Employee benefits and retirement plan solutions Trends and Insights Innovative approach to help nurses improve 401k balances one shift at a time

Innovative approach to help nurses improve 401k balances one shift at a time

There’s an inventive way to look at getting travel nurse costs under control that can also help full-time team members save more for retirement one shift at a time. It’s called the retirement shift.
A health care team member is smiling while she helps a young girl and her mother.
Felix Okwaning, FSA, EA
Headshot of Felix Okwaning, FSA, EA
Managing Director, Enhanced Plan Design at Principal Financial Group®
5 min read |

Help improve retirement account balances while reducing travel nurse costs

It’s been nearly two years since the end of the global pandemic and hospital administrators are still trying to get control of their travel nurse budget. While the use of travel nurses has decreased somewhat, the ongoing nurse shortage due to turnover and attrition is still contributing to a dependence on these positions. The US Bureau of Labor Statistics projects that more than 275,000 more nurses are needed each year from 2020 to 2030 to backfill these positions.

The average cost of turnover for a bedside registered nurse (RN) is $52,350, leading to an average cost to hospitals between $6.6M-$10.5M per year.

Such reliance on contract nursing is expensive and can affect team member morale and overall hospital culture. It’s not uncommon for staff nurses to feel some discourse over the huge imbalance between their wages and their travel nurse counterparts, which can be nearly 3x more.

Reigning in the cost for travel nurses is an opportunity to take a deeper look at employee benefits and other retention efforts. Doing so might make a big difference. According to NSI, for every 20 travel RNs eliminated, a hospital can save, on average, $4,203,000.

How a retirement shift might impact the bottom line

It pays to be creative when considering the budget. A possible way to reduce the number of shifts travel nurses fill is to encourage full-time nursing staff to take one extra shift a month. Though administratively it’s meant to help the hospital’s bottom line by reducing travel nurse costs, to team members, this extra shift has a more personal meaning. It signifies a way to build a larger retirement account balance and a path to a successful retirement.

This extra shift could be referred to as the retirement shift. Naming it as such could be a way to build a retirement savings culture and educate employees on the retirement plan. And if they’re not a plan participant, the hype around the extra shift might encourage them to sign up.

How could a retirement shift work?

Nurses schedule one extra shift a month (the retirement shift) and defer that extra money and employer contributions into their retirement account. With just one extra shift a month, the nurse may achieve a retirement account balance up to 40% higher. Our scenario shows account balances could reach well over $1 million after 30 years.*

Is it possible to make nurses millionaires one retirement shift at a time?

Line graph showing how much nurses can possibly save in their retirement account after 10, 20 and 30 years.

Top line: following the retirement savings plan set out by the company, plus contributions and earnings from the extra retirement shift.

Bottom line: following the retirement savings plan set out by the company.

As an actuary, it’s always about the math. It will depend on the plan design, but in nearly all situations, with overtime pay and the employer matching contribution, a retirement shift for full-time staff is still more cost-effective than paying a travel nurse for the same shift. The number of retirement shifts worked will affect how many travel nurse positions can be reduced.

Recruit, retain, and improve retirement success

By reigning in travel nurses’ costs, health care administrators may now have the capacity to focus on staff recruitment and retention.

A retirement shift may offer a unique opportunity when recruiting high-demand skill sets. A story that’s different from your competitors. A way for nurses to potentially improve their retirement outcomes, one shift at a time.

And let’s not forget the side effects of consistent staff retention and higher levels of staff morale can produce—increased patient satisfaction. This can lead to better outcomes, and opportunities to maximize revenue.

Discover more retirement research and insights

Find the latest on plan design, retirement legislation, and pension plans from Principal® thought leaders. Uncover additional ways to use the retirement plan as an incentive that works for your business and helps your employees save more. Get more insights

It’s important to work with a retirement service provider who understands and has the expertise to consult on options to help deliver the desired results. If you’re looking for options that could work in building a more robust retirement plan—reach out to your Principal® representative.

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Footnotes

Tripled pay is great for travel nurses - not for hospitals, Abshier, Holden. NPR WYFI Indianapolis. November 30, 2022. US. Department of labor, News Release: U.S. Department of Labor announces $80m funding opportunity to help train, expand, diversify nursing workforce; address shortage of nurses, October 3, 2022. 2023 NSI National Health Care Retention & RN Staffing Report, NSI Nursing Solutions, Inc. 2023.

*This fictitious example assumes the nurse is working full-time, 40 hours per week before taking on an extra 8-hour shift per month. Assumes that extra shift is paid as overtime at a rate of 150% normal hourly rate. The deferral assumption is 4% at entry, increasing by 1% per year to a maximum of 10% under an auto-enrollment and auto-escalation path. With the addition of the extra shift being saved, the deferral assumption changes to 10% at entry, increasing 1% per year to a maximum of 15%. ABC Health is assumed to contribute 2.85% of salary as a nondiscretionary elective contribution, and an additional 75% match on the first 4% deferred each year. Assumption of a 6% annual rate of return, 3% raises, and a 2% rate of inflation. Projections assume the team member starts working for ABC Health at age 25 and starts saving at age 35 for the next 30 years of their career. The assumed rates of return are hypothetical and do not guarantee any future returns nor represent the returns of any particular investment. The amounts shown do not reflect the impact of taxes on pre-tax distributions. Individual taxpayer circumstances may vary. This is for illustrative purposes only. The inclusion of the extra shift in contributions in the illustrative example above does not result in the individual contributing beyond what is allowed under IRS regulations.

The subject matter in this communication is educational only and provided with the understanding that Principal®, is not rendering legal, accounting, investment or tax advice. You should consult with appropriate counsel, financial professionals, and other advisors on all matters pertaining to legal, tax, investment or accounting obligations and requirements.

Contributing or increasing your contribution does not guarantee you put yourself in a better spot. Investing involves risk, including possible loss of principal. EA-Defined benefit measurements, if applicable, are for the sole purpose of providing the plan sponsor information with respect to their plan or plans evaluated.

Related analysis presented is/will be completed based on the plan’s participant data, provisions, and actuarial assumptions and methods incorporated into the DB plans most recent funding and/or accounting measurements. Analysis using different information and at future measurement dates may differ significantly from the current analysis.

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