think it's going to be an easy problem to solve. There are so many factors to deal with.
Steffanie | 03.01.16 @ 15:15
Thankful for the companies that see this as an issue. We need to take care of our society as they age, even the ones who are still working.
Elaine | 03.01.16 @ 15:16
Not sure if it going to be an easy fixed but I'm glad to hear that some are striving for a better solution.
Alec | 03.01.16 @ 15:17
There's a woman that works at my local grocery store who has to be at least 70. She is working almost every time I go in. It's crazy how many people are still working at that age and it seems like the government would do more to help them retire instead of them having to depend on their employer when they've already worked their whole lives.
irene | 03.01.16 @ 15:18
I'm glad that some companies take this into consideration
Heather | 03.01.16 @ 15:19
With the cost of living and medications constantly on the rise, I'm not surprised to see more elderly in the workforce. Something needs to be done to help them more and glad to see that some companies are taking notice.
Jo Ann | 03.01.16 @ 15:20
t is nice to see that older workers are being valued for experience. Its is great to see that they are working on balancing the benefits for both older and younger employees.
Jackie | 03.01.16 @ 15:22
This is a very important topic as retirement age for social security keeps rising. My neighbor is 77 and still working full time. She told me she has to work in order to have health insurance.
Nancy | 03.01.16 @ 15:27
I am glad that some employers are preparing for the older workforce. I do know that a lot of employers simply cut the older workers loose and hire younger, cheaper workers.
Ron | 03.01.16 @ 15:27
Retirement for many is just a word thrown around. Myself, I will be working until I die, period. Companies who can retain the experience likely could so at a stagnant rate for if the seniors chose to leave, getting hired on may be difficult. So there is an incentive to stay versus testing the waters.
Victor | 03.01.16 @ 15:33
I agree it is an impact on the company when retiring older employees, such lost of knowledge, leadership, and experience, but it is not impossible to find ways to pass down that knowledge to the younger employees and therefore minimize this impact on the companies, of course allow the older employees to retire at their own pace and will, always keeping in mind there are younger employees looking forward to have growth in their lives and also prepare for a future retirement some day, its a cycle.
$commenter.renderDisplayableName() | 12.03.20 @ 17:31