Total Retirement Offering
Employers Mutual Casualty Company
TOTAL PLAN ASSETS/PARTICIPANTS: $339 million/2,300 for the 401(k); $306 million/2,000 active participants for the cash-balance plan
PARTICIPATION RATE: 94.1% for the 401(k)
AVERAGE DEFERRAL RATE: 9.55% for the 401(k)
DEFAULT DEFERRAL RATE: 6%
EMPLOYER CONTRIBUTION: 100% on 4% match for 401(k); service credit of 3.25% – 13.5% for cash-balance plan
Employees at Employers Mutual Casualty Company (EMC) are on track to replace 74% of their income in retirement, based on their 401(k) savings and expected Social Security. With the insurer’s active cash-balance plan also factored in, the company projects that its retired employees will exceed 100% of their pre-retirement income.
The insurer, whose headquarters are in Des Moines, Iowa, centers its brand on the “Count on EMC” philosophy, says Elizabeth Nigut, senior vice president, human resources (HR). “We want to provide a feeling of stability for our agents and our policyholders, so they know they can rely on us,” she says. “And we want to provide that same stability to our employees during their working careers.”
The company switched from a traditional defined benefit (DB) plan to a cash-balance plan in 2000. Asked why a cash-balance plan approach makes better sense for the company, Nigut says, “It has allowed us to continue to offer a pension plan, given the liabilities associated with a traditional defined benefit plan, and to sustain our pension plan at a fully funded rate. It also is more aligned with our value of being good financial stewards of economic resources.”
From an employer’s perspective, Nigut says, the cash-balance plan remains a fantastic tool in both recruiting and retention. “It is one of the ways we can differentiate ourselves from much of our competition for talent,” she says. “Folks see it as, ‘Wow, I’m working with a company that’s investing in me for the long term.’” The employer makes an annual age-based contribution to employees’ cash-balance accounts that ranges from 3.25% to 13.5% of their pay.
Although they have a pension plan, EMC staff members—who have an average tenure of 12 years—realize they also need to save for their retirement, says Rob Seiler, benefits and wellness manager. “We have sold employees on the idea of a three-legged stool: Social Security, the cash-balance plan and their 401(k) account.”
EMC implemented automatic enrollment for the 401(k) plan, which is recordkept by Prudential Retirement, in 2014. It enrolled new hires at a 6% deferral, and included 1% automatic increases. Since implementing automatic enrollment, participation has risen from 86% to 94.1%.
Despite a 75% deferral limit, Seiler says he would be happy to see participants reach 15% annual contributions to their EMC retirement accounts. With the plan design, that will happen quickly, even for younger employees. If employees contribute 6% and get the 4% match, that puts them at 10% for the 401(k). And service credits for the cash-balance plan start at a minimum 3.25% annually, depending on employees’ age. “So right away, even if you are in the youngest age bracket for the cash-balance plan, between that and the 401(k), you can put away 13.25% a year,” Segar says.
“We talk about the need to be aware of what your current retirement-savings status is,” Nigut says. “We want employees to understand, ‘Am I saving enough?’ It is not something where we want to say, ‘Hey, we’re going to take care of you 100%.’ We tell our employees, ‘This [cash-balance plan] will get you headed in the right direction.’” —Judy Ward