One of the biggest retention tools of any employer is some kind of employee retirement plan. According to a report from financial services firm Fidelity Investments, there are five best practices that hospitals and health systems should utilize to make their defined contribution pension plans more competitive, which will ultimately help their employees prepare for retirement.
Fidelity analysts produced the following best practices based on data it has with 600 nonprofit healthcare retirement plans.
1. Increase participation in the retirement program. The average retirement plan participation rate is 66 percent across the entire nonprofit healthcare sector, according to Fidelity, and the rate of active participants is a big determinant of a retirement program's success. Hospitals can increase participation in their programs though automatic enrollment and targeted communications to employees.
2. Set an employee savings rate goal of 10 percent to 15 percent. Putting money away for retirement depends on each employee's individual needs, but hospitals should set this goal for employees so they can get the most out of the program. Fidelity recommends hospital leaders use an annual increase program, which automatically helps employees put aside a capped amount to save. Fidelity analysts found employees in pension plans with AIPs save at a 74 percent higher rate.
3. Strengthen participation asset allocation. According to the report, hospitals should use a target date fund or managed account as a default investment option, which will increase age-based asset allocation.
4. Boost employee engagement and guidance. Employees who are engaged in their defined contribution program are usually happier and better prepared for retirement. Fidelity said hospitals ought to promote one-on-one and self-directed guidance for their staff.
5. Assess employee retirement readiness. Ultimately, every pension plan should put employees in a comfortable position for retirement, and providers must measure if their employees are "retirement ready." Hospitals should provide analytical tools to their employees so employees can evaluate if they are on track with their target retirement savings.
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