A Guide to Understanding Retirement Rewards and Benefits with Fortune 500 References

U.S. Bureau of Labour Statistics¹ has shown that 73% of working professionals accessed retirement rewards and benefits. Moreover, 56% of the workers participated in the plans. The research also revealed that up to 77% of workers with access to employer-sponsored benefits, chose to participate in the program, increasing the take-up rate. These strikingly high numbers underscore the importance of financial security and the significance of it as an active element for engagement. 

In fact, an Employee Benefit Research Institute report² has shown that 64% of workers feel somewhat confident about having enough money in retirement, while 18% are confident in their retirement structure. Compared to this, the retirees, 75% in exact, have showcased confidence in their retirement finances. This blog will cover the significance of retirement rewards and benefits by accentuating the impacts the big whizzes had with their defined benefits. 

What are retirement rewards? 

Retirement rewards, namely the various incentives, benefits, or positive outcomes, shape the post-employment experience to recognize an employee's dedicated service to an organization. The retirement rewards come with a well-managed and planned retirement to provide financial security and stability among the employees during their post-employment phase.

The rewards, financial and non-financial, serve a dual purpose. They acknowledge and celebrate an employee's years of service and contributions to the organization. Meanwhile, these rewards and benefits provide a financial cushion for the employee's transition into retirement. If used as an organizational tool, retirement rewards have the following benefits:

• Employee engagement since retirement benefits can keep an employee engaged.  
• Perfectly structured retirement benefits can be used as a strong recruitment and retention tool to make employees stay with the employer. 
• Improve the employees' retirement preparedness by making them financially literate.  
• Harbor a sense of trust between employees and employers. 
• A thoughtfully crafted retirement plan can positively impact employee morale.  
• Increase the productivity of employees nearing retirement. 
• A handsomely distributed retirement plan increases job satisfaction.

Let's quantify the significance of retirement rewards. 

The statistics highlighted the importance of retirement benefits and rewards for employee retention, and engagement. Psychologically, financial security can give an employee the sense of stability that one looks for after retirement.

So, it goes without saying that retirement incentives, benefits, and rewards can create an impact on employees' productivity. So, let's cover the types of employee retirement rewards and benefits you can avail to be stress-free upon retirement. 

Types of retirement plans

Retirement plans are placed in an organization to provide financial wellness to an employee. One reason behind this is the 'great resignation'. While fair remuneration is one of the attractive reasons for employees to choose over a company, one cannot go over the fact that not having a good retirement plan in place prompted many to serve in their resignation. A Zippia study has shown that 62% of employees consider the availability of a retirement plan while switching to another job. 

Recognizing the fact that the majority of the employees are opting for a safety net backed by financial security, the government introduced The Secure Act 2.0. Also known as the 401(k) bill, this makes it mandatory for businesses with 10 or more employees to offer a retirement solution to their employees. With such solutions put in place to assure safety, let us go through the types of retirement plans you need to be aware of to avail of the one that suits your requirements the most. 

1. Defined benefit plans 

This retirement benefit plan is calculated based on multiple factors, including salary and service. The plans are protected by federal insurance provided through the Pension Benefit Guaranty Corporation or PBGC. 

2. Defined contribution plans

Such types of retirement plans do not promise a specific number of benefits at retirement. However, the contributions are invested on the employee's behalf on their account. The value of the account may vary based on the investment gains or losses. Some examples of defined contribution plans include 403(b) plans, 401(k) plans, employee stock ownership plans, and profit-sharing plans.

With many acts, and programs in place, literacy about an employer's retirement plan is a must. In fact, 25% of employees, revealed the PwC Employee Wellness Survey, have shared that financial wellness benefits are the most desirable perk offered by employers. Moreover, these benefits should include access to educational training programs.  

Types of employee retirement rewards 

There are several ways employers can help their employees prepare for a secure retirement, beyond just offering a basic savings plan. Here's a breakdown of some common types of employee retirement rewards:

• Matching contributions: This is where your employer contributes additional money to your retirement savings account, often based on a percentage of your own contributions. It's essentially free money to boost your retirement nest egg. 
• Profit-sharing programs: In some companies, a portion of the company's profits are shared with employees, often deposited into their retirement accounts. This ties your retirement savings directly to the company's success. 
• Vesting schedules for company stock options: If your employer offers stock options as part of your compensation, there's usually a vesting period. This means you have to work for a certain amount of time before you officially own the stock. A clear vesting schedule helps you understand when these options become part of your retirement portfolio. 
• Retirement wellness programs: These programs offer educational resources and guidance to help employees make informed decisions about their retirement savings. They can cover topics like investment strategies, budgeting for retirement, and estimating future needs. 
• Recognition programs tied to retirement savings goals: Some companies acknowledge and celebrate employees who reach specific milestones in their retirement savings journey. This can be a great way to publicly reinforce the importance of saving for the future. 

Case studies 

Let’s dissect the retirement plans of two Fortune 500 companies to understand their approach toward securing their employees’ financial well-being. 

1. Allstate allocates $103 million for Allstate pension plan

Allstate, a leading American insurance corporation, was founded in 1931 in Illinois and committed to providing comprehensive insurance coverage and financial planning tools to its customers. So, a company with a proven track record of ensuring its customers' financial security can be expected to extend the same commitment to its employees. This Fortune 500 company is one of the only 21 companies that offers a pension plan to its employees. Let us analyze how that fared for Allstate.  

Allstate retirement rewards and benefits overview: 

Allstate offers a retirement rewards and benefits package to assist its employees in planning for a secure financial future. To do so, they offer:

• 401(k) Savings Plan: Allstate matches 4% of employee contributions to an employee's contribution of at least 6% of their compensation. The vesting period is two years, and full vesting is achieved after three years. 
• Cash balance pension plan: Employees can enrol in this plan after their first year of service. They become fully vested after three years. 
• Allstate retirement plan: This plan is for regular full-time employees, regular part-time employees, and certain employee agents of participating employers. The benefits and rewards for this plan depend on the employee's level of compensation and length of service. Moreover, the plan was placed to provide a total retirement income. What they do is combine this benefit with other sources of retirement income, such as the Allstate 401(k) Savings Plan, Social Security, personal savings, and other assets to provide 360-degree financial security post-retirement.  
• Early retirement benefit: Another instalment in their myriads of well-structured retirement programs is the early retirement plan. Allstate employers are eligible for an early retirement benefit if they are 55 years old or over with at least 20 years of continuous service. They qualify for this plan if they are age 60 or over. However, they must elect their payment start date.

These lengthy yet carefully aligned retirement benefits are designed to help employees plan for their financial future and achieve a comfortable retirement. 

How did they fare? 

In addition to providing a thorough pension plan, Allstate offers a finance coach, and resources 24/7 to get their employees up to date regarding their financial well-being, so far, Allstate has:

• Contributed $23 million and $24 million to the retirement plans in 2020 and 2019, respectively. 
• Allowed their participants to contribute $14 million and $15 million in 2020 and 2019, respectively. 
• Contributed to the Allstate Plan specifically was $103 million, $93 million, and $89 million in 2020, 2019, and 2018, respectively.

Lastly, the future benefit payments expected to be paid in the next 5 years include 726 million, 27 million in 2024, 694 million, 26 million in 2025, and 2,320 million, 98 million within 2026-2030, as retirement benefits and post-retirement costs respectively. Allstate has 53,400 employees all over the world, and has kept them engaged through their comprehensive, yet phenomenally structured benefits, including their retirement plans.

2. Exxon Mobil places savings plans with a contribution of 7% 

Exxon Mobil, founded in 1999, is a leading American gas and oil corporation. This Fortune 500 company is one of the leading organizations with a diverse portfolio of energy and petrochemical products. As of 2023, Exxon Mobil has 61,500 employees, with 62% of the employees reporting that they are happy to go back to work.  

Exxon has managed to keep the engagement level high by presenting its employees with exciting rewards, benefits, and a 'pay-per-performance' philosophy. ExxonMobil offers competitive compensation and benefits packages to attract and retain top talent for the long term. Their belief is to offer handsome benefits throughout their career and into retirement.

Exxon Mobil retirement rewards and benefits 

With a clear intention to be fair and objective, their compensation system is built on the idea that pay should reflect performance, thus 'pay-per-performance'. This approach helps ensure fairness and consistency within our company. In addition to compensation, Exxon Mobil offers a variety of benefits and programs to support employees after they retire. These programs, which include savings and pension plans, help Exxon employees and their families achieve financial security. Their plan includes:

• ExxonMobil savings plan: Employees can elect to defer 20% of their salary into a retirement savings account on a pre-tax or Roth basis. Exxon contributes an additional 7% of the employee's salary to this plan, which becomes accessible after three years of service. The maximum annual employee contribution is aligned with the Internal Revenue Service (IRS) limit, currently $23,000, with an increased limit of $30,500 for employees aged 50 or over. 
• ExxonMobil pension plan: This plan offers a monthly retirement benefit for employees at no cost. Employees become vested in the pension plan after five years of service. To be eligible for retirement benefits, employees must be at least 55 years old and have at least 15 years of service. The benefit amount is calculated based on a formula considering years of service, average salary, and Social Security benefits. This is applicable up to a maximum salary of $275,000 in 2024. 
• Supplemental pension plan (SPP) and Additional payments plan (APP): These plans provide additional retirement benefits for employees earning above the IRS compensation limit, which is $275,000 in 2024 and based on years of service and final incentive compensation, respectively. 

How did they fare?

According to their 2023 FY report, Exxon Mobil has successfully:

• A non-service pension and postretirement benefit expense of $0.7 million. This expense is not directly related to the cost of providing employee services.  
• Allocated $217 million as the total cost associated with non-service pension and postretirement benefits under GAAP. 
• Addressed the future payments for postretirement benefits of $10,494 million.

The importance of retirement rewards for employees to drive engagement: 

Retirement rewards and benefits are an organizational tool that can improve retention rate and improve engagement. Let's take the two Fortune 500 companies, Exxon, and Allstate as examples. From these companies, we have learned to:

• Place comprehensive retirement benefit plans, even if no one else is doing it. Allstate pension plan is something that has only been adopted by 21 companies.  
• Have structured and detailed retirement benefits and rewards in place. Allstate and Exxon, both companies laid out a detailed retirement plan to improve the financial well-being of their employees, throughout their career, and after their retirement.  
• Design strong retirement programs to showcase the company's commitment to its employees' future. The Allstate Pension Plan and Exxon savings plan are unique to the respective employees. However, both programs aim to deliver parity and security.  
• Establish a positive work culture. Allstate has opened the option of taking early retirement if opted.  
• Have an attractive retirement plan with major perks. Allstate matches 4% of employee contributions while Exxon matches 7% of the employees' contributions. 

Conclusion 

By simply matching the contributions to retirement savings plans, companies like Exxon Mobil and Allstate have created retirement plans that focus on financial wellness, and literacy. To celebrate the milestone, integrate Empuls. Empuls can help with setting up retirement rewards for an employee's years of service. With Empuls, you can:

• Offer service rewards to employees to recognize and celebrate employees' years of service, and milestones. 
• Milestone recognition to celebrate retirement with personalized and automated messages, rewards, and gifts. 
• Total rewards with stock options, profit sharing, retirement plans, and health care benefits. 

Citations 

1. U.S. Bureau of Labor Statistics. (n.d.). 73 percent of civilian workers had access to retirement benefits in 2023. U.S. Bureau of Labor Statistics. https://www.bls.gov/opub/ted/2023/73-percent-of-civilian-workers-had-access-to-retirement-benefits-in-2023.htm  

2. Greenwald Research & Employee Benefit Research Institute. (2023). 2023 Retirement Confidence Survey (By Employee Benefit Research Institute & Greenwald Research). https://www.ebri.org/docs/default-source/rcs/2023-rcs/2023-rcs-short-report.pdf?sfvrsn=7c8d392f_6