How Employers Can Address the Nurse Retention Problem

Since the start of the COVID-19 pandemic, recruiting and retaining nursing staff has been a major problem for the health care sector. 

Many nurses struggle with student loan debt and lack emergency savings, which impacts their ability to save for retirement, but new provisions in the SECURE 2.0 Act of 2022, as well as other employee incentive programs, are potential benefits that employers can use to improve retention and address the recruitment problem, according to experts at NSI Nursing Solutions Inc. 

In a study conducted in 2022, NSI found that it takes more than three months to recruit an experienced registered nurse—up by more than eight days from 2021 —with medical and surgical services presenting the greatest challenge. With a national vacancy rate of 15.7%, hospitals are facing significant nurse shortages. 

The NSI survey, conducted throughout the year, included 273 hospitals in 35 states, covering 736,021 health care workers and 205,502 registered nurses. 

In addition to leaving staff shorthanded, the cost of turnover can significantly impact shrinking hospital margins. NSI’s survey found that the average cost of turnover for a bedside RN is $52,350, a 13.5% increase, resulting in the average hospital facing between $6.6 million and $10.5 million of higher costs.  

As a result of this financial stress, many hospitals are looking to control their labor costs and decrease their reliance on supplemental staffing. But it has yet to result in nurses who are on the job building up very much financial reserve. 

Sangeeta Moorjani, executive vice president and head of tax-exempt business and retirement solutions at Fidelity, says 55% of nurses who work for Fidelity’s tax-exempt clients have less than three months’ worth of essential expenses saved. On top of that, 53% have student debt and 60% feel overwhelmed by the thought of confronting an unexpected financial challenge. 

How SECURE 2.0 Can Help 

Under the SECURE 2.0 Act, employers will be able to make matching contributions to an employee’s retirement account when the employee makes “qualified student loan payments.” The intention is that workers will not have to forgo retirement savings while repaying their student debt. This provision goes into effect for plan years that begin after December 31, 2023. 

Nurses are likely to be one of the professions most impacted by the option: Moorjani says the median student debt carried by nurses is between $40,000 and $50,000. 

“The ability to use the match to pay off student loan payments is a big aspect of SECURE 2.0,” Moorjani says. “That’s really going to address a core blocker that’s getting in the way of nurses being able to be more financially well.” 

The new emergency savings provision outlined in SECURE 2.0 can also be used as a retention tool for hospitals, Moorjani argues.  

Beginning in 2024, employers will be permitted to create a “sidecar” account tied to a non-highly compensated participant’s retirement account. Employees may voluntarily contribute or may be automatically enrolled at up to 3% of their annual pay. This account is capped at $2,500 or a lower limit created by the plan sponsor. Participants may take a distribution from their emergency savings account at any time. 

Employers can also offer participants an emergency savings withdrawal of up to $1,000 per year from their retirement savings that is not subject to withdrawal tax penalties and may be repaid over three years.  

“The way Fidelity is helping plan sponsors is by creating a mechanism where [employees] can directly, from payroll, put money toward emergency savings, and plan sponsors can make contributions,” Moorjani says. “That’s really what allows both the plan sponsor and the participants to be thinking about more automatically saving for the future.” 

The Benefits of Auto-Portability 

Because more than 54% of nurses quit within their first five years in the job, and 53% of those under the age of 35 cash out their retirement accounts when they leave a job, access to automatic portability services can also improve nurses’ financial wellness, according to Fidelity. 

SECURE 2.0 allows plan providers to offer auto-portability services, which automatically transfer retirement accounts to a new employer’s plan. This service can be particularly beneficial for nurses with low retirement account balances. 

“Essentially, the individual or the nurse doesn’t have to do anything,” Moorjani says. “If you’ve saved [for retirement] at one hospital and you move to another hospital with a different plan sponsor, those savings travel with you. The cumulative impact of those savings is going to be a significant aspect of making sure that [nurses] can achieve financial wellness and long-term retirement security.” 

The issue of cashing out when switching or leaving jobs is not unique to the health care industry, and researchers have found that employers’ choices in the design of their defined contribution plan, as well as a lack of communication, make employees more likely to drain their accounts at job separation.  

What’s Causing the Turnover? 

For employers looking to retain their nurses for longer than five years, it is important to understand the reasons nurses are hopping from one job to the next.  

According to NSI, voluntary terminations accounted for 94.7% of all hospital separations. Survey respondents identified that the top reasons for leaving their jobs included salary, retirement, education, scheduling, workload/staffing ratios and commute.  

The report also found that both the competition for labor and employee burnout remain high.  

Another survey of 369 front-line nurses conducted by McKinsey & Co. in September 2022 concluded that 31% of nurses say they may leave their current direct-patient-care jobs in the next year. 

McKinsey found that about 35% of nurses said were likely to remain in direct patient care but at a different employer or role, and the remainder said they intended to leave the bedside for non-direct-patient-care roles: to purse different career paths, or to get more education or to exit the workforce entirely.  

When hospitals struggle with staffing at patients’ bedside, the top five most common strategies they use to address staffing are: asking RNs to volunteer for overtime; authorizing critical staffing pay; adding part-time or per-diem employees; relying on travel/agency nurses; and increasing their RN salary scale, according to NSI. 

From an effectiveness perspective, hospitals felt that compensation programs relative to critical staffing were the most successful options, followed by expanding the “in-house” staffing pool. 

What One Hospital Can Offer 

Mohammad Raihan, the chief retirement officer at NYC Health + Hospitals, says nurses and health care workers within the NYC Health system can take advantage of several different retirement and pension plans, which he believes can help attract and retain a larger workforce. 

Raihan manages the NYC Health 403(b) plan, which was first established in 1977. He says more than 90% of the hospital system’s staff is enrolled in this plan, and members have access to certified retirement counselors at all hospital locations. 

Because NYC Health + Hospitals is part of a city agency, nurses and health care workers have access to the New York City Employees’ Retirement System pension plan. Members of the pension plan may also be eligible for retiree health benefits, which Raihan says is an effective retention tool. 

The health system also offers a Voluntary Defined Contribution program, which is only available to nonunion employees. To be eligible for this plan, employees must also make a salary of at least $75,000. The employer contribution, made only after one year of service, is 8% of the employee’s salary, while the employee has a mandatory contribution of anywhere between 3% to 6%, based on earning.  

In addition, employees have the option of enrolling in the New York City Deferred Compensation 401(k) or 457 plan.  

Participants can also meet virtually with a retirement counselor, and Raihan says this is especially helpful due to health care workers’ often irregular schedules.  

“Our hospitals run 24/7, and a majority of our nurses are working different shifts,” Raihan says. “Some are coming in at 7 in the evening and leaving at 7 in the morning, [and] sometimes they do double shifts. They [often] have a hard time finding the time to speak to a retirement counselor, so that’s why we developed a convenient time when they can schedule an appointment and talk about their retirement goals, savings and also help them with enrollment.” 

In addition, employees represented by a labor union may receive other benefits provided by the union welfare fund, such as disability insurance, health club reimbursements, life insurance, supplemental hospital coverage and tuition reimbursement. All employees, regardless of their union status, have access to a 529 college savings plan, flexible spending account programs, transit benefits and student loan forgiveness. 

Employee Incentive Programs 

Moorjani says asking nurses to continuously work overtime contributes to their burnout, and relying on travel or agency nurses is not the solution. 

To improve recruitment and retention, she recommends hospitals develop a “non-traditional path of growing for new nurses.” She says this could be a “learn-as-you-grow” option, and employers can allow non-clinical employees the option of getting their nursing degree as an incentive. 

“That’s an investment in your people, and it also brings a lot of loyalty over time,” Moorjani says. 

She adds that creating innovative recognition programs can help nurses feel a sense of belonging and want to stay at a particular hospital. Developing internal traveling nurse programs can also help hospitals eliminate agency costs, and Moorjani says this becomes an attractive option for nurses who like to travel. This simultaneously benefits the employer, because the employee is staying within the same health care system.  

“The qualitative research we’ve done over the years definitely validates that burnout is a big factor [in retention problems],” Moorjani says. “What causes the burnout is that they don’t have a lot of scheduling flexibility, and that stresses the nurses out, given [their] overall load. The more those aspects are managed, the more [hospitals] can control the high turnover rate.”