Retirement benefits, specifically defined benefit programs, are critical when it comes to attracting and retaining employees.
According to a survey, which was released Thursday, of 3,000 U.S. workers conducted by Towers Watson, 60% of employees with less than two years of service at a job with defined benefit plans cited the retirement program as an important reason they chose to work for their current employer, a sharp increase from 27% in 2009.
The survey, which was conducted in May and June of 2010, indicated that 72% of new employees said the retirement program is an important reason they will stay with their employer, up from 51% in 2009.
Conversely, 20% of new employees with a defined contribution plan in the retirement program said it played a role in their decision to work for their employer, up from 16% in 2009. Twenty-six percent said the retirement program was an important reason to remain with their current employer, unchanged from 2009.
"Given the growing importance of security in retirement, employees increasingly view retirement benefits as a significant differentiator when making decisions about where to work," said David Speier, a senior retirement consultant at Towers Watson. "In an environment in which talented employees are difficult to lure away from stable jobs, retirement plans — and especially defined benefit plans ¾ could give employers the edge they need."
The survey also found that 67% of employees would like to continue working for their current employer until retirement, an increase from 56% last year. However, defined benefit plans are much more likely than defined contribution plans to be an important factor in the retention of employees. Eighty-percent of workers at companies with defined benefit plans said they plan to continue working for their employer until they retire, compared with only 62% at companies with DC plans.
The percentage of workers under the age of 40 who cited their defined benefit plans as an important reason to work for their current employer jumped by more than half, from 28% in 2009 to 43% this year.
On the other hand, for those with a only a DC-plan declined slightly — from 19% last year to 17% in 2010. Younger employees at organizations with DB plans are also much more interested in remaining with their employer until retirement — increasing from 44% in 2009 to 70% this year.
"Until the economy shows real signs of recovery, employees will remain hesitant about leaving secure jobs that also come with secure benefits,” said Kevin Wagner, a senior retirement consultant at Towers Watson.. “But once the economy strengthens, employers will be in a challenging position of retaining their younger employees, who may begin to look for employment elsewhere. The heightened employee desire for retirement security might lead some companies to rethink their DC-only plan strategies. In fact, recent IRS guidance providing more clarity on cash balance pension plans will likely pave the way for employers to evaluate them as a desirable retirement plan option."