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May 09, 2006
Study Links Employee Turnover, Retirement Plan Participation Rates
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ew study appears to confirm what has long been suspected: Turnover among employees who participate in their company's voluntary retirement plan is lower than among employees who do not.

The study by Charles W. Cammack Associates, Inc. (CWCA) was based on 2004 compliance data collected from more than 85 employers covering more than 115,000 employees. Researchers found that the percentage of nonparticipating employees who terminated employment was more than double the percentage of those who chose to participate in voluntary retirement plans (25 percent to 10 percent, respectively).

CWCA vice president Michael A. Webb, Vice President cautioned against thinking that simply increasing voluntary retirement plan participation will automatically increase employee retention levels.

"Other studies have demonstrated that a variety of factors influence an employee's decision to leave his/her employer, so the link that we have identified between voluntary retirement plan participation and employee turnover is not likely to be causal," Webb said. "However, the lack of retirement plan (and other benefit participation) may possibly be a symptom of a lack of employee engagement with his/her employer, which may explain the increased turnover among non-participants."

CWCA plans to replicate its study using 2005 compliance testing data to determine if year-over-year changes in participation rates affect turnover. "If future studies demonstrate increased participation rates are connected to decreased turnover percentages employers might wish to more closely examine the retirement plan participation/turnover link," Webb said, adding that, in the interim, employers might want to track their own data to determine if there appears to be a positive correlation between retirement plan participation and reduced turnover rates.

Charles W. Cammack Associates, Inc. is a full-service employee benefits and human resources consulting firm with offices in New York and New Jersey.

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