40 Years of Actuarial Work -- Nothing but Change, Change, Change

Forty years ago this morning, I walked into an office with no idea what I would be doing. I was starting my career as an actuary -- technically an actuarial student in the parlance of Hewitt Associates, a grand firm that no longer exists. I was one of five new Associates in the Rowayton office -- also known as The Mansion and as the Eastern Center -- and three of us were budding actuaries. I was proud of my two freshly passed exams, but then learned that my two fellow budding actuaries both had Masters Degrees in Actuarial Science and had passed four exams apiece. Oh well.

After orientation and paperwork, I was assigned my first tasks to perform at my desk. My desk was barren. There was no computer. In fact, there were no computers in the entire office, but there were a few mainframe terminals on a different floor of The Mansion from which we could access the central system. 

My first task was to complete a Form 5302 for a defined benefit plan. I wondered what a 5302 was and what a defined benefit plan was. No idea about either. I learned. After completing that, I was asked to calculate actuarial equivalence factors for modified cash refund annuities. Without Excel (or Lotus 1-2-3 which we used before we used Excel). 

On day 2, I began to learn ValCalc, the homegrown mainframe software program that we used to perform actuarial valuations. In addition to learning the coding, the most important part was that unless there was a good reason not to, I had to run all my ValCalcs overnight. The daytime charges were simply too high.

Actuarial valuations were different then. The Enrolled Actuary -- something I would become -- chose all of the actuarial assumptions and the actuarial cost method and asset valuation method which in combination were the funding method. There were lots of funny rules to learn, but nothing compared to where we are today. I learned that each plan had its own vesting schedule and there were generally four choices:

• 10-year cliff
• 5-15 graded
• 4/40 vesting
• class year vesting

While I could still tell you the details of each, don't ask. 

I only had to do one valuation for each plan. it was to determine the funding requirements for the plan. No separate valuation was needed for accounting as we followed APB 8 (Accounting Principles Bulletin if you care) under which a company simply expensed what it funded. It seemed so common-sense; the accounting profession disagreed.

Labor Day came early that year and right after it, my work life changed. It was Schedule B time. The Schedule B, a predecessor of Schedule SB was a 2-page form that sometimes had a less than 1-page attachment. I had to do lots of them for N0941 and G1799 (if you worked for Hewitt, you'll understand). 

And then the world began to change. The FASB issued Statements No. 87 and 88 telling us how pension accounting should really work. (Funny aside: I was giving a performance review at the end of 1988 and one of my direct reports said to me that we got FAS 87 in 1987 that told us about pension accounting and FAS 88 in 1988 that told us about special pension accounting, so what would FAS 89 be in 1989? In her mind, we now knew everything we needed to know about pension accounting, so FAS 89 was unnecessary.)

There were also rumblings about something being called "Treasury 2." For those that don't remember, Treasury 2 was the blueprint of the Tax Reform Act of 1986. And snuck in, but little heralded at the moment was the Single-Employer Pension Plan Amendments Act, a nasty little law that raised PBGC premiums from $2.60 per person to $8.50. It also banned insufficient standard terminations.

In 1986, the Tax Reform Act passed and the world changed. Faster vesting, more rapid amortization of unfunded liabilities, and lots of other little annoyances in addition to the change of virtually everything else dealing with taxes in the US. 

So we had this new law and these new accounting standards. I noticed the experienced people struggling with them. So I made up my mind that I would learn them better than anyone else. I don't know that I succeeded, but I certainly learned them better than most. 

And around this time, we got an internal memo from "Wilson." For whatever reason, internal memos were from the author's [last name]. It told us how to value a cash balance plan. 

A what?

It seemed that some other firm that I had never heard of -- Kwasha Lipton -- had designed a newfangled defined benefit plan for its client BankAmerica. Who cared? Some strange thing in San Francisco. I didn't work on any cash balance plans, so I sure didn't need to know what to do with them.

I passed more actuarial exams. I was most proud of passing my Enrollment exams quickly. But then I found out that I could not be an Enrolled Actuary without 3 years of responsible pension experience. I didn't have 3 years period, so I certainly didn't have 3 responsible years. It was 37 years ago today, however, that I sent in my application for Enrollment that did not come through until early 1989.

More laws changed. The Pension Protection Act of 1987, embedded in the Omnibus Budget Reconciliation Act (OBRA), was a biggie. It changed the way we do actuarial valuations forever. It took levels of discretion away from actuaries and it began to try to put DB plans in a coffin.

In 1988, I changed firms and cities. Towers, Perrin, Forster, & Crosby (TPF&C) in Atlanta wanted me and off I was. We got another new law with small pension effects called the Technical and Miscellaneous Revenue Act (TAMRA). If ever the name of a law made it, on its face, seem like a sham, that was it. At least, that was it until we got the One Big Beautiful Bill Act (OBBBA doesn't even sound like a real law acronym). And, in the biggest shocker of all, I had a PC -- a personal computer -- on my desk.

Every year, we got new laws that affected pensions and every year, they got more confusing. With that confusion, companies sponsoring the plans doubted their commitments. As they doubted their commitments, I started to learn new topics among them retiree medical valuations, equity compensation, golden parachute rules, and a myraid of other things I had never heard of just a few short years earlier.

We got another interesting law in 1993 -- another OBRA. By 1993, I was occasionally supporting the Technical Services group and as such, I was asked to dig deep into a specific chapter of OBRA 93. In doing so, I found an interesting provision that going from memory called for unspecified cuts of something likts $2 billion to be enacted in years 8 through 10 of the Act. 

Unspecified cuts ... a new way to balance a budget.

Pension law continued to change nearly every year. Plan sponsors didn't care. Virtually every non-union pension plan in the US was overfunded due to still high interest rates and a booming stock market. Someday that would come to an end, however, and with it we would see a massive exodus from pensions.

As we fast forward to 2025, I am now a Partner with October Three Consulting. I'm nearing the end of my 10th year with the firm. We specialize in ... wait for it ... cash balance plans. The laws have continued to change. Remember those PBGC premiums that had increased to $8.50 per person for 1986. In 2025, depending on how well funded a plan  is, they range from $106 per person to $823 per person. 

That's $823 per person per year for the right to pay each of those people a pension in the future. Just wow!!

I remember that when I first got my PC on my desk, I got really good at Lotus 1-2-3. I built macros and created complex pension design software. Today, I am perhaps the weakest person in my firm at spreadsheets.

But I still know all those pension laws. I probably know the ones from the 70s and 80s better than, or at least as well as, I know the more recent ones. I can still tell you how to do a Proof of Integration under Revenue Ruling 71-446 or to test multiple plans for comparability under Revenue Ruling 81-202. I still know how Q&As 24 and 26 apply to excess [pension] parachute payments under the Deficit Reduction Act of 1984. I remember that automatic cost of living adjustments to pensions vest under Q&A V-12 of Technical Information Release 1403 -- a bulletin that helped to explain, or at least purportedly did, some of the challenging changes brought to us by the Employee Retirement Income Security Act of 1974 (ERISA).

I've done my best, however, to learn in a little bit less detail some of the new changes that simply don't apply to my work. My clients often don't care. When they do, I learn them, but when they don't, I peruse them. 

We're in a different world and pensions are certainly different. My work is different. My home is different. 

I stumbled into this profession 40 years ago today. It's been good to me. I've won some awards. That's nice. I had the opportunity to serve my profession as President of the Conference of Consulting Actuaries. That was an honor and a privilege.

These days, my greatest professional achievements are all ones that I am quite proud of. I've placed my focus on clear communication whether it be in writing, on the phone, through Teams or Zoom, or in person. I'm working on developing the current generation and next generation of great consulting actuaries. Seeing them succeed is a great cource of pride.

My work is very different than it was 40 years ago. I still enjoy it though, but the reasons while different remain the same. I like the people interaction and because of it, at least part of me mourns that I am no longer in a physical office in space allocated by my firm. And I love solving problems ... difficult problems that others say they can't. 

It's no longer about determining actuarial equivalence factors for modified cash refund annuities. Today, it's likely to be evaluating financial risks related to pensions in mergers and acquisitions. 

In 1985, I took on challenges that some of my peers didn't want. In 2025, while the challenges are very different, I guess I'm still doing the same thing. 

There won't be another 40 years, but this is also not a retirement speech. It's been fun looking back for these few minutes and doing so without regrets.

Pensions -- A Consistent Strike Issue

We're seeing it over and over again. Pensions are a consistent strike issue. It doesn't mean that every striking group gets or keeps a pension, but what we are seeing is that labor unions that do make pensions a strike issue or either getting (or keeping) those pensions or are receiving very significant concessions from management in other areas.

Yes, those kinds of pensions. The ones that reward long service and provide guaranteed lifetime income paid from an employer-sponsored, employer-provided plan. Those same pensions can benefit employers too, but instead of looking at how they might be useful or even accretive to the business when everything is considered, many companies simply look at pensions as an evil, albeit not a necessary one.

Let's consider the pros and the cons of these pensions. While I started by mentioning pros as is the custom {cons and pros simply sounds awkward], let's start with the cons.

Pensions cost money. They cost money over the long term. In fact, they are a form of deferred compensation. That is, an employee gives up current compensation to receive compensation in the future of presumably equal value. Because of that, there are several costs: the cost of administering the pension, the accounting or accrual cost of the pension, and the cash cost of funding the pension. 

Those last two are not additive. In fact, they are duplicative, separated only by timing. It's that separation, however, that has over time caused many organizations to stop offering pensions. You see, in a 401(k) plan, a company expenses for a year the amount it pays for the year [sometimes off by a very minor timing differential, meaning weeks or months, not years]. In a pension plan, that same company might have a prepaid pension cost (it has funded more than it has accrued) or an accrued pension cost (it has accrued more than it has funded) on the balance sheet.

But don't tell me pensions are inherently too expensive. I can design a pension plan to have a typical cost of essentially whatever amount you are willing to spend. You want a pension that costs 1% of payroll? Just like a 401(k) plan that costs 1% of payroll, it won't provide large benefits, but I can design it. You're willing to provide a plan that costs 10 times that, I can design it too.

There are more pros than cons. Pensions have been shown to be a useful tool in attracting and retaining workers. They can be used as a workforce management tool. And, they do a far better job of evening out the retiree wealth gap in ways that are consistent with your DEI initiative than do 401(k) plans. 

How do I know that workers want pensions? I see what they are asking for. In the UAW strike, they asked for pensions. The companies made large concessions to convince the UAW brass to give up on that piece. In various hoospital strikes, workers have asked for and are asking for pensions. In fact, my own research shows that the most asked for elements in union demands in strikes in 2023 have been more pay and pay increases, better working conditions, and pensions. Yes, pensions. In the same strikes, I've not seen demands for different 401(k) investment options, 401(k) auto-enrollment, or 401(k) in-plan annuities. Yes, I'll grant you, the latter have been the outcome in some cases, but they have been a union concession in order to get something else they really want or need.

Another major clue that workers want pensions comes to me from employers. One such employer that froze its pension noted that employee turnover has increased noticeably (they haven't measured it exactly yet) and that they expect the cost of turnover exceeds the cost of providing a pension. Another employer in an industry that is struggling with hiring said they have no problem doing so. They simply trumpet their pension and recruit at competitors that don't have one. 

In Franklin Templeton's "Voice of the American Worker" survey published in early 2023, the number one financial issue for American workers is financial independence in retirement. Yes, mean 401(k) account balances are large, but means are skewed by the large account balances. When we look at medians, however, (50% of balances larger and 50% smaller), they are entirely inadequate. 

Even the data coming from the large 401(k) recordkeepers show that roughly (some report more than 50%, some less than 50%) half of American workers are on track to retire. If you, unlike me, think that is a good thing, let me recast that data point.

If 50% of Americans are on track to retire, then the other 50% can't retire. So much for the American Dream. 

It's no wonder pensions are a consistent strike issue. When the Big 3 US automakers offered pensions, you didn't see their lifelong UAW workers not being able to retire. In fact, my observation is that they have tended to live better financially in retirement than they did while they were working. 

Consider that cost of unwanted turnover. Consider the cost of unhappy workers sticking around. Consider what a pension might do to fix that.

Survey: The Most Important Benefit Employees Want Their Employers to Focus on Is Retirement

News flash, although not to people who follow my ramblings, employees want their employers to focus on retirement benefits. Not flexible work, not health benefits, but retirement. And of workers whose top priority in the survey is retirement, more view a guaranteed lifetime income benefit as a high priority than anything else.

The National Association of Plan Advisers (NAPA) wrote an article on this survey done by a former employer of mine. Curiously, many retirement firms in other publications seem to be telling employers not to focus on retirement benefits. Perhaps I am reading their materials incorrectly.

The data in this survey screams one thing: Defined Benefit Plans (DB). This does not come as a surprise to me. I've been saying this for at least 30 years. The average worker does not have the combination of discipline to save and financial acumen to invest in ways to build up sufficient assets on which to retire well unless the financial markets really cooperate.

Today, the trend is to try to make 401(k) plans work like DB plans. Have I got another news flash for you: they don't; they can't; they never will!

We'll come back to this, but let's look at some snippets from the analysis of the survey data. And, please note that the survey was done in the December 2021 to January 2022 timeframe. That was before inflation really started spiking, before interest rates started jumping, and before the equity markets visited the narrow whole in the toilet.

36% of workers earning $100,000 or more per year are living paycheck to paycheck. That's double the percentage just one year earlier. 

Then it gets more shocking. Last year, 26% of the survey respondents took out a 401(k) loan and 36% fell behind on their utility bills, rent, or mortgage. And, for all the people who fell behind on their mortgages who have adjustable rate mortgages, it's getting worse ... much worse.

What do you think those people will do? They'll have to do something. They'll have to cut back somewhere. While it's not in the survey, you watch. Many of those 36% will or already have cut back on their 401(k) deferrals.

Which benefit do these people want the most focus on? Drum roll please.

44% view retirement benefits as a top priority, 39% flexible work, and 33% health. One-third more are focused on retirement than on health during a global pandemic. As the late great Mel Allen would have told you, "How about that?."

Of the survey respondents who labeled retirement a top priority, 62% want a guaranteed retirement benefit (that is spelled D-E-F-I-N-E-D B-E-N-E-F-I-T for those who are not listening), 58% want more generous retirement benefits and 53% want retiree medical. Nowhere in that do I read making 401(k) plans work like something they are not.

Nothing that I've commented on here is the least bit surprising. 401(k) plans were never intended to be a primary source of retirement income. They were never intended to provide lifetime income. They were intended as tax-favored retirement savings. The thought is that if you give someone a tax break to do it, when they are able, they will save more for retirement. It's a good concept. Giving insurance companies a windfall with rip-off in-plan annuities is not as good a concept.

I know, DB plans are bad for employers because they are expensive and the costs are volatile. But, they don't have to be.

Defined benefit plans can be designed at whatever cost level an employer considers affordable. And, modern designs are such that when properly designed, the costs do not need to be volatile. In fact, they can be far less volatile than the maybe not so treasured (according to the survey data and remember I had nothing to do with the survey) 401(k).

Get with the program people. Listen to what your employees are saying they want. If your consultants haven't told you how you can do this cost-effectively and cost-consistently, call me. Google me. I'll take your call. Quite happily, in fact.

Dear 401(k) Participant -- An Open Letter

Dear 401(k) Plan Participant,

I hope you are doing well. I really do, but I am concerned about you. No, if you are one of those wealthy participants, I'm sure you'll be okay. It's the rest of you I'm worried about.

You got your statements around the end of last year and the markets were at near record highs. But, the Dow is down somewhere around 20% since then and the NASDAQ nearly double that. The fixed income part of your portfolio that most of you don't understand isn't doing very well either. Have you looked at those statements recently?

Let's look into the future. Do you plan to retire someday? Do you expect a source of regular lifetime income? You do? How much can that 401(k) buy you? Have you factored in the insurance company margins? How about the fees you're being charged by the recordkeeper for the plan and the fund manager? You haven't? Perhaps you should?

How about that lifetime income? Social Security is there, but it might not be the same program when you get to retirement age. 

What's that you say: you have a friend with a defined benefit (DB) plan? I know; you told them it was foolish to factor that into their choice of an employer, but they're still not upset with their choice, are they?

I understand that a year ago, you were contributing 10% of your pay to your 401(k) plan. That's great. But with inflation, you don't seem to be able to do that anymore? Oh, you maxed out your credit cards so that you could contribute to your 401(k) and now you can't pay them down? And, you can't afford to go out, but you can't afford groceries, and you can't handle your credit card debt? Where did you say that lifetime income was coming from?

How about that friend who took the job you recommended against? You know; that job with a pension. That's a pension her employer pays for. You say your friend has been contributing a steady 5% of pay to their 401(k) and feels absolutely fine about retiring someday? Your friend isn't worried about lifetime income just because they have a good DB plan? 

Amazing!

And that house you just overpaid for? But, you got a great teaser rate on your Adjustable Rate Mortgage. Oh, what was that? The rate resets after one year and it doesn't look good. But you told me it was okay because you read you can tap into your 401(k). Something that I think you called a hardship withdrawal?

So, the markets are depleting your 401(k), you're depleting it, and you can't afford to contribute to it anymore? Doesn't that bother you? Why isn't your friend with the DB plan losing sleep at night like you are?

What's that you said? You're going to be parents? The medical costs for childbirth are going to eat away at your HSA balance? And, then there are diapers and you're afraid you'll have to buy formula? Those are all expensive, aren't they?

How are you doing with those lifetime income projections?

Don't you wish you had a DB plan?

How are you doing with your credit card debt? Your mortgage? Your weekly food bills? Your discretionary income for fun? You mean you had to give up saving for retirement?

Don't you wish you had a DB plan?

Regretfully, but I told you so,

John

Inflation and the Labor Market in Revenue-Controlled Industries

For many of us, we're seeing inflation today that we've never experienced before. I'm old enough to not be part of that "many of us," but it's been a long time. In fact, by the time I was in the profession I am in today, inflation was seriously on its way down -- a downward path that has largely remained until just recently. Still, I vividly remember the late 70s and early 80s.

When inflation spikes, it seems to come upon us somewhat suddenly -- unexpected, yet expected. The 2022 vintage of this phenomenon fits that pattern quite well. There has been rampant government spending and therefore printing of greenbacks for the last couple of years and large amounts of those dollars have gone into the hands of consumers. In the case of most people, when they suddenly have more cash than they are used to, they look for ways to spend it.

The current period is no exception. With all of the various government programs from which Americans have received compensation for being unemployed, underemployed, low-income, middle-income, high-income if you can cook up the right circumstances, and more, even people deeply in debt having the choice of paying down that debt or spending the hot dollars in their hands on goods have opted more often than not for the goods.

Let's think about this in economic terms. People want to spend more. Said differently, demand is up. Production of goods, particularly in the US is not up at the same rate with the reasons purported to be largely supply chain-based (not my expertise and I don't want to argue whether these reports are true and not inflated). And, with global tensions, imports of products from many typical supplying countries are way dawn. Translated: supply is down and demand is up.

Let me repeat: supply is down, demand is up. That means people will pay more for goods and services resulting in inflation. Frankly, I've been expecting it for years as have very likely most of you, but I would argue that the Fed has taken steps to somewhat artificially keep it in check. 

Now let's turn to what I suggested was the core topic of this post. We'll consider the labor market first.

Employee turnover is at historically high levels. People are taking time off or simply job-hopping. In many cases, they do it for the instant gratification of additional cash in hand. Generally speaking, they do it because there is something better about the employment deal at New Employer than their was at Former Employer. It might be purely pay. It might be a great boss. It might be the ability to work from home whenever you feel like it. 

Whatever the reason, employers are finding that unless they are offering something special -- higher pay, some wonderful benefits, or whatever the fad of May 26 is -- they are losing employees and having to spend money to recruit new ones at higher pay. Said differently, labor costs could easily be 20% higher in 2022 than some Finance executives anticipated (they might not be, but I think it is certainly a possibility).

How about the employer? Most of us think better in round numbers, so for illustrative purposes, I am going to start with one. Suppose Employer X had budgeted $100 million for total labor costs (whatever that means to them) for 2022, but now finds that in order to run its business, it now finds its labor costs for 2022 up 20% to $120 million. 

The immediate response is simple: they should raise their prices. Since consumers are used to paying more, they'll pay more for these goods or services as well, right?

They might, but it's not that simple.

Consider Hospital H. Hospital H is paying more for supplies, more for utilities, and as we noted, 20% more for labor. But in the 2022 environment, H really has no way to bump up its prices. 

Why? Hospital H gets the very large majority of its revenue by being an "in-network" facility for pretty much every major health plan in its area. It negotiated 2022 reimbursements a while back. And, the health plans/insurers are not about to be charitable and renegotiate them. Hospital H's revenues are largely locked in. It's stuck with its expenses. Whoops!

This is where the creative minds will win out. How can Hospital H cut its expenses for the second half of 2022 without harming patient outcomes or patient experiences? Are there ways to do that without jeopardizing 2023 and beyond?

Some organizations will have that flexibility. Others will not. But I think there are solutions ... at least partially.

A Tale of Two Businesses

 It was a thriving business, it was a sinking business. It was a wise idea, it was a foolish idea. It was a time of profit, it was a time of loss. It was the season of growth, it was the season of closure. 

The story is true, or at least almost true. The names have been changed to protect the innocent and the not as innocent.

As we all know, both London and Paris lived to flourish, but I'm not as sure about the two businesses although time is yet to tell. You see, these were two business in the same industry and in the same geography. They competed with each other. One's market share drew from the others. When one offered a better product or service than the other, it thrived and the other suffered. When one treated its employees better, their customers were also treated better while the one with a less welcoming environment lost customers because they were treated poorly.

This nearly true story is a tale of two businesses.

You see, both of these businesses were dealing with the effects of COVID. Both were dealing with the so-called Great Resignation -- a term that I despise just as an aside, but in these days of short catchy names and the 24-hour news cycle, great is a word that goes with lots of things. And, each of the two were viewed as sector leaders in their common geography, but each was struggling to have enough employees to produce what was needed to serve their customers.

The leadership team at one of the organization -- let's call them Paris because for them it turned out to be the worst of times -- had some not so innovative ideas. Their strategy was focused on cash and on instant gratification -- something that a leaked internal email said would satisfy the younger generation. So, Paris through cash into the marketplace. Come work for us. Paris is great. If you come work for Paris, we'll give you a big signing bonus. And, what we're not going to tell you or anyone else except when the law forces us to is that we are going to pay for those signing bonuses by reducing other parts of the rewards package. We'll tweak your health benefits in ways that you hopefully won't notice. We'll eliminate your pension because we know you don't care about pensions. We'll reconfigure the matching contribution we give your retirement amount because a match is a match. And, in doing all this, we'll get great new employees and dominate our market.

Not so fast Paris. What is it they say about loose lips. We're in 2022. Nothing is a secret. Paris forgot that experienced employees would find out about this. They asked where their bonuses were, but were told there was no money left. They asked why their health benefits and their pensions were cut. That was to pay for all these expensive signing bonuses. 

So, the experienced workers did what any smart yet underappreciated Parisian would do; they left for London.

London's leadership also had a strategy. Their strategy was to provide a great working environment and to spend money uniformly on their employees both old and new. They kept their generous health benefits. They kept their pension. They benchmarked and looked for tactical opportunities to be above the median where their employees would appreciate it. 

What London has noticed is that their business is thriving. Their turnover is extremely low for their industry and surveys that an external vendor does of their customer base show them that London is best in class. At the same time, Paris seems to be burning.

Instant gratification is what it is. You can get people in the door with it, but at this point, neither London nor Paris would tell you that you can keep them that way.

Revisiting 5 Years Ago -- The Talent Problem Isn't New, But More Apparent

I haven't written here for quite a while. There are a number of reasons, some of them probably not so good, but I'm not going to go into them today. But, let's get started.

It was almost five years ago that I wrote about the talent crunch with a focus on hospitals. Little did I know that that was just the beginning. For a while, if you asked a hospital CHRO or VP-HR what their biggest challenge was, they would far more likely than not have told you it was talent -- recruiting and retaining talent. 

Today, however, you don't have to keep it to hospitals or to the Human Resources side of the house. Go to almost any industry and find a CFO -- that's right, a Finance Chief -- and it's very likely that even that side of the house will tell you that along with cybersecurity and supply chain, recruiting and retention is a top issue.

If you haven't studied talent management a whole lot, this probably comes as a great surprise. So, let me toss out some data and rather than linking to a whole bunch of sources, let me say that what I am about to state is based on an amalgam of recent studies. The cost to replace unwanted skilled talent (below the level of high management is estimated anywhere from about 1.25 to 2.25 times cash compensation. For top management, up to and including the CEO, those same studies say that the cost varies anywhere from about 2.5 to 4 times cash compensation. 

Impossible? No.

Those numbers include recruiting costs, transition costs, transition of knowledge costs, potential other turnover, costs of having to hire more than one person when the first one doesn't work out and many more items. In fact, when you lose a well-liked, high-performing CEO without an obvious successor, the disruption caused by that loss might be as big as the numbers cited in even the studies that indicate such loss is more expensive.

How do you keep these people? Sometimes you just can't. Sometimes somebody throws money or some perquisite at them that you just can't compete with. It could be that the allure of Hawaii is just too much. 

But, let's assume that it wasn't anything like that. Let's assume you just didn't have anything to keep them. Then, we might say the loss was avoidable. But, sometimes proverbial handcuffs work.

Often times, long-term compensation with long vesting periods is enough to keep people around, but long-term compensation is usually limited to pretty high up people. And, a company that really wants that person might buy out the non-vested portion anyway.

The trickier part is pensions. Pensions are a form of deferred compensation. The deferral period is often long and the time at which the benefit pays out is often far in the future. In fact, it pays out during the period of time -- retirement -- during which that person might not be able to replace it. 

For a time, that wasn't a big deal. But, in 2022, other surveys indicate that there are a tremendous number of workers who say they will never be able to retire. Of course, those are not workers with pensions. Those are workers who are not sure where their lifetime income is coming from.

This is not to say that pensions are somehow nirvana. But, they do serve as recruiting and retention device when communicated properly that very little else does. Someone can always pay you more currently. But, are they willing to pay you more after you have left their company? The companies that will certainly seem to be having a little less trouble recruiting and retaining.