A Plan Sponsor Gets Participants Unstuck

May 5, 2014 (PLANSPONSOR.com) – “Two years ago, we noticed a lack of participants who were on track to replace adequate income in retirement,” says Ann Gormley, senior vice president of Human Resources at Pinnacle Health in Harrisburg, Pennsylvania.

Pinnacle Health’s retirement benefits program consists of many parts, including a defined benefit (DB) plan that was frozen as of 12/31/2007, a frozen 401(a) plan in which participants used to receive a base contribution of 2% from the employer and a 401(k) plan for employees of the for-profit divisions of the organization. The Tax-Sheltered Annuity Trust (TSAT), an Employee Retirement Security Act (ERISA) 403(b) plan, is the savings vehicle for the majority of employees.

Gormley tells PLANSPONSOR the organization implemented automatic enrollment in 2007 with a default 2% employee deferral; however, a plan design optimization analysis to determine how many participants would retire with an acceptable income replacement rate performed by Pinnacle’s plan adviser at Strategic Retirement Group with its provider Prudential, led the organization to realize many participants were stuck at the 2% deferral and not increasing their savings. “They were not actively engaged in the plans, and not saving enough to retire,” she says.

Being stuck at the 2% deferral rate also meant employees were passing up Pinnacle Health’s employer match contributions to the 403(b) and 401(k). Gormley explains the plans offer a 50% match of the first 6% of employee deferrals, and after five years of employment, participants may earn 67% of the first 6% of deferrals.

With the help of its adviser, Pinnacle Health decided a reenrollment was in order, and implemented an automatic deferral increase program. David Hinderstein, president of Strategic Retirement Group in White Plains, New York, tells PLANSPONSOR the reenrollment was done at 12/31/2013. There are 5,056 employees contributing to either the 403(b) or 401(k). According to Hinderstein, prior to the reenrollment, there were 355 eligible employees who were not contributing; afterwards, there are only 79.

In addition, there are now 3,484 participants signed up for auto-escalation in the 403(b) plan, and 179 in the 401(k). Gormley says there were no glitches or pushback when implementing the reenrollment.

But, Pinnacle Health’s efforts to get employees’ retirement savings moving did not stop with the reenrollment and implementation of auto-escalation. Hinderstein said the 2% base employer contribution was previously put into the 401(a) plan for employees to help the organization pass non-discrimination testing, but Pinnacle began to see the multi-plan benefit arrangement as a hurdle to engaging participants, so the 401(a) plan was frozen and those contributions now go to the 403(b) plan.

In addition, says Hinderstein, the retirement program was totally unbundled before the reorganization, with Prudential as the defined contribution (DC) provider since 1997 or 1998. Now DB services, including actuarial, trust and investment services are also with Prudential following a comprehensive request for proposal (RFP) process.

One way this helps participants is by improving access to comprehensive retirement benefits information. With the help of Prudential, Gormley says, Pinnacle branded the program on its new comPassion (comp + passion) web site. According to Gormley, the website creates an easy-to-use experience for employees to access information across all Pinnacle plans that are part of the program; motivates and allows employees to make easy transactions (enrolling across applicable plans, increasing contributions, managing beneficiaries, etc.); and provide fresh, relevant and regularly updated educational content without necessitating an undue content-generation burden on internal resources.

Improving the program for participants has been “a true team effort,” Gormley says. “David’s firm, our provider, ERISA counsel and HR department all work as a team with one goal in mind—to help employees retire with dignity.”