So when the Internal Revenue Service came out with guidelines in May around phased retirement, there was little surprise that they were of no help to his company, Marathon Oil Corp.
The rules, which were announced May 22, allow employers with defined-benefit plans to begin paying out benefits to workers who are 62 or older even if they continue to work on a reduced schedule. Previously, the age limit was 65. The goal of the rules is to allow employers to retain these workers longer.
For workers between 55 and 62 years old, employers are supposed to make a "good faith determination" of whether the worker is of "the normal retirement age" for the industry and can begin paying benefits to workers on a reduced schedule.
"This can be highly subjective, and in many cases there is not going to be statistical information to back up with that employer decides," says Jan Jacobson, retirement policy legal counsel at the American Benefits Counsel.
For companies like Houston-based Marathon Oil, where the average age of employees is 46 years old, the regulations didn’t mean a thing, says McDaniel, manager of human resources services. More than 90 percent of Marathon’s retirees take out the pension payments as a lump sum, so "they wouldn’t see this is a positive," he says. "They would say, ‘I don’t want an annuity.’ "
Like a growing number of companies, Marathon is focusing on how to keep retirees in the workforce longer in the face of a pending talent shortage as baby boomers retire. The company’s retirement age is 50 with 10 years of service, and that can pose a challenge since the average tenure at Marathon is 16 years.
Changes in pension laws aren’t going to address this issue for most organizations, expert say, particularly those with only defined-contribution plans.
"The broader issue for employers is how they can keep this organizational knowledge from leaving when the baby boomers retire," says Joel Rich, senior vice president of Sibson Consulting, a division of the Segal Co. "This requires companies to think creatively."
Taking matters into their own hands
Marathon executives began discussing how to retain retirees 10 years ago when it first implemented a part-time work program, McDaniel says.
"We saw that we were losing people to retirement and we knew there was going to be a war for talent and this was how we could differentiate ourselves," he says.
Under the program, employees can work 20 to 34 hours a week and still receive retirement and health care benefits. Marathon has a defined-contribution plan and a defined-benefit plan.
While employees working part time have to pay higher health care premiums than those employees working full time, employees over the age of 50 pay the same in premiums as a full-time worker, McDaniel says.
Turnover at Marathon has dropped in recent years, but McDaniel says it’s hard to attribute retention of retirement-age workers to offering part-time work.
"We know it’s worth the investment because we see good employees staying on," he says.
McDaniel says offering a part-time work option helped Marathon retain Gary Bogner, a payroll manager who has been with Marathon for 32 years.
When Bogner, 53, approached McDaniel last year about scaling down his workload, McDaniel was relieved that he was able to allow him to work 32 hours a week and continue to accrue benefits.
Now Bogner is around to help Marathon with its upgrade of SAP systems that it is conducting currently. "I would be paying some SAP expert $200 to $300 an hour to assist with this and they wouldn’t have the institutional knowledge that Gary has," McDaniel says.
And Bogner is also around to train his replacement, McDaniel says.
"It gives me peace of mind that if she has questions, she can just ask him," he says.
Mentoring programs are another aspect of effective programs to retain retirees and make sure their knowledge is being passed down, experts say.
"It makes people who have been with the company a long time feel good about being able to pass on their knowledge," McDaniel says.
Another early adopter of phased retirement is Mitre Corp., a nonprofit organization that conducts research and designs IT systems for the federal government. Since various government agencies rely on Mitre for its institutional knowledge, keeping that knowledge is crucial, says Bill Albright, director of quality of work life and benefits.
At Mitre, which has 6,300 employees, the average age is 47 and the retirement age is 55 with 10 years of service. The company, which is headquartered in Bedford, Massachusetts, and McLean, Virginia, has offered part-time work for retirement-age workers since the 1980s.
But five years ago, realizing that it needed to do more, Mitre introduced "Reserves at the Ready," a program by which retirees can sign up to be part of a pool of potential workers available for projects or short-term assignments at the company, Albright says.
Initially under the program, retirees could be redeployed anywhere within the organization that made sense. However, during the past few years, Mitre has found that the departments losing the retired workers were the ones that were tapping the reserves, so now reassigned workers go to the departments where they retired, Albright says.
The pool of workers is particularly helpful in assisting younger employees with understanding the context of how to implement certain technology, Albright says.
"We have new staff that have the latest knowledge of a specific technology, but they don’t understand how we apply that technology and that’s where our senior staff can help," he says. Mitre has 300 retirees in the program.
As early adopters of phased retirement, Marathon Oil and Mitre have both realized that one of the challenges of retaining older workers is helping them to work closely with younger workers of different generations.
This is becoming a greater issue for companies as older workers tend to stay employed longer, says Kathleen Lingle, director of the Alliance for Work-Life Progress, an affiliate of WorldatWork.
"One of the new workforce management issues is getting workers from different generations to work together," she says.
To address this issue, Mitre has begun conducting focus groups of younger employees to get a sense of their needs and work demands, Albright says.
"Since we are a mature organization and we still have a small group of younger people, we think this is important to understand younger workers’ needs," he says.
Similarly, Marathon is developing a training program to teach mentors how to mentor. The program is an extension of Marathon’s diversity program, John Farrell, organizational development manager, told attendees at WorldatWork’s annual conference in May.
"We want to teach people how to be quality mentors," he told attendees.
The bottom line is that there is no rule or regulation that will be the panacea for companies trying to retain retirees, experts say.
"Companies need to create a culture around these initiatives," said Donna Klein, president and CEO of Corporate Voices for Working Families, speaking at the WorldatWork conference. "For many companies, that’s going to be a cultural shift."