The Great Resignation: Pension Plans Become Resigned to the New Normal
Shareholder Advocate Spring 2022
The Great Resignation. The Great Reassessment. The Great Refresh. There’s no shortage of monikers for the phenomenon that began in 2021 and continues today. Americans first quit work in record numbers in April 2021, according to the U.S. Bureau of Labor Statistics (BLS). They broke that record again in July and August of 2021 before hitting an all-time high of 4.5 million “quits” in November. Defined as voluntary separations initiated by employees, “quits” are an indicator of workers’ willingness or ability to leave jobs, the BLS says. The trend doesn’t appear to be fading: the BLS reported well over 4 million quits in both January and February of this year.
The Great Resignation has affected almost every industry and impacted employers across the country, including pension plans. What does the trend look like in the pension world and what lessons can we learn from peers? We asked colleagues from two different-sized state retirement systems to tell us how their systems have been affected by the Great Resignation, what challenges it has created for them, and how they’ve responded.
Recognize the New Reality
“We really are in a new world,” says Laura Gilson, Chief Legal Counsel at the Arkansas Public Employees Retirement System (APERS), a pension system with 64 employees. Gilson notes that a confluence of events with multifaceted causes has shaped this new reality. The COVID-19 pandemic was clearly a primary impetus, as it caused workers to reflect on their careers and their lives. While the pandemic may have triggered the Great Resignation, however, changes in demographics also play a role, Gilson says. Millennials and Generation Z, who now make up the largest portion of the workforce, are also more than twice as mobile as older employees, according to a late 2021 survey. More than three-quarters of Gen Z workers (ages 18-24) and nearly-two thirds of Millennials (ages 25-40) surveyed said they would soon be hunting for new jobs, compared to only one-third of baby boomers (ages 57-75). Just as there wasn’t a single cause of the Great Resignation, Gilson notes, no single answer can address all the challenges it has created.
Flexibility is Key
Janet Bray, Chief Organizational Excellence Officer at the Teacher Retirement System of Texas (TRS), says flexibility is key for employers. She notes: “It is important for employers to consider work-life balance,” observing that today the need to balance personal needs and business needs is critical. That statement is confirmed by recent studies, including research conducted by Oracle, which found that 88% of workers have changed their definition of “success”—with work-life balance (42%), mental wellness (37%), and workplace flexibility (33%) now top priorities.
In April, TRS was able to onboard the largest new hire class in its history, bringing the total number of TRS employees to 892. The new hires are comprised primarily of call center staff, who now work 100% remotely. The ability to offer remote work has proven key to successfully recruiting new employees.
Gilson reports that APERS has also successfully moved call center staff to remote work and that removing the distractions inherent to a crowded call center room has increased performance. Productivity is tracked in real time by supervisors, who are able to see metrics such as how much time staff spends on calls and how many calls they take, and APERS has found that technology has not impeded the successful transition to remote work.
Both pension plans are careful to note that while flexible work arrangements are becoming the norm, 100% remote working may not be appropriate or available for many positions. Bray says many TRS managers are offering a hybrid work arrangement with 2-3 days a week in the office. Gilson agrees that different positions may require different accommodations when it comes to remote work. For example, when she recruited last year for a part-time attorney position, all applicants expected—indeed, required—that the work would be performed remotely. She notes that the position probably would have been remote, at least temporarily, due to the pandemic, but that the pandemic had shifted power to the applicants. She is currently recruiting for a full-time attorney position and anticipates that the position may not be filled by someone who works 100% remotely.
Work Within the Confines—and Change Them When You Can
Gilson points out that government pension plans often have to work within the confines of the governmental system in which they operate. For example, in her case, remote work was allowed at that time under State of Arkansas government directives. Pension plans may have to be increasingly creative within those limits when recruiting new employees in today’s marketplace. Furthermore, according to Bray, if the opportunity exists to change those limitations, it may well be worth pursuing such efforts.
For example, TRS staff brought to its Board the results from a classification and compensation review that the system had undertaken. The review demonstrated the impact of the Great Reassessment on TRS, including direct costs (such as a 67% increase in costs to pay out annual and overtime leave at separation, difficulty in hiring key positions that require skills that are in high demand, and paying a premium for contract work that could be done at less expense by TRS employees) and indirect costs (increases in workload and burnout). Detailing the pressing need, staff recommended that TRS leave the state classification and compensation plan and adopt a TRS-specific classification structure, which was permitted by state law. At its February meeting, the TRS Board agreed and authorized implementation of a new classification structure.
Bray calls the new classification structure “a powerful tool for TRS” that will make it easier to conduct labor market comparisons, adjust classification system parameters as necessary to reflect the skills needed by the agency, and recruit talent using job titles that make sense in the market. A new salary structure will give TRS the flexibility it needs to respond to market shifts and the ability to vie against businesses who are often competitors for candidates to fill jobs.
Play Your Strong Suit—Mission and Culture
In the end, retirement systems’ most powerful tool may come down to the mission and culture of their organization. Bray notes that nearly every Texan knows someone who has made a significant impact in their lives and who is a member of the TRS system—a teacher, coach, counselor, or family member—and it is this support for the community and desire to be a part of the community that is crucial. Gilson agrees and adds that having a culture that values staff and prioritizes employee well-being in a collaborative environment is critical to today’s workforce and necessary to attract and retain the best and brightest.
That message resonates with Bray, who says that “executive management at TRS values the input of employees.” She notes that the executive director and the deputy executive director promote an open-door policy and regularly hold “employee huddles” that serve as pulse checks around the agency. Another aspect of the organizational culture within TRS is its serious commitment to diversity, equity, and inclusion in the workforce, which includes a high-level director of Diversity, Equity and Inclusion. “If I had known that work could be like this”, Bray says, “I would have been here a lot sooner.” And that’s a valuable lesson for all pension plans as we adapt to the changes wrought by the Great Resignation.