Corporate 401(k) >$10MM - $50MM
Gonnella Baking Co.
TOTAL PLAN ASSETS/PARTICIPANTS: $12,330,000/338
PARTICIPATION RATE: 90%
AVERAGE DEFERRAL RATE: 6.8%
DEFAULT DEFERRAL RATE: 3%
EMPLOYER CONTRIBUTION: Profit sharing with a safe harbor contribution rate of 3%, plus a discretionary employer nonelective
It is safe to say that family always comes first at Gonnella Baking Co., a fourth-generation, 130-year-old family business, known for its specialty breads, and located in Schaumburg, Illinois.
In 2011, Gonnella froze its defined benefit (DB) pension plan and started a 401(k) plan, having quickly realized the need for an investment committee to achieve the continuous improvements aligned with the company’s objectives. Fast forward to 2017, Gonnella has grown to over $12 million in assets, with an average participant balance of $30,000 and a participant deferral rate upward of 90%. What is more, the company recently adopted zero revenue sharing and, in return, has seen fees go down and assets go up.
The plan was conceived as a profit-sharing plan with a base safe harbor contribution rate of 3% plus a discretionary employer nonelective contribution; participants do not need to contribute to receive an employer benefit.
Their investment committee comprises seven executives who play vital roles in integral sectors of the business.
“On our committee, we have the key decisionmakers and representatives from each of the various areas of the company; that bring insights from their department, and that is what is really important,” says Timothy Madda, chief financial officer (CFO) of Gonnella..
The company's extensive work with its financial adviser David Schabes and Michael Ciesemier, with Morgan Stanley Wealth Management, along with recordkeeper Prudential Financial, has resulted in significant improvements to the plan.
Ciesemier has been advising the plan since 2013, and describes the committee’s careful decisionmaking when it considers changes. “[Members] pause and consider thoughtfully what’s going to be the anticipated impact for their employees before they make any decision,” he says.
The plan added automatic best practice features, including automatic enrollment at 3% after seeing wide success with a former auto-enrollment of 2%, where less than 5% of participants opted out; and adding automatic escalation as an opt-out enrollment at 1%, beginning next January. When the company incorporated low-cost target date funds (TDFs) as the qualified default investment alternative (QDIA), along with other low-cost investment options, the plan’s average expense ratio plunged over 60 basis points (bps).
Additionally, Gonnella regularly offers informative, bilingual, multi-shift employee education and free, unlimited access to speak with an adviser.
“It drives higher levels of engagement and comfort,” says Madda. “People are more comfortable asking questions in that kind of context.”
From the perspective of Schabes, who also has worked with Gonnella since the plan’s inception in 2011, the committee’s loyalty to their employees is—in a sense—almost family-based.
“This committee has a keen understanding of the employee population,” he says. “It’s clear that they care very genuinely and deeply about providing the best possible 401(k) plan for the employees.” —Amanda Umpierrez