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A Lump of Coal for Plan Sponsors

By Jack Towarnicky

Naughty or Nice, Makes No Difference – A New Mandate Proposed For You!

It should come as no surprise that DC beltway policy wonks always have another idea on how to spend your money and how you should run your business.The newest proposed federal mandate comes from individuals who have never served as a plan sponsor or worked in human resources.  

Father Knows Best
They know what’s best for your firm and for every American employer of 20 or more workers.  Just ask them – they will tell you.  It’s like a 21st Century version (or reruns of the 1950’s TV show) of Father Knows Best.2

They just know that:

  • Each and every worker wants access to phased retirement, 
  • Employers should be required to implement phased retirement, and
  • Phased retirement will be cost-effective, and self-financing.  

The experts just know that employers should take this leap of faith. Where have you heard that before?3 

A New Legal Right 
The authors recommend workers be given a legal right to phased retirement. To qualify, it seems that an employee would only need to be working for an employer with 20 or more workers – no minimum age, no minimum completed service, no performance/productivity requirements, no other requirement.  They assert older workers should have a preference over younger workers from:

  • Eliminating involuntary termination of older workers (regardless of economic consequence to the employer and remaining workers), 
  • Eliminating employer control over hours of work, wages, benefits and work assignments for older workers, and 
  • Requiring that employers incur higher benefits costs for older workers.  

The write-up lacks details. However, it seems to be a very open-ended proposal. It appears that they believe workers should be able to demand a period of part-time employment lasting several years, during which the worker can choose to remain in her current position and, apparently, choose her work assignments, hours, etc. While not specifically confirmed, it appears that they would also include a mandate that the current rate of pay and benefits be continued.  

New Legal Exposure
Fail to meet a worker’s demands and you will be subject to new legal exposures. Because workers would now be entitled to phased retirement, employers would have to justify any failure to offer the desired form and duration of phased retirement. Specifically, in any EEOC complaint or subsequent litigation, it appears that the employer would be presumed to have engaged in age discrimination unless they could show that the requested period of part-time, phased employment was infeasible and/or involved significant additional expense. Typically, standards like “infeasible” and “significant additional expense” are determined on a “facts and circumstances” basis. Few will be able to meet those standards because the worker would already be in place and would only need to be accommodated.    

A Better Alternative – Remove Existing Legal and Regulatory Barriers 
The authors note a few other policymaking proposals some believe would facilitate phased retirement, changes that affect social security benefits and something the authors call “changing employee benefits to a defined contribution model.”4    

However, if you want private sector employers to adopt formal phased/flexible retirement/employment policies, start by removing the legal and regulatory barriers, the impediments that already exist. That would enable private sector employers/plan sponsors to identify where flexible employment (the other side of the phased retirement coin) can help secure highly competent, highly experienced, highly skilled workers/talent at reasonable costs, thus filling talent needs and improving productivity.  

Today, much of corporate America is searching for talent;the number of job openings continues to exceed the number of unemployed workers.   

Remove the barriers to phased/flexible retirement/employment then sit back and watch as private sector employers innovate and compete for highly skilled workers – regardless of their age.  

1J. Gotbaum, R. Wolfe, Help People Work Longer by Phasing Retirement, Brookings, 12/14/18.  “… What’s missing, however, is the legal right to transition into retirement gradually over several years. ...”  Accessed 12/18/18 at:  
2Father Knows Best, Accessed 12/18/18 at  
3J. Towarnicky, Coincidence is not Correlation; Correlation is Not Causation, 10/16/18, Accessed 12/18/18 at:   Author’s note:  It is not clear what is recommended with respect to adoption of/conversion to a defined contribution model.  Do the authors believe defined benefit models are ubiquitous today and somehow an impediment to phased retirement?  Perhaps they are recommending that the tax code and ERISA be amended to freeze defined benefit pension plan accruals (perhaps concurrent with benefit commencement), so that a person in phased retirement would only have access to participation in a defined contribution plan?  Or, perhaps they are talking about adopting a defined contribution model for active worker medical benefits/coverage?   
4Bureau of Labor Statistics, Job Openings and Labor Turnover Survey Highlights, October 2018, 12/10/18.  “The ratio of unemployed persons per job opening was 0.9 in October 2018, a series low.”  Accessed 12/18/18 at: 

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