Vermeer Corp.

As the recession’s effects lingered, some employees at agricultural and industrial equipment-maker Vermeer Corp. felt financially squeezed—and reduced their 401(k) contributions to boost their take-home pay.

That worried Cheri Klyn, director of shared services at the company in Pella, Iowa. “I’ve seen in the past that if somebody lowers his deferral in downtimes, he forgets to raise it when times are good,” she says.

The $221 million plan has 2,799 participants and automatically enrolls new participants at a 6% default into custom model portfolios put together by adviser Alliance Benefit Group Financial Services Corp. (ABGFS). The company matches 50% of the first 6% of pay participants contribute.

Vermeer’s concern about deferrals led to ABGFS spearheading production of a report that showed where participants in Vermeer’s 401(k) plan stood on retirement preparedness—on both aggregate and individual levels. The report, compiled from 2011 plan data, revealed that, with combined 401(k) balances and Social Security benefits, employees were on track for an average 64% income-replacement ratio.

Vermeer and its adviser had determined that employees needed to replace 75% to 100% of their ending wages, through the 401(k), Social Security and other assets. Vermeer’s plan committee discussed the projected shortfall. “We were all pretty concerned,” Klyn says. “We tend to be paternalistic, and we care about them after they leave here.”

So Vermeer asked ABGFS to do one-on-one meetings, in 2012, about retirement readiness. “We decided to meet with absolutely every employee and present these findings,” Klyn says. “We wanted to show each person his individual results.”

ABGFS spent six weeks doing the on-site meetings with participants. “A lot of people who thought they were well-prepared were surprised to find out where they actually stand,” Klyn says. Some took action to improve their situation, and the average replacement ratio rose to 69% for the 2012 plan year.

To keep the momentum going, Vermeer created an education policy statement (EPS). Putting its plan in writing to help improve retirement readiness makes the company’s commitment to executing it more formal, spells out its strategies and establishes clear benchmarks for judging success, Klyn says.

Last year, the plan committee adopted the statement, which addresses specifics of the company’s education program. ABGFS also, each year, produces the two-page “Retirement Readiness Report,” which it personalizes for each participant.

The EPS also cites several specific goals to benchmark: a 90% participation rate, an average contribution rate of 10% and use of model asset-allocation portfolios by 90% of participants. The plan already has met the first and third goals—with 94.9% participation and 89% of participants using the custom asset-allocation strategies. Last year, contributions averaged 7.2%.

—Judy Ward