Retirement is on employers’ minds.

Employers are revisiting how they view their retirement programs and how they view their role when active employees become retirees, said Nigel Branker, partner and leader of Morneau Shepell’s DC pension consulting practice in Ontario, at the firm’s Trends in Human Resources event in Toronto.

But the survey of the same name reports that 21% of employers want to reduce the costs and risks in their retirement plans.

DB plan sponsors are looking at ways to de-risk their plans, said Branker. They’re looking at both investment strategies and plan design.

The survey indicated 38% are reviewing their investment strategy, and the same percentage are reviewing their plan design. Only 18% are looking to convert their DB plan to a DC.

DC plan sponsors, on the other hand, are becoming more interested in the adequacy of retirement income. They’re looking at ways to provide payment options for retirees, Branker said, adding that the industry has not seen “waves of employees retiring from DC plans yet.”

Historically, Branker explained, employers have left the decumulation phase to employees, leaving them to search out products in the market. But “employees make poor and often expensive decisions without the lack of support from employers,” he said.

Currently, 27% of DC plan sponsors are already providing payment options or are thinking about doing so.

There are three typical reasons why employers want to provide payment options:

  • to increase retirees’ income in retirement through lower investment fees – “A 2% savings in post-retirement fees can result in up to six extra years of retirement income,” said Branker.
  • to stay involved with retirees and keep an ongoing relationship – For example, in the retail sector, your retirees are your customers, said Branker.
  • to keep assets in their plan – “With waves of people retiring and taking their balances out, that’s going to affect the fees.”

Read: How to help plan members with decumulation

Retiree benefits
Employers are not only looking at the financial side of retirement, they’re also considering their employees’ health.

Employers are looking at options for providing benefits for employees after they retire, he said. In fact, according to the survey, 31% of employers provide health benefits right now and will continue to do so. Unfortunately, 57% of employers don’t and have no intention of doing so. But Branker sees a solution.

It’s called a retiree exchange. Under the exchange, retirees have access to benefits and employers’ costs are fixed, he said.

The employer uses an exchange provider to bring a number of insurers together to create a marketplace for employees to choose from, he explained, adding that employers have the option of making a fixed contribution to help pay for the benefits.

Retirees use the exchange to buy the plan that’s best suited for them; they pay any additional costs that aren’t contributed by the employer.

These exchanges are a marketplace for insurance, similar to sites like Travelocity and Trivago for travel, said Branker.

While these exchanges have been used in the U.S. for a few years, he said they’ll likely be on their way to Canada soon.

In the past, employers haven’t thought about helping employees after retirement, Branker concluded. “[Now] there’s a philosophical shift of how do we relate to our employees and what role do we want to play.”

Also read:

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