Improving Employee Retention With Innovative Retirement Plan Design

Recruiting and retaining employees is a significant challenge facing human resources executives. The talent market has shifted dramatically over the past few decades, with employees switching jobs faster than ever before. When pension plans were the norm, employees had incentives to remain loyal to their employers. But without the lure of a guaranteed lifetime income, it is typically more attractive for people to hop from company to company. Not only is turnover disruptive, but it is also pricey—costing employers more than $700 billion in 2021¹.

What might entice employees to stay with a company? The promise of guaranteed lifetime income. The numbers show that companies that offer defined benefit plans have an advantage in employee retention. However, the perceived financial burden of traditional pensions, combined with lack of employee appreciation, has led many companies to transition to defined contribution plans to reduce risk and volatility—despite the allure of pensions as a retention tool. The unpredictable expenses associated with traditional DB plans aren’t worth it. The ideal solution would be a retirement plan that marries the best qualities of a DB plan with the lower risk profile, stable costs and flexibility of a DC plan.

People want robust retirement plans, and employers must tackle workforce management issues. To answer these needs, we have crafted an innovative retirement program—O3 PRIME—based on the three linchpins employees and employers look for in a retirement program: lack of volatility, security and personalization.

How does PRIME work? It consists of two retirement accounts: a security account and a personal account. They work in tandem to provide a personalized retirement journey for each participant. Employees get the security of guaranteed lifetime income and the flexibility to tailor it to their unique needs.

Employers pay for the security account, like they would pay for a traditional pension plan. They put money away for their employees to be professionally invested and managed on their behalf. However, known and consistent year-over-year costs are inherent to the program’s unique design, making it different from a standard DB plan. The flexible design allows the employer to reward long-term employees, motivate newer employees to stay and delivers an edge when recruiting and retaining a diverse workforce.

The personal account allows employees to save additional money based on their ability and desire to save. Like with a 401(k) account, employees can choose which funds to invest in based on their personal risk tolerance, allowing them to fine-tune what the employer has chosen.

Thanks to the security account, employees are only partially responsible for their retirement preparedness. The employer can also add creative ways to encourage employees to save, even if just a tiny amount, though they face an expensive burden (i.e., paying off debt, school tuition, medical expenses and more).

What sets it apart from other retirement programs? It allows you to design a robust plan that fits your company’s needs with known, stable and affordable costs— while creating a personalized retirement experience for participants. Unique features like the optional medical savings account make it even more appealing. Amid a retirement crisis, younger generations are increasingly concerned about their current and future financial wellness. By offering a program with a guaranteed lifetime income, a sponsor stands out in a competitive hiring environment.

Using our decades of expertise in defined benefit plans, we have crafted a cost-efficient and effective retirement program that meets the needs of the modern workforce and employers. O3 PRIME empowers employers to invest in their workforce and their employees’ futures, enabling Americans to retire with financial stability and peace of mind.