2011 Plan Sponsor of the Year
Ernst & Young
Mary Stringfield of Ernst & Young
|Photography by Hank Gans
Plotting the ages of Ernst & Young LLP’s 25,000 U.S. personnel produces a visual similar to a barbell—a lot of people on one side, and lots on the other. People younger than 30 make up more than 40% of its workforce. At the same time, the New York-based accounting and advisory firm attracts many career-long employees.”We continue to look at what we can do for our people who are very young and in this high-demand industry, and how to take care of our long-term employees at the same time,” says Nancy Altobello, Americas Vice Chair of People. “We are constantly balancing the two.”
That explains why Ernst & Young offers both a defined benefit plan and a defined contribution plan, Altobello says. The pension plan “is very attractive for people who are making their whole career here, including support personnel and partners,” she says. And it explains why the firm offers all employees unlimited free access to its personal financial planning services. “I think we have a responsibility to have them be planning for retirement, versus having them say in 20 years, ‘I wish I knew,’” she says.
Employees at Ernst & Young have an average age of 33, and tenure averages seven years. Almost all employees have bachelor’s degrees, and many have advanced degrees, says Mary Stringfield, Americas Director of Benefits. “This year we will hire about 5,000 people. It is typically the case in a professional services firm that you find a lot of younger people who join for a number of years, and they may then choose to move to other companies and industries,” she says. “And then there is a significant population of longer-service people. We need to appeal to both groups.”
The 401(k) has about 45,000 total participants, who get immediate vesting on the firm’s match: 25% of the first 6% of pay contributed by an employee who has been at the firm one to four years, or 50% of the first 6% for people who have completed four or more years with the firm. Ernst & Young started doing automatic enrollment in July 2007. The firm defaults new employees at 3% into an age-appropriate target-date fund; currently, participants have to choose voluntary contribution escalation, but the plan may implement auto-escalation.
The defined benefit plan has about 47,000 participants and $3.3 billion in assets. Ernst & Young has “a real commitment to this plan,” Stringfield says. “We are the only one of the Big Four [accounting firms] with a defined benefit plan that has a traditional final-average-pay formula.” The plan has a cash-balance formula alternative, and retiring participants get the greater of the two formulas. “For a younger, shorter-service person, sometimes the cash-balance formula works out to be better,” she says. “After five to seven years, the final-average-pay formula provides a better benefit.”
Ernst & Young does not target a specific replacement ratio for retirees. Participants can retire with a full, unreduced benefit at age 60 with 30 years of service, or age 65 with five years of service, done because many mid- to late-career people such as former Internal Revenue Service staffers join Ernst & Young. The firm also subsidizes 50% of retiree medical insurance costs.
The pension plan remains “well over” 100% funded, Altobello says. Longer-service employees value the plan highly, she says, although she acknowledges that many younger staffers likely have a harder time seeing its worth. “Our younger employees do not even look toward retirement as a very important benefit for them. If you asked them to list 20 things they value from us, I do not think it would be in there,” she says. “We have a lot of benefits in place that we think are good for our workforce, whether most employees value them now or not.”
Younger employees highly value the lifestyle-oriented benefits that Ernst & Young offers them with the aim of making their lives easier and more fun, Altobello says. “We have a very young workforce, and they are in a very demanding job,” she says. “We want them to have a lot of things that help them, and we lean toward things that their families also see, so they know that the firm supports them.”
The firm offers paid parental leave as well as family medical leave of 16 weeks. Every employee gets a minimum of three weeks of paid vacation, and they can “buy” up to an additional two weeks of vacation by forgoing their salary for those days.
The firm’s “EY Assist” program includes typical employee assistance program (EAP) elements, but has a scope much bigger than a traditional EAP, Stringfield says. It includes things like child and adult backup care, summer camp information, and referrals to auto repair shops and pet care. Additionally, it offers “EY Discounts” with significant price breaks on everything from restaurant meals and movie tickets to diamond rings.
EY Assist also has a college-coaching program for parents of high school students preparing for college. It includes a series of webinars for parents and additional services such as having their child’s college application essay critiqued by experts at Bright Horizons Family Solutions LLC’s College Coach service.
And Ernst & Young offers its employees access to the financial planning services early and often. Young employees attend their first session as interns, and then are reminded of its availability throughout their careers. “EY tries to put financial planning into people’s minds from the time they come to us as interns,” says Don Culp, a Senior Manager who coordinates the financial planning services for employees. For instance, when Ernst & Young announced this year’s 401(k) match, employees could watch a webinar reminding them of the 2011 payroll-tax cut and the opportunity it offers to up their 401(k) contribution. “It is important to stay in front of people all the time, and make it convenient for them,” he says.
Targeting webinars to life stages helps pique interest. “What we have learned is that if we do a general financial planning webinar, we get lower participation,” Altobello says, “but if we do a financial planning webinar for people who are just out of school, or having their first child, we get much higher participation.”
The firm—which has a financial planning practice whose services it sells to external clients—started offering unlimited financial planning access for its employees in 2007. “We had been offering it as a service to other companies, and the firm decided that it should offer it to all their folks, too,” Culp says. All of the financial planning staffers who work with participants are registered investment advisers, Stringfield says, and almost all have previous financial services experience.
The personalized help comes primarily by telephone. “Ernst & Young folks are located all over the United States, so if we were trying to schedule a meeting with a planner in a room with someone, that would make it cost-prohibitive,” Culp says. Employees can call in weekdays from 9:00 a.m. to 8:00 p.m. Eastern time.
Participants age 50 and older use the personalized service most often, Culp says, largely for questions about retirement and investments. The financial planners do not recommend specific investments such as a particular mutual fund. “We help individuals through the asset-allocation level,” he says. “Our goal is to help them understand the investment strategies, and for them to pick what makes the most sense for them.” The 401(k) has 19 core funds and 11 target-date funds.
Between the Web site, webinars, and phone usage, the financial planning service sees annual rates of utilization by Ernst & Young employees in excess of 20%, Culp says. “We recommend that we touch base with folks every year by phone,” he says, “to make sure that they are on track with their goals.”
Return to 2011 Plan Sponsors of the Year
Note: All the benefits programs discussed in this article are for U.S. employees and partners/principals.