One of the rarest benefits for active employees in today’s workplace is the defined benefit (DB) pension plan. Long gone are the days when DB pensions were standard in both public and private industry. Though public-sector employees still enjoy DB plans in varying forms, it is highly unlikely that someone in the private sector has an active or even a frozen pension benefit to look forward to when she retires. The replacement, the defined contribution (DC) retirement plan, has become standard.
None of this is news to the reader, however. The demise of the DB plan began when funding, public policy, and accounting policy changes began to take shape decades ago. Yet liabilities (for active and frozen plans) remain, along with the fiduciary oversight, ongoing administrative expenses, and other costs.
What are you doing to create employee value for this very large company expense, both in terms of hard dollar cost and fiduciary oversight?
Consider working with your internal communications team, if you have one, or an external communications expert to supplement required plan communications, by creating value through an annual, comprehensive benefit statement. Active and frozen plans have annual notification requirements, so employers already are required to communicate plan funding status and vested benefits. Most of these communications, however, are flat, confusing legal and actuarial text that reads like (and are, for the most part) templates to satisfy the department of labor. Probably they are left unread in the dead-letter stack at home.
Benefit statements explain in detail the value of all the benefits offered by your company, with particular emphasis on retirement benefits (DB and DC). They also contain projections of how plan benefits grow into the future, a very valuable part of the communication experience for employees. The statement, and all benefits communications coming from the company, should always link plan benefits to the overall company employee value proposition (EVP). Especially for those companies with active DB plans whose benefit continues to grow, and notice is taken particularly by longer-serviced employees. An active, or frozen, plan has many millions of dollars already invested in its employees. Continue to take credit, and gain employee value, for that investment.
If you have a frozen DB plan, a more nuanced approach may need to be taken. After all, the annual vested benefit remains static, and this can often be a reminder to employees that an ongoing benefit has been taken away or reduced in terms of future projections – never an easy message to deliver. Freezing (or terminating) a DB plan is an employee relations communications challenge. Once again, work with your internal communications team or outside benefits consultant to craft a message that is both explanatory as to why the action was taken and focused on the valuable vested benefit that still exists.
Another point to consider when communicating to employees is what, if anything, has replaced the DB benefit that has been frozen or terminated. Careful preparation and discussion among HR and senior management in this instance will be key to maintaining strong employee satisfaction and engagement and driving the EVP. For example, if freezing or terminating the plan was a function of organizational survivability, transparency and strong employee communications should accompany this decision, and employees should receive enough information to process and absorb this information. This news should be communicated clearly and effectively, preferably by members of senior management. Employees may not be happy with the decision, but they will retain confidence in management if they are treated with honesty and transparency.
In cases where the decision to freeze or terminate a plan was made as a result of a strategic decision to focus benefits expense in other areas, such as an enhanced DC benefit plan, a strong communications campaign that highlights how employees will benefit from this new approach is paramount. Particularly for longer serviced employees who may be closer to retirement and whose continued dedication to the organization is vital to its success. A frank discussion about how the enhancement will support the retirement plans for all staff is critical to retain their loyalty and maintain your organization’s EVP.
For more information on benefit statement communications or for help developing your organization’s employee value proposition, call Westminster Consulting, LLC, at 585-246-3750