401(k) Plans—Auto-Enroll, Auto-Escalate— What and How You Can Do It! Employee Benefits Symposium Rosewood Hall, SoHo Birmingham, Alabama August 22, 2013 Donna Cornwell, O’Neal Steel B. David Joffe, Bradley Arant Boult Cummings LLP Gordon Earle Nichols, Bradley Arant Boult Cummings LLP
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401(k) Plans—Auto-Enroll, Auto-Escalate—
What and How You Can Do It!
Employee Benefits Symposium
Rosewood Hall, SoHo
Birmingham, Alabama
August 22, 2013
Donna Cornwell, O’Neal Steel
B. David Joffe, Bradley Arant Boult Cummings LLP
Gordon Earle Nichols, Bradley Arant Boult Cummings LLP
What were we doing about it?- Retirement Committee review of all plans on a continuous basis
- 401(k) – defining opportunities and the tools necessary to help employees understand the value and need of saving to meet financial goals, and ultimately, have sufficient savings for retirement
- Ensure fund offering was in alignment with efficient growth opportunities at reasonable cost to the employee and the plan
Retirement Plan History
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O’Neal believes that it is essential to weave financial health and
well-being into the Culture of our Organization
Communication
Integrate benefit plan design & workplace
environment
Key Factors of Engagement
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Alignment: Strategy, Metrics, Goals
2012 2013 / 2014March 2007
• Participation and Engagement
– Auto enrollment for new hires
• 401k Education
– Increase onsite meeting schedules
– Employee advice
– One-on-one counseling
• Measure changes in saving patterns
– Increase in enrollment
– Employees becoming proactive in 401(k) account management
• Bring other programs into the mix
– HDHP implementation with company contribution ($900/$2100/$3000 year)
• Implement QACA Safe Harbor 401(k) Plan
• Financial Wellness Program
– Define saving readiness and need of multi-faceted education program
– First time savers
– Get the house in order
– Emphasis on one-on-one counseling and saving readiness
• Define metrics
– Impact on productivity, absenteeism, presenteeism
– Impact on bottom line
• Integration
– Tie to programs
– Make it the culture
July 2011
• Participation and Engagement
– Auto enrollment for all employees
– Auto increase for all employees
– Resolicitation on an annual basis
• Improve financial literacy
– Webinars
– Onsite meetings
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Key elements to a successful strategy
– Communication – management’s commitment and support
– One size doesn’t fit all – make it meaningful to the employee
– Don’t forget the price – how restructuring of retirement savings plans impact the
cost/budget of other benefit plans
Program elements
– Budgeting and debt management
– Emergency fund and short-term savings
– Income and asset protection
– Retirement and long-term savings
– Distribution and legacy planning
Building the Culture
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Goal
Offer a financial savings program that demonstrates the company’s commitment
to helping employees meet financial goals and have adequate savings for
retirement.
Program Components:
Auto enrollment and annual re-solicitation
Annual auto-increase
Company match: $1 for $1 on first 1% of contribution; $.50 / $1.00 on next 5%
Communication and Education
o Growing partnership with vendors
o Saving readiness
o Webinars and videos on demand
o Total Reward Statements
o Employee Assistance Program opportunities
2013 401(k) Plan: QACA Safe-Harbor
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Program must be multi-faceted, non-discriminatory and offer a variety of levels of education and
financial advice
Employees want to be told how much and how to invest: “Tell me what to do”
Employees want to be successful: “Help prepare me so I can save in my 401k and prepare for
retirement”
Communicate, communicate, communicate: keep the message simple, management must support all
communication platforms
Tie benefit programs together to help employees think about a bigger financial wellness picture
Don’t force the issue – 401k plan savers may not be ready to contribute, and will take out loans and
withdrawals with little hesitation
Continuously re-evaluate the education program’s structure, metrics, participation and engagement
Keep the message consistent
Lessons Learned
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elect
Current Participation: 95% with 6% average deferral rate
Strategies to Encourage
Employees to
Participate and Engage
Plan Design:
• Expand Auto enrollment from new hires to existing employees with 0% deferrals
• Increase Participants with 1% and 2% up to 6%
• Add Auto Increase Feature – each participant is increased by 1% per year until they cap out at match ceiling
Education Recommendations in conjunction with Plan Design Changes:
• Group and 1:1 meetings at all locations encouraging asset allocation, retirement planning, diversification, and advice.
• Posters, wallet cards, quarterly messaging, and targeted age appropriate investing.