Retirement Plans Closing the Gap for Top Employee Benefit

Jun 25, 2018

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Have you considered setting up an employee benefit plan survey? Getting feedback from your employees may well be in your best interest and here’s why.

The number of companies offering retirement plans, currently about 30 per cent, has decreased from a high of about 50 per cent in the mid-1980s. There is also an opposite trend showing that employer sponsored retirement plans are increasingly important to the average employee. What’s driving these directions and what do they mean?

There’s really no great mystery behind either of these shifts. Benefits overall have grown in importance to employees largely because the average age of employees in Canada is now over 40. As we age we become more aware of our mortality. The feeling of invincibility isn’t as strong as it once was. This nudges an uptick in our use of health and dental services. 

And so, employees appreciate the ‘benefits’ of benefits packages. Usually, these comprise a bucket of traditional group insurance coverages such as extended health, dental, disability and life insurance. A fewer number of employers also offer sponsored retirement savings plans, as we’ve seen. Typically, these are either group Registered Retirement Savings Plans (RRSPs) or Deferred Profit Sharing Plans (DPSPs). They’re funded by both parties who contribute a monthly amount.

There is an important difference, however, between traditional group insurance benefits and employer sponsored retirement plans. The former are more transactional and limited in nature. That is, employees are reimbursed for expenses and the interaction is largely finished. But the benefits that flow from employer sponsored retirement plans are additional dollars, rather than simply reimbursed dollars. They also increase each year as the saved amount grows. 

This highly significant benefit holds wider appeal for the average employee who is now approaching middle age than for a younger millennial who has more immediate financial concerns. As a result, retirement plans are climbing up the rankings on employee benefit surveys. Given that, benefits packages may increasingly have to include retirement plans, especially in a period of growing labour shortages. Companies who can capitalize on this trend may have an edge in recruiting and retaining top employees, so keep an eye on the surveys. And those opposite trends mentioned at the outset? It will be interesting to see if they start moving in lockstep.

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