Fitting Synthetic Tenure into the Revolving Door of Talent

Helping employees develop synthetic tenure might just increase their real tenure.
By Zach Ewell Posted on April 15, 2019

Many reports today indicate that employees want to feel valued by their employer, and that comes across in multiple ways, including the benefits they receive. Retirement planning is part of those benefits, though it’s often misunderstood or even ignored by employees. And with many employees leaving one job for another, often after only a few years, establishing a solid 401(k) can seem like an impossible goal.

But building tenure in your 401(k) doesn’t have to coincide with tenure at your job. That’s where synthetic tenure comes in. According to the Retirement Clearinghouse, synthetic tenure is “consistent participation in more than one defined contribution plan across multiple job changes, with no interruptions or breaks in contributions or premature cash-outs, throughout a participant’s time in the workforce.”

The site goes on to say, “Sponsors and plan providers should be asking themselves what they can do to replicate the benefits of consistent participation, while recognizing the highly mobile nature of today’s workforce. Creating synthetic tenure is the key. Sponsors and plan providers should take the lead in implementing programs that remove the frictions associated with account portability and facilitate plan-to-plan roll-ins, thus enabling retirement savings to follow participants as they change jobs. Broadly delivered, these solutions will create synthetic tenure and the positive benefits of consistent participation.”

While synthetic tenure’s main goal is to prevent leakage of retirement funds when an employee switches to another job, it can also come into play if an employee’s salary changes when taking a new job. If someone earns a larger salary at a new company, that person should be encouraged to give more, if not the same percentage, of their contribution to their retirement savings. Although this sounds like a given, it may not dawn on employees to contribute more to future savings when they change jobs.

Why should an employer care what happens to an employee’s retirement after that person leaves the company? It goes back to feeling valued. Employers who care what happens to their staff regardless of whether or not staff members stay with the company demonstrate their interest in those employees beyond just their current contribution to the business. And who knows how that interest will translate—it may even mean increased “real” tenure.

For benefits brokers who are looking to help their clients with talent retention and engagement, synthetic tenure could be a new angle to an old problem. If implemented properly, the majority of the work force can retire with the same benefits and financial security as those who do stay at an employer for their entire working careers.

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