Retirement: Early Retirement Incentives
Impact Of Eris
Early retirement incentives can be either permanent or temporary, part of an ongoing pension plan or a special offer to workers. In general, ERIs are adopted by firms seeking to reduce their labor forces by increasing retirements rather than resorting to layoffs. ERIs provide workers with monetary incentives to leave the firm. Evidence indicates that older employees respond to these incentives and retire earlier than they would without the ERI. The impact of ERIs on labor costs depends on the generosity of the incentive plan, whether all retiring workers are replaced or the workforce is actually reduced, and whether the organization is able to use monies in overfunded pensions to finance the ERI. Typically, wage and salary costs will decline; however, pension costs including the ERI will increase. The impact on the quality of remaining workers is less certain, and depends on which workers accept the ERI. Given the economic incentives, firms risk losing their best older workers. As a result, companies may attempt to target their ERIs.
ROBERT L. CLARK
See also PENSIONS, FINANCING AND REGULATIONS; PENSIONS, PLAN TYPES AND POLICY APPROACHES; RETIREMENT, DECISION MAKING; RETIREMENT PLANNING; RETIREMENT PLANNING PROGRAMS.
BIBLIOGRAPHY
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Additional topics
- Retirement: Early Retirement Incentives - Employer-provided Retiree Health Insurance
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