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The Practical Employer

How Can You Transition Older Workers if You Can’t Force Them to Retire?

With the exception of a few limited circumstances, mandatory retirement ages are about as close to a slam-dunk case of illegal age discrimination you can find.

A Michigan oral surgery practice has agreed to pay $47,000 to settle an age discrimination lawsuit filed by the EEOC. The agency alleged that it violated the ADEA by maintaining a policy that required employees to retire at at 65. The lawsuit stemmed from the firing of an employee four days after her 65th birthday.

According to Kenneth Bird, regional attorney for the EEOC’s Indianapolis District Office, “December 2017 marked the 50th anniversary of the ADEA, Five decades later, the EEOC remains committed to vigorously enforcing that all-important law. Private employers need to understand that mandatory retirement policies run afoul of the ADEA and will be met with challenge.”

He’s absolutely correct.

It’s still a fairly popular misconception that businesses can force employees to retire at a certain age.

In truth, with the exception of a few limited circumstances, mandatory retirement ages are about as close to a slam-dunk case of illegal age discrimination you can find. The exceptions permit — but do not require — mandatory retirement:

  • at age 65 of executives or other employees in high, policy-making positions.
  • at age 55 for publicly employed firefighters and law enforcement officers.
Forcing an employee out is the same as requiring an employee to retire. While lessening duties and responsibilities, demotions and reductions in pay could cause an older employee to retire, it could also cause that same employee to claim a constructive discharge.
Yet companies do need to plan for their futures. This planning is becoming more difficult as more employees are working older. According to the 18th Annual Retirement Survey (conducted by the Transamerica Center for Retirement Studies):
  • 53 percent expect to retire after age 65 or do not plan to retire at all.
  • 56 percent plan to work at least part-time in retirement.
  • Of those employee who plan to work past age 65, more than three-fourths are motivated by financial reasons or health reasons (such as “being active,” and “keeping my brain alert”).
Despite the aging nature of our workforce, many employers are unprepared, ill equipped or unwilling to accommodate its needs. Indeed, 38 percent of baby boomers report that their employers do absolutely nothing to help facilitate their transition to retirement.

What steps can employers take to help facilitate the transition of aging employees out of the workplace, without committing age discrimination? Consider the following four suggestions, culled from the tips offered by the Transamerica Center for Retirement Studies):

    1. Help with retirement planning. Offer a retirement plan (to include part-time workers, if feasible). Consider auto-enrolling your employees to increase participation, and escalating contribution rates to increase salary deferrals. Structure matching contributions to promote higher salary deferrals (i.e., 50 percent of the first six percent instead of 100 percent of the first three percent).
    2. Educate your employees about saving and investing. Any 401(k) provider worthy of your (and your employees’) investment will help with this task. Offer guidance and information on how to calculate a retirement savings goal and on the basic principles of saving and investing. Most importantly, ensure that your employees understand that taking loans and premature withdrawals from their retirement accounts is an absolute sin.
    3. Offer benefits to enhance employees’ long-term financial security. Consider disability insurance, life insurance, employee assistance programs, workplace wellness and financial wellness programs, long-term care, and other insurances, all of which can help protect employees’ overall financial security as they age.
    4. Create employment opportunities to assist employees to phase into retirement. Consider offering voluntary flexible work schedules and arrangements, transitions from full-time to part-time, and shifts of aging employees to work in different capacities
And, most critically, get rid of your mandatory retirement policy.
Jon Hyman is a partner at Meyers, Roman, Friedberg & Lewis in Cleveland. Comment below or email editors@workforce.com. Follow Hyman’s blog at Workforce.com/PracticalEmployer.