Pension Promises

Younger workers look for employers with DB plans
Reported by Tara Cantore

In 2011, younger workers increasingly said they accepted a job offer from a company because it offered a defined benefit (DB) pension plan.

According to the Retirement Attitudes Survey by Towers Watson, in 2009 28% of workers younger than age 40 said a defined benefit plan was the reason for accepting their job. This number more than doubled in 2011, to 63%. This compares with a nine percentage point gain (19% to 28%) for younger employees at organizations that offer only a defined contribution (DC) plan.

Defined benefit retirement plans have also become strong retention tools among this demographic. Nearly three-fourths (72%) of younger employees cite their retirement plan as a strong incentive to stay with their employer—nearly double the percentage (37%) in 2009 and twice the retention value reported by younger workers whose employers offer only a defined contribution plan.

David Speier, a senior retirement consultant at Towers Watson, credits two contributing factors. “The combination of a slow economic recovery and [a greater number of] older employees delaying retirement is making it increasingly difficult for younger employees to find jobs or advance in their careers. “Young workers are clearly giving much more weight toward both employer retirement and health care benefits when making career and employment decisions.”

The survey found that the number of defined benefit plan participants hired within the last two years who said the retirement program was an important factor in deciding to join their employer jumped from 27% in 2009 to 70% in 2011. At employers with defined benefit plans, employees hired within the past two to five years were more than 3.5 times as likely to say their retirement program strongly affected their employer choice decision than those hired before 2007 (67% versus 18%). Meanwhile, defined contribution plans have only slightly improved as attraction tools. At companies just offering just that type of plan, only 19% of those hired during the same time span said the retirement program influenced their employer choice.

The Towers Watson survey was conducted last June and July and includes responses from 9,218 full-time U.S. employees at nongovernment organizations with 1,000 or more employees.