Are you having a hard time communicating the benefit of your LAGERS pension to your employees? When employees understand the value of their defined benefit plan, quit rates decrease by 20% (National Institute on Retirement Security – read article here). Below are a few tips that you can use when discussing your LAGERS pension with employees.
Secure retirement income has increasingly become a desirable benefit for workers. According to a Merrill Lynch survey, 82% of workers are willing to give up 5% of salary for dependable monthly retirement income. Dependable, modest, monthly income is exactly what LAGERS employers provide for their employees. Since secure retirement income is so desirable, try using words like “guaranteed, protected, lifetime retirement income” to promote your LAGERS benefits.
Have you noticed at times that the employees don’t seem to care about a benefit until they find out what’s in it for them? People want personalization. . One way personalize their retirement plan is by promoting their LAGERS annual statement. This statement has information about current and potential future benefit accruals. Another way to personalize is encouraging the usage of the myLAGERS portal. The myLAGERS portal allows employees to view their account(s), change personal information, view past annual statements, create benefit estimates and much more. Finally, another way to personalize an employee’s benefit is to show employee contributions vs. total potential payout illustration. This will give them a big picture view of how much of an impact their LAGERS benefit makes on their retirement security.
While illustrating the employee contribution vs. total potential payout illustration is helpful for personalizing an employee’s benefit, showing what the employer contributes on the employee’s behalf may be cause for confusion. When you show an employee what the employer has contributed, they may think that their employer is contributing funds into an individual account and this account balance will produce their retirement nest egg. . Keep the focus on the formula used to calculate benefits and the steady stream of income this formula produces. .
At times, an employee may have some difficulty with the calculation of the benefit. A great way to express the calculation of LAGERS benefits is through replacement ratios. A replacement ratio illustrates their benefit through a percent of salary replaced. The way you calculate a replacement ratio is by taking your benefit factor times the number of years the employee has worked or plans to work. For example: I have the 1.50% multiplier and I plan to work for 25 years, my LAGERS benefit will replace 37.5% of my pay when I retire. This will also show the employee the need for personal savings as well, because LAGERS is not intended to be his or her sole source of retirement income.
Give some or all of these methods a shot, you may find that the employees have a better appreciation of their retirement benefits and it may make your job just a little easier.