“I Have a Pension? I Didn’t Realize That.”

May 17, 2011

Less than 1 in 5 workers today have a traditional pension these days, so those that do have a pension should be very appreciative, right?  Well, not if they aren’t even aware they have a pension!  I meet with thousands of employees each year who are fortunate enough to work for companies that still offer a company-funded pension, yet they don’t even know how lucky they are and don’t realize they are accruing a pension benefit for retirement by just coming in to work every day.  I’m sure when they were hired, their new employee handbook had details about the pension, and they may even get a yearly statement mailed to them, but do they really understand what it means to them?

Most financial education revolves around the 401(k), since this is where the employee needs to make an active decision regarding how much to save and where to invest their nest egg.  What is often overlooked is the pension component, because the typical traditional pension plan does not require any action or decisions on the part of the employee until the worker actually retires.  In some cases, a company may have different plan vendors for the pension and 401(k), so when the 401(k) plan provider comes out to do annual enrollment meetings, the pension may not be part of that presentation.

Here are some suggestions to make sure your workforce IS familiar with the company pension:

  • Send a “congratulations” letter when the employee hits the pension vesting milestone.
  • Incorporate a holistic approach to retirement plan communications that includes both the defined benefit pension and the defined contribution 401(k) plans as a combined retirement solution, and also add any other group benefits – such as LTC, retiree medical, retiree life, etc.
  • Encourage employees to run an online pension estimate (if available) by offering an incentive, which could be a random drawing for a neat prize or even wellness credits.  Because financial health is a critical source of overall wellness, there should be a financial component to your wellness program.