Phased Retirement

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Chair – Richard J. Helmreich
Vice Chair – Mary Nell Billings

Description

Traditionally, the employment system in the United States has resulted in retirement practices in which employees’ transition directly from working on a full-time basis to being fully retired. This conventional approach to retirement has not utilized a system in which workers may ease into retirement. However, the changing nature of employee and employees needs has demonstrated that this traditional approach may not be the most effective, productive or efficient approach. Faced with a shortage of skilled workers, many employers now need to retain retirement-age workers in order to maintain an adequate workforce. In addition, retirement-age employees are facing increased financial limitations, compelling them to work longer in order to supplement their retirement benefits. As a result, many employers and employees seek to develop formal or informal “phased retirement” programs, which permit retirement-age employees to assume a reduced workload and ease into retirement gradually.

This working group will examine both sides of the employment equation. The group will examine the issues facing employers who wish to create phased retirement plans as well as the issues facing employees who wish to take part in phased retirement programs and the impact on the employees’ retirement savings, pension benefits and Social Security benefits. Specifically, this group will examine whether there are any legal impediments in the American retirement system that discourage American workers from continuing to work in their retirement years.

Objective And Scope

The working group’s basic objective is to determine the need for an improved system of phased retirement opportunities. After discerning the needs of employers and employees for phased retirement, the working group will draft recommendations for the ERISA Advisory Council to make to the Secretary of Labor so that the Secretary and the appropriate staff members of the Department of Labor (DOL) can deliberate on the issue, and, if appropriate, act.

As part of this process, the study and the related recommendations will take into account the relevant roles of three separate forces on the retirement system: employees, employers and government. First, the study will identify whether there is a need for any type of guidance that will enable employees to make well-informed decisions regarding the issues involved with phased retirement. Second, this study will also determine the types of guidance and best practices that will enable employers to make well-informed decisions regarding the implementation of phased retirement programs, which can help reduce training costs and maintain an adequate workforce. Third, this study will identify whether there are any governmental actions, including actions by the DOL that can improve the American retirement system by removing barriers and better enabling employers to implement phased retirement programs.

In this regard, the study will seek to specifically determine whether governmental action, including regulations or other guidance, could:

• Remove barriers to the availability and utilization of phased retirement programs;

• Assist employers and employees in determining the efficacy of different types of phased retirement programs best suited to their individual needs;

• Encourage employers to provide appropriate advice and education to employees concerning the opportunities and consequences of phased retirement helping to ensure that employees understand the financial ramifications of selecting phased retirement; and

• Facilitate broader use of phased retirement systems.

Questions For Potential Witnesses

Background

• Employee perspective: What types of phased retirement efforts are American employees currently utilizing? What are the advantages and disadvantages of different efforts?

• Employer perspective: What types of phased retirement programs are employers currently implementing? What are the advantages and disadvantages of different programs? What employers or institutions have already implemented phased retirement programs either successfully or unsuccessfully, and what made those phased retirement programs successful or unsuccessful?

Needs for Phased Retirement

• Employee perspective: Do American employees now have a greater need or desire to remain in the workforce beyond the traditional retirement age? If so, what pressures or systemic changes have led to this development? What types of employees are most severely impacted by this need?

• Employer perspective: Do American employers now have a greater need to retain employees beyond the traditional retirement age? If so, what developments in the American employment system have prompted this change? What types of employers are most severely impacted by this need? How will the introduction of phased retirement affect productivity in the workplace?

Impediments to Phased Retirement and Potential Changes to Phased Retirement Programs

• Are there specific legislative, regulatory or other governmental obstacles that serve to directly or indirectly prevent more widespread implementation of phased retirement programs? If so, what changes would need to be made to remove these obstacles? Is there any specific action the DOL could take to remove such obstacles?

• Are there any other obstacles to the implementation of phased retirement programs on a more widespread basis? If so, what changes would need to be made to remove these obstacles? Is there any specific action the DOL could take to remove such obstacles?

• What types of phased retirement programs should be available or encouraged? What are the advantages and disadvantages to participants? Do employers currently have the ability to identify any existing or future opportunities to implement phased retirement programs best suited to their needs? If not, what could be done to improve employers’ awareness of such opportunities? Is there any specific action the DOL could take to improve such awareness or this educational process?

• What type of systematic changes should be implemented to help facilitate increased opportunities for phased retirement? Are specific institutions better suited to help implement phased retirement programs?

• Is there anything that could or should be done to encourage employers to implement phased retirement programs? Is there anything that could or should be done to encourage employers to provide appropriate advice or education to employees concerning the opportunities of phased retirement? Is there anything that could or should be done to encourage employers to provide appropriate advice or education to employees concerning the financial ramifications of selecting phased retirement?

Witnesses Testimony

As currently scheduled, this group will hear witness testimony on these issues on July 17, 2008 (DOL Room: C5515 Rm. 4) and September 9, 2008 (DOL Room S3215 A-B).