2013 survey: oversight of company-sponsored retirement programs: a mercer and Directors & Boards collaboration concludes that these programs are requiring ever-greater scrutiny by board members.

• Author: McGrath, Jess
• Position: MERCER

PENSIONS ARE BACK on the boardroom agenda. A Mercer and DIRECTORS & BOARDS survey of over 200 respondents has highlighted two important areas of concern: minimizing the negative financial impact of such plans on the company, and ensuring that these plans are utilized as tools to improve workforce performance and productivity. Board members need to translate this worry into action plans to manage cost and risk as well as maximize value for their organizations.

The role of retirement programs in supporting workforce management objectives

"The board needs to take the lead in defining what it should know and do to align our pension and retirement plans with our own goals as well as with best practices industry wide." That is the comment of one respondent but sums up the gap between aspiration and reality for many. While 72% say that the retirement gram is either an important or a very important part of their total rewards package, an astonishing 60% have not assessed its effectiveness in terms of attracting and retaining staff.

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It is important to take a step back and reassess the role of the retirement program for an organization. Mercer research has shown that employees, when assessing the total reward package provided by their employer, place great value on the retirement program--in fact, it's second only to pay. Therefore, the employer has a great tool to incent changes in staff behavior and productivity.

For those companies that still operate traditional defined benefit plans--typically in industries where tenure is valued--then this type of pension plan acts as a great lever to attract and retain staff, as well as to ensure orderly succession. However, as companies make the move to defined contribution plans where wealth accumulation is the primary focus, then it is important that companies do not lose sight of the workforce management implications of such a shift.

In a defined contribution world, there is less certainty for the employee when it comes to planning for retirement. Therefore, there is a greater chance that some members of the workforce will delay retirement as they can't afford to exit the company--e.g., more than three-quarters of near retirees responding to Mercer's 2012 Making Smart Benefit Choices survey say they are either "very" or "fairly concerned" about their readiness for retirement. If employees are delaying retirement, then this spells trouble for employers, including:

* Reduction in...