Q: In reviewing employment data at our company, we were surprised to find the average time our employees stay with us to be about 6 years. Considering that many employees who leave us take a lump sum distribution from their 401(k) accounts, it made us wonder what we can do help more transient employees prepare for the future.
A: First, congratulations! Your average tenure is slightly higher than that of the overall workforce, based on the January Current Population Survey (CPS) from the US Census Bureau, as cited in an Employee Benefits Research Institute (EBRI) issue brief, Trends in Employee Tenure, 1983-2018, February 28, 2019. The issue brief reports that, according to CPS, over the past 35 years, a five-year employment tenure is about average. It seems the idea of holding one job for an entire career is a bit of a myth. The EBRI brief also points out the concern you have, that changing jobs (or even careers) every five years could have a negative impact on retirements.
Shorter tenures may result in a lack of defined benefit plan vesting (when a defined benefit plan is even offered), reduced defined contribution savings, and as you mention, lump sum payments at times of job changes. While you may not be able to keep employees longer, you may be able to impact their savings and withdrawal decisions, thereby improving their future retirement prospects.
- First, implement regular and high-quality financial education, including specifics about the retirement plan.
- Second, enlist longer-term employees who do understand the plan to help give “on the ground” information to newer employees.
Read the EBRI issue brief.
Want to know more? Speak to Erick, a 401(k) Advisor
Sources/Disclaimers:
For plan sponsor use only, not for use with participants or the general public. This information is not intended as authoritative guidance or tax or legal advice. You should consult with your attorney or tax advisor for guidance on your specific situation.
Kmotion, Inc., 412 Beavercreek Road, Suite 611, Oregon City, OR 97045; www.kmotion.com
© 2019 Kmotion, Inc. This newsletter is a publication of Kmotion, Inc., whose role is solely that of publisher. The articles and opinions in this publication are for general information only and are not intended to provide tax or legal advice or recommendations for any particular situation or type of retirement plan. Nothing in this publication should be construed as legal or tax guidance; nor as the sole authority on any regulation, law or ruling as it applies to a specific plan or situation. Plan sponsors should consult the plan’s legal counsel or tax advisor for advice regarding plan-specific issues.
Tracking #1-857322
