Benefits

Company Uses ‘Holistic’ Approach to Improve 401(k) Participation

By Corie Russell editors@plansponsor.com | May 25, 2012
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May 25, 2012 (PLANSPONSOR.com) - Increasing 401(k) plan participation rates is high on many plan sponsors’ priority lists, but what are the most effective tactics?

For Leviton, a privately held manufacturer of electrical wiring equipment, the answer is holistic education, as well as auto and advice features. The company, which has 2,400 U.S. employees, boasts an 84% participation rate in its 401(k) plan.

Fran Ruderman, Leviton’s vice president of human resources, told PLANSPONSOR the company uses automatic enrollment, automatic increase and Advice Access—a tool from Bank of America Merrill Lynch that offers saving and investment advice based on an individual’s personal situation and life stage.

Leviton adopted auto enrollment in 2007, Advice Access in 2009 and began auto increase at the beginning of this year.  The company’s 401(k) match starts at 3% with an automatic increase of 1% per year.

“The fact that auto enrollment and auto increase was available was great,” Ruderman said. “We’re a big proponent [of] employee education, information and accountability.”

According to Bank of America Merrill Lynch’s 401(k) Contribution Activities Scorecard, plan sponsors using auto enrollment, auto increase and Advice Access had a 76% participation rate on average in March 2012 and March 2011. Plans that did not use these services showed a 48% participation rate in March 2011 and a 50% rate the following year.

Kevin Crain, head of institutional retirement and benefit services for Bank of America Merrill Lynch, said he foresees an increase in plan sponsors implementing auto and advice tools together—generally with auto enrollment first, followed by auto increase and advice tools. “So I think that’s kind of the order we normally see … and then you’ve really got a complete picture,” he said.