The Boston College Center for Retirement Research (link) (along with a partner  RRC at the U. of Michigan) is an outstanding source for great, in-depth studies of retirement issues. The Director of BCCRR, Alicia Munnell, frequently testifies before congress and is quoted in leading publications. She and Steven Sass have a just-published book on ‘Working Longer’ published by the Brookings Institution Press (link). 

This book should be on the bookshelf of anyone involved in the issues of working later in life and/or retirement. The 52 pages of notes and references at the end of the book alone represent a great resource for understanding the dynamics of those issues.

Many politicians and commentators talk about worries that Social Security will disappear in the future. Many politicians say that they are going to “save Social Security.” What they seldom address is the fact that Social Security has already been significantly eroded. Munnell and Sass do a great service by quantifying the fact that “the full retirement age is being increased from 65 to 67,”…” Medicare part B premiums are slated to increase sharply,” and “SS benefits will be taxed more….as the benefits are not indexed to inflation.” The net of these changes will “reduce the net replacement rate for the average worker who claims at age 65 from 39 percent (of pre-retirement income) in 2002 to 30 percent in 2030.” To compensate for just these factors “workers will need to extend their work lives by about four years.”

A very important part of the book addresses the even more difficult time that women will have.

The only issue that I have with the book is that there are many references to problems that employers and workers have with working later in life. However, they do not give enough focus to the Towers-Perrin study (link) that delineated the fact that older workers do not cost more. Their higher health costs are offset by less job switching, less absenteeism, etc. As Bill Novelli, CEO of AARP and the sponsor of this study, told me, “This is the seminal study regarding the value of older workers.”

The older workers could be even more valuable if, as Munnell and Sass point out, “Most older workers have sufficient mental agility to learn and adapt if given the necessary training, but few get trained and many fail to learn and adapt on their own.”

This is a major contribution. Read it!

It is not often that there is an opportunity to report good news on the subject of retirement preparation. However, three studies released recently have included very positive developments in 401(k) auto participation.

Wells Fargo’s Institutional Trust Services, and BPS&M (a benefits planning division of Wells Fargo) issued their twelfth annual report on ‘Strategic Initiatives in Retirement Plans.’ (Link) Included was the information that plans using automatic enrollment for their 401(k) programs had increased from 26% of respondents  (employers) to 44% from 2006 to 2007. Human resource professionals have called this increase in one year amazing.

“The Pension Protection Act of 2006 has opened the door for employers to design plans that encourage plan participation…,” according to the study. The change from having employees ‘opt-in’ (actively sign up for a 401(k)) vs. ‘opt-out’ (they are automatically enrolled and have to take action to drop out) led to these amazing statistics above.

The Employee Benefit Research Institute estimates that auto enrollment, and auto escalation (another provision of the PPA) “will result in a significant increase of 401(k) accumulations - especially for low-income workers - compared with estimates previously determined for automatic enrollment.” (Link)

And a Harris Interactive poll, sponsored by AARP, FINRA, and Retirement Security Project (Link) measured the employee attitudes toward automatic 401(k) enrollment. Of those enrolled in a 401(k) plan, 98% either strongly or somewhat agreed that they were “..glad (their) company offers automatic enrollment.” Even for those who opted out, 79% strongly or somewhat agreed they were glad their company offered automatic enrollment.

The PPA has been described as the biggest improvement in pension legislation in many years. So, since congress takes so much criticism, it is only fitting that for a positive move, we should thank the PPA’s sponsors. They are Representatives Boehm (OH), Camp (MI), McKeon (CA), Kline (MN), and Thomas (CA).

In my last post I noted that the AARP ‘Best Employers for Workers Over 50′ program was more than an awards show (see above). AARP has taken the inputs of the applicants and turned them into a ‘best practices’ model for employers that wake up and realize that keeping Boomers in the work force is going to be a key strategic initiative over the next few decades.

The following morning, Molly Selvin reported in the LATimes (link) that Ernst & Young has updated their work on the Aging U.S. Workforce with the 2007 version of that study (link). This is another important study that should provide an additional alert to wake up those managers who are aware but not taking action.

 In fact, E&Y reports an incredible increase in the percent of HR executives that said “retaining key employees to maintain intellectual capital was the human capital issue of most concern” (from 38% in 2006 to 68% in 2007)! Efforts to increase awareness are obviously beginning to get some results.

A new finding (to me, at least) was that the focus in the strategic planning to address the aging workforce issue should be in middle management. This is problematic when “41% of the companies responding say that middle management will be the level most affected by the talent gap, yet 75 percent are focused on monitoring succession at the senior management level.” HR professionals clearly need to refocus their efforts.

Ernst & Young has several key recommendations for those HR managers who decide to tackle this issue. Combine their analysis with the ‘best practices’ noted from the AARP  Best Employers for Workers Over 50 program, and earlier work from The Conference Board and the General Accountability Office, and there is a substantial body of material that can provide significant guidance to those HR professionals who decide to take action in this important area.

Hopefully, we will start to see  a progression from increased awareness to increased action.

I recently attended the AARP ‘Best Employers for Workers over 50′ awards dinner. This was the seventh annual event, meaning that AARP started this commendable effort well before most people were aware that retention of Boomer workers was going to be a critical need for the U.S. economy.

The fifty employers receiving awards (link) certainly deserve the commendations. They are definitely in the vanguard, often because of problems with retaining certain classes of employees.

Award shows are often superficial and fleeting. This one is neither. Companies put a lot of work into their submissions, and the accumulation of these submissions is providing a very valuable list of ‘best practices’ in the area of making the workplace a positive environment for older workers, and therefore helping to retain them. In 2004 AARP had Mercer Human Resource Consulting analyze the best practices in a report (link).

AARP continues to analyze the submissions and has lists of best practices on subjects like ‘Retention’ (link) and ‘Workforce Trends’ (link).

Surveys are showing that most employers are not preparing for the forthcoming shortages of employees. Fortunately for them, when they do wake up and realize they are in trouble, the best practices developed by AARP will give them a badly needed head start in getting up to speed.