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Retirement Incentive Pay Outs
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Retirement Incentive Pay Outs
Exchange ideas about health plans, retirement, work/life benefits, and employee assistance.
My employer is looking at some significant budgeting issues for 2012. We'd like to consider offering pay outs to employees who might then be a better position to retire and therefore avoid termination
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Forums » Topic Forums » Benefits & Compensation » Retirement Incentive Pay Outs
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Retirement Incentive Pay Outs
posted at 7/28/2011 10:10 AM EDT
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Posts: 4
First: 7/7/2010 Last: 7/29/2011 |
My employer is looking at some significant budgeting issues for 2012. We'd like to consider offering pay outs to employees who might then be a better position to retire and therefore avoid terminations. Does anyone have experience with doing something like this and could offer suggestions, insight, go-to tools?
Thank you in advance! |
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Retirement Incentive Pay Outs
posted at 7/28/2011 11:20 AM EDT
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Posts: 2442
First: 2/12/2000 Last: 9/14/2011 |
A couple of questions/omments.
1. What is your budget/headcount target? How much money as a percentage of payroll are you trying to reduce? 2. What exactly is your target group and why would they want to leave on their own? 3. Will this be a "voluntary" program or an involuntary program? If you offer voluntary and do not have enough people that elect to leave will you then have an involuntary one? If yes, make sure everybody understands that the Involuntary program will be less generous. Keep in mind these points: 1. If you are targeting older workers it will be very, very difficult for them to find a new job in the current environment. Therefore for them to leave they would need a good bit of severance pay and outplacement assistance. 2. If you do not offer retiree medical, they will not have health insurance beyond their Cobra period. Also Cobra is quite expensive since the employee pays the full premium. Another disincentive. Consider continuing to pay for the employer premium equivalence when they go on Cobra 3. These will be very significant one time charges that I am sure are not budgeted for CY11. Any negative impact as a result? If you decide you are still going to proceed, I would go and talk to some of the people in the target group and "sound" them out regarding their expectations. This will give you an early indication of how tough it will be. I am assuming that this is a non union group. |
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Retirement Incentive Pay Outs
posted at 7/29/2011 3:52 AM EDT
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Posts: 4
First: 7/7/2010 Last: 7/29/2011 |
Thank you very much for your quick post. I appreciate your suggetions and questions.
We're a government entity so each department is tasked with reducing their budget approximately 8%. For smaller groups with small budgets the only way to achieve this is to reduce staff. Our HR Dept has been asked to investigate this idea and provide guidance. The target group would be those who may be on the verge of retirment and qualify for retirement pension benefits and our early retirement incentive plan that is already in place - it gives employees the choice for health insurance or monthly income benefit until Medicare eligible. Thoughts were a financial payout would be less expenseive than paying unemployment claims. We've requested a report of employees that might fall into target group so we'll find out how many might be eligible. This woulc be a voluntary program. If it did not result in sufficient savings, other considerations would have to be made by the department - layoffs, cutting services, etc. We are a non-union group. |
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Retirement Incentive Pay Outs
posted at 7/29/2011 9:42 AM EDT
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Posts: 2146
First: 2/15/2006 Last: 9/14/2011 |
Be very very careful on targetting any one group due to age. That runs afoul of the ADEA. Most I have seen offer some type of early retirement bonus.
And I am not so sure that this early retirement payment would take away Unemployment claims. It is still the employer's choice to get rid of the employee. Because the employee could argue had they not taken the early retirement, that they would have been fired anyway....the early retirement just being a pretense. At least in my state, if the employee signs any type of Release of Claims/Waiver of Rights, that severance payment is attributed to the employer paying for that signature NOT for severance wage benefits. |
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Retirement Incentive Pay Outs
posted at 7/29/2011 9:49 AM EDT
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Posts: 2146
First: 2/15/2006 Last: 9/14/2011 |
ONE NOTE: "Severance Agreements:
An individual may waive rights or claims based on the ADEA at the employer's request. This is usually done as party of a severance agreement or reduction in force. Valid waiver only occurs if the following conditions are met: The waiver is in writing and is understandable; ADEA rights or claims are specifically addressed; Claims or rights arising in the future may not be waived, only claims that have arisen prior to the signing of a waiver; The waiver must be in exchange for valuable consideration; Consultation with an attorney before signing the waiver must be recommended in writing; and The employer must provide at least a twenty-one (21) day period to consider the waiver before signing it and a seven (7) day period to revoke it after signing. If the waiver is signed in connection with employment termination or exit incentive programs, other, more extensive requirements apply. " http://www.tennesseeemploymentlawcenter.com/adea.html ANOTHER NOTE: "Additional information is required depending on the specific circumstance of the termination. For example, additional requirements are necessary in the event of a massive layoff or when early retirement programs are implemented. When a retirement or exit incentive program is proposed to a group of employees, the waiver must advise of the group covered by the proposed program, the eligibility requirements for the program, the job titles and ages of the employees who are and are not eligible for the program, and any time limits for participation in the program. " http://www.shipso.com/adea_owbpa.htm I strongly suggest your HR seek outside legal counsel before deciding how to go about implementing an early retirement program. |
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