Phased Retirement and Flexible Retirement Arrangements

Phased Retirement and Flexible Retirement Arrangements:

Strategies for Retaining Skilled Workers

Phased Retirement and Flexible Retirement Arrangements:

Strategies for Retaining Skilled Workers

Contents

2 Introduction: The Twenty-First Century Workplace--Managing the Human Capital of Workers 50+

3 Phased Retirement: A Strategy for Retaining Skills and Knowledge

4 Factors Influencing the Business Need for Phased Retirement

6 Creating a Phased Retirement Program 10 Marketing a Phased Retirement Program

to Your Employees 12 Challenges to Implementing Phased

Retirement and Proposed Regulatory Solutions 13 Ahead of the Curve: Cutting Edge Employee Programs 14 Conclusion 15 Appendix A: Phased Retirement Considerations 16 Appendix B: Phased Retirement Resources 17 Appendix C: Profiles of Phased Retirement 21 Endnotes

1

Introduction:

The Twenty-First Century Workplace-- Managing the Human Capital of Workers 50+

The American workforce is aging and this trend will reshape the U.S. labor force over the next decade and beyond.

In 2002, 14 percent (or 20.8 million) of the workforce was 55 and older according to the U.S. Bureau of Labor Statistics. This figure is expected to increase to 19 percent (just more than 31 million) by 2012.1 The aging of the workforce has enormous implications for our nation's employers.

As the baby boomer population retires, a dip in the number of younger workers means there may be more jobs than qualified workers to fill them. Some employers are already experiencing a shortage of qualified workers. The projected labor and skills shortages pose pressing questions for employers. What can companies do to remain competitive in today's marketplace? Are there practices and policies that will appeal to workers 50+, whose skills and experience make them a valuable workplace commodity?

Implementing appealing work arrangements that attract and retain workers 50+ may become increasingly important in an organization's bid to survive in today's marketplace. Phased retirement, which allows the employee to reduce work time in his or her current job, is regarded as one strategy to encourage hard-to-replace, experienced workers to postpone leaving the labor force.2

2

Phased Retirement: A Strategy for Retaining Skills and Knowledge

What is Phased Retirement?

Phased retirement has no succinct definition. The term phased retirement often refers to a broad range of flexible retirement arrangements, both informal practices and formal workplace policies, which allow employees approaching normal retirement age to reduce the hours worked or work for their employers in a different capacity after retirement.

The reduction in work hours has several legal and compensation implications that present a barrier for some employers who wish to develop programs to retain their workforce. To address this ambiguity and clarify phased retirement programs, the Internal Revenue Service (IRS) is considering proposed regulations that will establish criteria and guidelines for creating and administering a phased retirement program.

Currently, informal phased retirement arrangements are more commonplace than formal programs. When employers do have a formal written policy in place, it is often flexible and tailored to individual cases.3

What is the difference

between informal

practices and formal

flexible retirement

arrangements?

Some primary characteristics that may distinguish formal flexible retirement arrangements from informal ones include:

? A management structure from which one has to get formal approval;

? Clear eligibility criteria;

? Written materials that are made available to employees at orientation and incorporated into discussions about benefits; and

? Continued access to employer-sponsored benefits.

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