TO LURE AND KEEP TOP TALENT, companies roll out attractive new benefits every year, from subsidies for personal cellphones to repayment of employee student loans. But a small group of Massachusetts firms is sticking with an old and now extremely rare worker incentive: the pension.
Pensions may be the dinosaur of compensation plans, but those local companies that have retained them say they are useful in a competitive labor market, where employers are fighting hard for highly skilled workers. Community banks, nonprofits, and private companies that still fund pensions are increasingly pointing them out as an attractive benefit with unemployment in the state at 3.6 percent, the lowest it has been since 2001. "It's counterprogramming," says Andy Pond, president of the Justice Resource Institute, a Needham nonprofit that provides behavioral health and other social services. "It's something that distinguishes us."
Pond says the nonprofit's 2,500 employees, including those who earn starting salaries of about $14 an hour, qualify for the pension. During the financial crisis, when the organization's funding from public sources threatened to dry up, it did freeze pensions for six months, Pond says. But employees came to him and said they were willing to find other ways to trim expenses rather than give up their pension benefit. "It's a shame that a pension is now seen as an extravagance," Pond says. "But we believe that by being efficient with budget, we can make this work." The Justice Resource Institute also has a 401(k) plan to which employees can contribute, and there's a match from the nonprofit.
A majority of American companies used to offer traditional pensions to add to Social Security to help workers prepare for retirement. Those plans gave workers income for life, based on earnings and years of service. In 1983, nearly 2 out of 3 workers with retirement plans had a pension, but no 401(k) plan. By 2013, that had plummeted to fewer than 1 in 5 workers who depended solely on a pension plan, according to the Boston College Center for Retirement Research.
Most companies have moved to 401(k)s, which are structured so workers contribute to their retirement and bear the risk if the investment market sours. The numbers of workers relying solely on such plans between 1983 and 2013 has multiplied by six — from 12 percent to 71 percent. But experts also warn that Americans have woefully underfunded these 401(k) plans and aren't prepared for retirement.
The rise of 401(k)s also reflects a transformation of worker habits. Pensions are designed to reward employees who remain with a company for long stretches, but those who move around may benefit from the shorter vesting periods of 401(k) plans, says Stephen Blakely, a spokesman for the Washington, D.C.-based Employee Benefit Research Institute. American workers hold about a dozen jobs during their career now, but to get the full benefit of a pension plan, employees must stay with the same company for years and climb up the ladder, according to Blakely.
Pensions are unlikely to return in full force, but their decline may have eased. In its 2016 survey of employers, the Society for Human Resource Management even found a slight uptick in pensions — 25 percent of US organizations said they offered them, versus 21 percent in 2012. The human resources group was uncertain about the causes of the increase and whether it was a long-term trend.
Eastern Bank plans to hold onto its pension plan, along with its 401(k) retirement benefit, says Nancy Huntington Stager, the head of the Boston-based bank's human resources division. As a mutual bank, Eastern doesn't have stockholders to worry about and can ride out some years when the plan may be more expensive to finance, she says.
And when employees come to Stager and to tell her that they've received an offer from another company with a higher salary, she often shows them what their potential retirement benefit will be if they stay at the bank. When workers see how much they would be walking away from because of its pension, they're usually willing to stay, she says. According to Stager, the average tenure of an Eastern employee is 10 years. "The recruiters, they'll tell you, it's hard to get folks out of Eastern Bank," she says.