The retirement benefit landscape has become more complex, which means you need to think broadly about your plan's priorities and objectives.
At T. Rowe Price, we recommend developing a retirement benefit philosophy that aligns your organization's objectives—such as workforce management, talent acquisition and employee retention—with your retirement plan goals. The process takes time, but can produce positive results.
"Having a retirement benefit philosophy sharpens the focus on critical outcomes."Francisco Negrón, Head of Client Services
What's your plan's retirement benefit philosophy?
Many plans share a common objective: generating enough income to support employees throughout retirement. But not all employees have the same needs, and not all organizations require the same incentives.
Your retirement benefit philosophy should be grounded in your organization's goals, culture, demographics and financial constraints—and, of course, your employees' needs. When complete, this philosophy should define distinct plan objectives and priorities, which will shape specific changes. Those changes should focus on achieving outcomes that match your organization's goals.
For example, imagine a large warehouse retailer that has:
In this case, the plan sponsor may prioritize helping older workers become retirement-ready, making room for younger employees. Plan objectives may include reducing leakage to increase balances and providing services that facilitate the transition to retirement.
A fashion retailer, on the other hand, would be dealing with an entirely different situation:
This plan sponsor is unlikely to prioritize retirement income, opting instead to attract new workers and manage plan costs to better serve long-term employees. The company may want to ensure its benefits program is as good as or better than those of its competitors.
Clearly, not all plans are marching toward the same objectives. There is no one-size-fits-all answer. Each plan's success must be measured against its unique and specific goals.
"Success has to be measured against a company's unique demographics and objectives."– Guen Toste, RPS Relationship Manager
Developing a retirement benefit philosophy engages stakeholders at different levels of your organization, requiring them to discuss and align their views. For example, the corporate finance group's priorities may be quite different from the human resources group. As members of the benefits committee, the two groups must work together to establish objectives and priorities that will guide plan decision-making.
The result of the process is a way of thinking about retirement benefits that reflects overall needs of your organization.. In addition to connecting retirement plan success to company success, a retirement benefit philosophy should help a plan sponsor:
Consider the companies described previously. The priorities for the warehouse retailer include helping older workers become retirement-ready to make way for younger employees. Since the defined contribution plan is the company's primary retirement savings vehicle, the plan sponsor may want to consider the following actions:
The fashion retailer relies on its plan to counter high turnover and attract new employees. A plan priority is managing costs to better service long-term employees. So, the sponsor may want to consider these actions:
By aligning diverse company and benefits objectives, you can pinpoint plan priorities and sharpen the focus on critical outcomes. Creating a retirement benefit philosophy helps ensure that limited resources support plan priorities and that best practice recommendations (for plan design, investment menu, and participant experience) target strategic objectives.
"Hammering out our philosophy changed the way we thought about the plan."– Feedback From an Advisor
"The process is great. It helps get everyone on the same page."
- Feedback From an Advisor
Gathering the insights of stakeholders at different levels throughout an organization can take time, so it's a good idea to incorporate a retirement benefit philosophy into your strategic planning process.
To begin, your T. Rowe Price relationship manager, and/or your advisor will speak with you to understand your goals, help gather stakeholder insights, analyze your plan data, and ultimately collaborates with you to deliver a Strategic Plan.
Find out more about our strategic planning process.
Contact your T. Rowe Price representative to find out how we can take your plan to the next level.