Using a DC Plan to Reward High-Performing Employees

(11/14/18) — 

Some cutting-edge organizations are employing that strategy.

Defined contribution (DC) retirement plans are an often-overlooked component of organizations’ total compensation packages. Traditionally, they are designed and funded based on affordability and market competitiveness, an approach that often results in a DC plan that is simply “average.” However, DC plan design should be regularly reviewed from an HR perspective along with the general compensation program.

In fact, innovative high-growth organizations that want to attract and retain highly skilled and high-performing employees recognize that DC plans can be fine-tuned to align with an organization’s overall compensation, retention and recruitment strategy. Similarly, some large mature organizations that have the data and resources to implement a differentiated plan are doing so. DC plan differentiation can include different match or non-match formulas, vesting schedules and other design modifications.

“DC plans generally cannot discriminate person by person, but they can treat groups of employees differently,” noted Doron Scharf, senior vice president with Sibson. “Consequently, a DC plan can reward roles rather than individual performance by deciding which roles are critical to driving the organization’s long-term competitive advantages.”

According to Jonathan Price, vice president with Sibson, “After identifying strategic roles, analyzing the plan beyond the usual statistics — such as employee savings rates by age, career level, business units and performance — will demonstrate how different groups benefit from the DC plan. That’s something every HR leader should know.”

The latest publication in Sibson Consulting’s series on various aspects of retirement readiness focuses on how employers can use DC plans to reward high-performing employees whose roles are critical to the organization’s success.

To speak with one of our consultants about this strategy, contact Erin Burns.

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The Segal Group (www.segalgroup.net) is a private, employee-owned consulting firm headquartered in New York and with more than 1,000 employees throughout the U.S. and Canada. Members of The Segal Group include Segal Consulting, Sibson Consulting, Segal Select Insurance Services, Inc. and Segal Marco Advisors.

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