Why do I get the idea that at times employers approach encouraging financial wellness among employees the way that parents speak to each other in front of their children?
For instance, my Dad often whispered to my Mother in German something approaching, « Don’t talk while the children are around » if a subject came up that he thought wasn’t appropriate dinner table talk. The list of banned topics is too long to mention but I shudder to think today about how naïve I was when I left home. (One example is I thought my Mom invented California onion dip. I was shocked to later learn the recipe was on the back of a package!)
This came to mind as the Society of Actuaries just released updated mortality tables that will be widely used in determining pension plan expense. These tables reflect the fact that people are living longer. And while the longevity improvements are not as dramatic as initially projected, they are still causing concern for pension plan sponsors due to the higher cost of providing lifetime income given longer lifespans.
No doubt the new tables will be the source of many conversations with sponsors over the next several years. But if the past is prologue, I don’t expect sponsors to share much of this discussion with employees. And that is really unfortunate. Because given the shift away from defined benefit (DB) programs, employees are now expected to fund their own lifetime income through defined contribution plans. And as people are likely to live longer, they may need to adjust their savings and investing similar to the way a DB plan sponsor would – through some combination of contributing more, contributing for a longer period, or investing more aggressively in hopes of achieving higher returns. The alternative is facing a funding « crisis » in future years.
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So why isn’t increasing lifespans and its consequences a more common topic when discussing financial wellness and retirement planning? One reason may be is that some sponsors think the issue is just too complicated or difficult to communicate, particularly since there are no easy answers in response. But that is similar to the attitude my parents took to certain dinner table topics and few among us would suggest raising naïve children is a good idea.
Just like our children, employees will go off on their own one day. Wouldn’t it be great if they were better equipped for the real world they will face?