American Benefits Council: News Room

NEWS RELEASE

September 9, 2008
PR-08/15
For additional information:
Jason Hammersla
202-289-6700

Council describes for DOL panel the importance of "win-win" flexible retirement programs

Retention of skilled, knowledgeable workers critical for American companies

WASHINGTON, D.C. — "Losing skilled employees due to the inflexibility surrounding current retirement laws is an increasing risk to the success of our company," said Maria Norman, corporate director, benefit strategy and design for Northrop Grumman Corporation. Norman, a member of the American Benefits Council Board of Directors, testified on behalf of the Councilin today's hearing of the U.S. Department of Labor (DOL) ERISA Advisory Council Working Group on Phased Retirement.

Norman urged the panel to "focus on the role that flexible retirement programs can play in meeting the needs of both workers and employers, as well as in bolstering the economy and relieving burdens on government programs. Under current law, there are certain obstacles to the ability of employers to implement these 'win-win' programs and, as the population ages, the disconnect between the law and the needs of the workplace will expand." These obstacles include:

The inability of active employees to access early retirement subsidies under traditional defined benefit plans that encourage employees to leave the workforce between ages 55 and 62 and that generally phase out by the plan's normal retirement age;
The inability of active employees to take advantage of low interest rates that result in a greater lump sum payment under traditional defined benefit plans that permit lump sums; and
The inability of employees under current law to work a reduced schedule while drawing benefits from their employer's retirement plan in order to supplement their income.

Earlier this year, the Council participated in the development of a survey with Employee Benefit Research Institute (EBRI) and HR Policy Association that illustrated the modern challenges for employers seeking to retain highly skilled workers in the face of major economic and demographic shifts. Among the key findings: half of recent retirees with a defined benefit pension stated that receiving a full pension while working part time would have been effective in delaying their retirement (50 percent) and almost as many feel the same about receiving a partial pension while working part time (44 percent).

"As life expectancies increase, fewer Americans see early retirement as an attractive option, and not just for financial reasons. Workers also seek the intellectual challenges and social interaction associated with work," Norman told the panel. "Meanwhile, from the employer's perspective, older employees possess skills and institutional knowledge that are highly valued and often can help meet the companies' pressing demand for workers. Thus, employers are interested in implementing flexible retirement programs that enable older employees, who might otherwise retire, to remain actively employed either on a part-time or full-time basis," she added.

"We strongly encourage the Advisory Council to be very careful in recommending policy changes so that retirement programs can provide maximum flexibility to employers and employees," Norman said.

The full text of Norman's testimony is available on the Council Web site. To arrange an interview with Council policy staff, please contact Jason Hammersla, Council director of communications, at jhammersla@abcstaff.org or by phone at (202) 289-6700.

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The American Benefits Council is the national trade association for companies concerned about federal legislation and regulations affecting all aspects of the employee benefits system. The Council's members represent the entire spectrum of the private employee benefits community and either sponsor directly or administer retirement and health plans covering more than 100 million Americans.