Why Your Best Employees Leave and How Retirement Benefits Can Help You Keep Them

Losing a senior employee is expensive.

According to the Work Institute’s 2025 Retention Report, replacing an employee costs roughly 33% of their annual salary in recruiting, onboarding, and lost productivity. For a senior attorney, advisor, or physician earning $300,000+, that’s at least $100,000 — before accounting for disrupted client relationships and the institutional knowledge that walked out the door.

The instinctive response to turnover is often raising salaries or increasing flexibility. While necessary, these are reactive measures. They treat the symptoms of disengagement rather than the conditions that foster loyalty.

Retirement benefits are an effective solution to the root issue. Research from Vestwell found that 89% of employees say they’d be more likely to stay with an employer who offers retirement benefits. And a Gusto study found that having a retirement plan reduced the risk of an employee quitting by 40% in their first year.

Let’s explore how professional service firms can design retirement benefits that do more than check a compliance box. 

How Plan Design Affects Employee Retention Rates

We’ve seen firms treat retirement plan design as a compliance exercise, outsourcing the heavy lifting to administrators whose primary objective is to satisfy IRS testing — not to drive retention. They usually aim to meet the “compliance floor” to minimize administrative headaches, inadvertently turning a potential competitive advantage into a stagnant cost center.

The design elements that actually influence employee behavior and retention are different.

Employer Contributions

The generosity of employer contributions is the most visible expression of a firm’s commitment to employee financial well-being. The average employer match across 401(k) plans is 4.6% of salary. Firms that exceed this benchmark send a clear message.

Consider two legal firms competing for the same senior associate: an attorney three years into their career earning $250,000 annually. Firm A offers a 3% employer match, contributing $7,500 per year. Firm B matches 3% and adds a discretionary profit sharing contribution of 2%, contributing $12,500 annually.

Over 10 years, assuming 7% annual growth, the difference in accumulated employer contributions is roughly $104,000 in Firm A’s plan versus about $173,000 in Firm B’s. That $69,000 gap is real money an employee would be walking away from. More importantly, it’s a tangible, compounding expression of what each firm actually thinks about its employees’ long-term financial futures.

The firms competing hardest for specialized talent in professional services aren’t always the ones paying the highest salaries. Sometimes they’re the ones whose retirement plan tells a more compelling story.

Vesting Schedules

Vesting schedules determine when employees gain full ownership of certain contributions. And according to an Employee Benefit Research Institute panel focused on employee tenure, non-immediate vesting schedules for employer matches are an overrated retention tool. 

Vesting thresholds can often be outweighed by accepting a higher-paying position elsewhere — and employees who aren’t aware of their vesting schedule can’t be influenced by it at all.

While vesting schedules are still important to the big picture, it suggests the bigger retention lever is the generosity of contributions. A plan with material employer contributions and a more immediate vesting schedule is more likely to influence retention than a restrictive vesting schedule on modest contributions.

Plan Quality and Investment Options

Investment menu quality, fee structure, and the availability of planning tools and resources communicate how seriously the firm takes employees’ financial futures.

Automatic enrollment and auto-escalation features increase plan participation, and employees who actively use the plan are more financially engaged and more aware of the benefit they’d give up by leaving. Vestwell’s research found that plan participation itself is a noteworthy factor in retention, independent of the contribution levels.

Employee Education: A Retention Multiplier

It’s fairly easy to undervalue the compounding of retirement benefits, particularly from employer match contributions. An employer contributing $10,000 annually to an employee’s retirement account, compounding over 15 years, represents far more economic value than the nominal annual figure suggests. 

But people rarely take this into account unless someone shows them.

The retention impact of retirement benefits is only as strong as employees’ understanding of what they have and what they’d forfeit by leaving. One-on-one guidance, financial literacy workshops, and regular benefit statements that project future account values all help increase the perceived value of the plan.

Stay interviews (i.e., proactive conversations with current employees about what keeps them engaged and what might cause them to leave) and continuous feedback can surface whether employees understand and value their benefits. This exercise also overlaps with professional development opportunities and career path conversations. Employees who feel supported in both their long-term professional trajectory and financial future are more likely to stay.

Designing Your Plan With Retention in Mind

Professional service firms typically offer a retirement plan. But is it intentionally designed to encourage employee engagement? 

The cost difference between the two can be smaller than employers assume. Marginal increases in employer contributions, paired with better education and communication, help deliver retention value that exceeds their cost — especially relative to the expense of replacing a senior employee.

Measuring Employee Retention Strategies

Retirement plan design is one variable in a larger retention equation. According to Gallup research, engagement and culture account for 37% of the reasons employees leave, while work-life balance and wellbeing account for another 31%. Together, these two categories represent two-thirds of turnover drivers. 

Tracking the impact of your retirement plan means understanding the broader context it operates in and being honest about what the data is actually telling you.

Employee retention rate and turnover trends. Track overall retention rates over time, and look for patterns by tenure, department, and role. Turnover concentrated in years one through three could reflect onboarding gaps, misaligned expectations, limited opportunities for advancement, or management issues — not just benefits. You have to look at the full picture to understand which factors are driving early departures.

Exit interviews and stay interviews. Exit interviews are most valuable when they go beyond surface-level reasons and probe for underlying drivers, such as company culture, recognition, career trajectory, management quality, compensation, and benefits. Stay interviews are the proactive counterpart: asking current employees what keeps them engaged, what would cause them to leave, and whether they understand and value what they have. 

Engagement surveys and pulse surveys. Regular engagement surveys help measure employee satisfaction, sense of belonging, and employee morale across the organization. When benefits-specific questions are included alongside broader questions about leadership, professional development opportunities, and work-life balance, you get a more complete view of potential retention risk.

Plan participation rates. Low participation typically indicates a communication and education problem. Employees who aren’t contributing to the plan typically aren’t aware of their benefits or what they’d be leaving behind.

Industry benchmarking. Comparing your plan’s employer contributions, vesting schedule, and investment quality to other firms in your market tells you if you’re competitive. 

Turning Your Retirement Plan Into a Competitive Advantage

Burnout, work-life balance concerns, and lack of recognition all impact job satisfaction. No retirement plan addresses those directly. But they are a massive, underutilized lever for institutional stability. Considering top talent is constantly courted, a strategically designed retirement plan formalizes a long-term financial partnership between the firm and its employees.

At BEW, we help firms transform their retirement plans from overhead into an asset. Let’s discuss how to align your plan with your talent management strategy.