Thank you Nick Dobbelbower, PhD, CEBS, DipIEB, GPHR, Vice President and Regional Practice Leader at Lockton Global Benefits for an amazing summary of the do's and don'ts of retirement benefits for employers who have employees outside the U.S. If you have not had a chance to listen to our conversation, use the media player below.
While ERISA and the typical fiduciary responsibility that come with U.S. based retirement plans do not apply to global retirement benefits programs, per my conversation with Nick, that doesn’t mean they are any less complicated! If you know how retirement benefits work in one country outside the United States, its today’s fiduciary fact that you know how retirement benefits work in one country!
For employers who are new to the global retirement benefits world (pun intended!) whether that be through a merger, acquisition, expansion or other reason, the most important thing to do is ensure you have the necessary information and perspective prior to making decisions to alter any programs. I’m not just referring to the legal or factual information about local country rules and any required contributions to social or government programs, but an understanding of what is not written down in the regulations.
Not all countries and their citizens share the same cultural attitudes around retirement as we have developed here in the US. For example, while many people in the US have grown comfortable with or even in some cases demand the ability to control their own retirement investments, outside the US those attitudes are not as prevalent and there is a general preference for guaranteed return or pension type benefits.
Alternatively, an average or even slightly above average employer contribution of 4% in the US might not even meet the minimum required contribution outside the US, or on the other side of the spectrum it could be a completely foreign concept to your global employees as their retirement expectations are based on a certain level of income provided by the company, government or some form of social security.
Finally, while in the U.S. you are generally able to make changes to your 401(k) plan with either a simple employee communication or signature on a plan amendment, outside the US it is not that simple or, it might not even be possible due to local regulations, “union” arrangements with co-determination rules or even acquired rights laws which prohibit changes to retirement contributions unless you have the consent of the employees!
As a global employer, with all of the variations in delivery, design and cultures outside the U.S. relating to retirement, don’t assume what your US based employees find attractive or are provided would be welcomed by your employees outside the US. Similar to preparing for international travel, let’s follow the advice of our US Customs office to avoid today’s folly, know before you go! Do your research, ask questions, know what you can and can’t do and plan ahead so you can enjoy a smooth journey operating retirement benefit plans outside the U.S.!
If you have employees outside the US and have questions about their retirement programs, or you would like to some help coordinating a global retirement benefit strategy, send an email to email@example.com. There is no pressure and no commitment, and who knows, we might be able to help!
Be sure to subscribe to the podcast by searching "401(k) Fridays" on iTunes or your favorite podcast app. We release a new episode every Friday!
Do you want to contribute questions or input on upcoming episodes? A key benefit of being an email subscriber is you will be notified in advance of future episode topics and guests and will have the opportunity to submit questions for me to ask during the interview. Click here to join our growing subscriber community!