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National Association of Counties • Washington, D.C.      Vol. 34, No. 16 • September 2, 2002

The H.R. Doctor Is In


So, what does it mean to retire? We used to think we knew. When we reached 65 years of age, we stopped working, we collected a pension and we moved to Florida. For some of us, there was a mandatory age to retire.

Later, the idea of waiting six decades to retire began to give way in the face of changing demographics and soaring investment returns to the fashionable idea of early retirement. Why wait until I am 65? Why don’t I retire at 55 or 62? I can work part time while collecting my pension. I can open a new small business. I can spend hours per day on the golf course, traveling, playing the clarinet or working in support of community charities.

Now, however, we seem to be rethinking these concepts in the face of investment losses, the massive costs of health care and prescription drugs as we age, and an additional, even more important consideration. That is, the false idea that we can simply and suddenly stop working without radically changing the way we live, behave and think. It’s not healthy for mind, body or spirit. It is true that many people dream of not spending any more precious time at a job they may not really enjoy.

For those who have no hobby and who live to work, retirement can actually be harmful to their health and behavior. The job for such people is a synonym for their personal identity and psychological anchor of well-being. Leaving work without a personal strategic plan for the future is a big mistake.

Every business and government leader extols the virtue of strategic planning and contingency planning for the future. This is true even if our deeds, in terms of support for strategic and proactive administration, don’t match the rhetoric. So, why don’t we learn a lesson about the value of strategic planning for personal life as well?

The HR Doctor was recently approached by a 35-year veteran employee who came into the office to fill out papers for retirement which was occurring a month later. In the course of congratulating him and looking back at what life was like in the agency three and a half decades ago, he was asked if he had any questions. He said he had only one, “Is there any way I can defer payment of income taxes and save money for my retirement?”

Despite all the education and information shared with agency employees multiple times during the year about 457 plans, about flexible spending accounts for health care, about credit union savings programs, etc., etc., the sad reality is that some people smell the fertilizer instead of smelling the roses. When a wake-up call such as a decision to retire is made without advance planning, the result is very likely to be a shattering of the hopes and dreams that led to the decision to retire in the first place.

The HR Doctor has recommendations for both employees and public agencies on the question of the redefined world of retirement.

First, for the employee, the time to begin active and committed retirement planning is the first day on the job, not one month before retirement. More than ever before, a successful and secure retirement from a city or county should not rely entirely upon a government pension plan alone or even of its combination with Social Security.

It should also include the result of years of thoughtful and diversified investments, especially deferred compensation. Begin immediately.

Wait, I heard that! What do you mean you cannot afford to put money into deferred comp? You are wrong, you cannot afford not to! Don’t make a gigantic mistake. Start immediately and keep going, adding to the money you invest automatically through payroll deduction and by sharing some of your profits with your own savings account every time you receive a pay increase or a promotion.

However, dear colleague, retirement is far, far more than a financial transaction. Look out for your personal health. Take to heart, literally, five bits of the HR Doctor’s advice, offered sincerely and based upon years of experience with public health care and the following of health trends.

First, stop smoking! Better yet, don’t even start. It’s destructive, it’s dirty and it smells. Second, never enter a vehicle without wearing your seat belt. Make it a family rule. No exceptions. Make it automatic.

Three, eat well and enjoy meals but mix the foods you eat so that the vegetables and the fruits have at least as great a role in your life as the meat and the grease!

Be moderate in how much you eat so that you can be on the lean side of the statistic that 50 percent of the American population is obese. The one exception, of course, involves chocolate, which should be ingested regularly and thoroughly enjoyed!

Next comes making your doctor your friend. Regular check ups and a personal commitment to learn about medicine and health are important components to success in retirement living and in living period. The HR Doctor has seen the impact on a local government budget, not to mention on human health, resulting from the lack of preventive care and basic health information.

Also important: practice what my colleague Mark Gorkin, aka The Stress Doc, calls “safe stress.” Apply a sense of humor to your life. Enjoy diverse, outside interests and get involved in community affairs and continuous personal learning. Altogether, this package of financial and personal health, humor and involvement is the best advice the HR Doctor can offer you. I even waived any co-pays or deductibles!

What about the employer? The role here is extremely important and its significance is growing. Create benefit policies and processes which allow the employees to take full advantage of tax-deferred savings opportunities. Continually and repeatedly educate employees and share information about the power and value of a 457 deferred compensation program. Some public agencies use a defined contribution savings programs, called the 401(a), some others, such as some public hospitals and schools, may have another form of tax-deferred savings called a 403(b) program. Whatever programs you have for tax-deferred saving, make sure every employee is thoroughly educated about them.

There are currently two other powerful tools available on a tax-deferred basis. The employer should help ensure that these two programs are also the subjects of brain implants into the knowledge base of every employee.

First is a Section 125 flexible spending program for health care reimbursement or dependent care cost reimbursement. And the second is post-employment health savings programs. In one such program, offered by Nationwide Retirement, a partner of NACo, tax-deferred savings accounts may be used for health care costs after employment. However, the employer pays for the program.

Another similar program is also emerging in which the employee can make the deposits. In either case, thinking about life after retirement and preparing for it is something every employer should facilitate through learning and encouraging. Start the process immediately upon hire. Include it in new employment orientations. Consider automatically opening a new deferred compensation account for the new employee with a small deposit in her name, perhaps to take effect when the employee successfully completes probation. Not only will this help make the probationary period more meaningful, but it will also be a jump-start provided by and encouraged by the employer for career-long savings through deferred compensation.

Employers should be champions for health maintenance — introduce health risks assessment and disease management programs to help employees with chronic illnesses such as asthma and diabetes. Have a strong and accessible employee assistance program available to employees and their family, and to former employees who leave the organization for a reasonable period after departure, such as 18 months. The cost of this enhancement is relatively small compared to the return in terms of healthier employees and a reduction in time paid for not working, such as sick leave or disability payment.

Make sure there is an active safety and loss prevention program at work, with an ergonomics component to attack problems such as carpel tunnel syndrome and disabled accessibility before they become liabilities. Also consider a life stage flexible cafeteria benefit model in which the employee configures a personal benefit plan based on the choices made available by the employer, and an allowance determined by the organization or, if appropriate, through collective bargaining.

Having an array of benefits in the cafeteria plan, such as long-term care insurance and disability insurance, allows employees with different family circumstances and different ages to create a more effective program to meet their needs.

All employers’ interests are served by retaining strong performing employees who have a sense of organizational history. Among the ways to accomplish this goal will be an increasing focus on ways to help star employees balance their personal goals with continuing contributions to the agency.

Developing a phased retirement program is one such way. In this approach, the employee works part time and collects a partial pension. Key benefits, such as health insurance or long-term care coverage continue, often at employer expense. This phased model can be for a limited time, such as one year. During this time, the employee can be a mentor to a successor and can convert institutional memory from the floppy disk of personal memory to the hard drive of written policy.

Every agency has very key personnel, well respected and a go-to person for problems. Imagine what would happen if this person suddenly chose to retire. Is succession planning a reality in your agency or only a dream? Smooth conduct of the public’s business demands that responsible employers take steps to make smooth transitions possible.

So, what’s the bottom line? Retirement has taken on new meanings for employees and for the public agency. Neither are as well prepared for these changes as they should be. Your assignment? Plan and act now for your own retirement to be bright and for your legacy in the agency to be a positive one!

The HR Doctor wishes you the best in your planning and in your living!

All the best,
Phil Rosenberg
The HR Doctor •