HEADQUARTERS: Jackson, Michigan

TOTAL PLAN ASSETS/PARTICIPANTS: $154.7 million/2,056

PARTICIPATION RATE: 61.7%

AVERAGE DEFERRAL RATE: 8.7%

DEFAULT DEFERRAL RATE: Not applicable

DEFAULT INVESTMENT: Prudential GoalMaker;
Prudential IncomeFlex for participants 55 and older

EMPLOYER CONTRIBUTION: Matching contribution
of 100% of first 3% and 50% of next 2%

ADDITIONAL RETIREMENT PLAN: Not applicable

Most employees at Dawn Food Products, Inc., do not need financial expertise to do their jobs. So figuring out how to save for retirement, and where to invest, challenges many of them.

The international bakery supplier, headquartered in Jackson, Michigan, has 20 U.S. distribution centers, whose approximately 880 team members include warehouse workers, truck drivers and salespeople. Another 1,400 team members are employed in Dawn’s eight U.S. manufacturing plants, many of whom operate machinery on the manufacturing floor; 300 work at corporate headquarters. Additionally, the company utilizes many contract workers during busy seasons in both the distribution centers and plants.

“It is not typically the financially savvy person” who works at the manufacturing and distribution sites, says Carey Dassatti, chief human resources (HR) officer. Asked about the challenge of helping these team members save for retirement, he talks about convincing them to devote the time and resources to planning for the long term, when they often worry about shorter-term issues such as the economy or their current financial stressors. “The individual has to put himself into a mindset of, ‘How do I do the planning and put myself in a good place?’” he says.

Dawn’s $154.7 million 401(k) plan for its nonunion workers has 2,056 participants and a 61.7% participation rate, up from 53% in 2013. The company also offers a plan for union workers, with 183 participants and $8.9 million in assets.

The plan does not automatically enroll employees, but it does default enrolling participants into Prudential Retirement’s GoalMaker model portfolios. When all participants reach age 55, their balances get moved into Prudential’s IncomeFlex in-plan retirement-income solution, unless they opt out.

The doubling of participants’ average savings rate from 4.2% in 2013 to 8.7% in 2015 points to the plan’s progress in helping employees get on track, says Brian Coleman, vice president of total rewards and HR shared services. As a sponsor, he says, “We look at, ‘How can we get them to free up their money so they can save more?’”

Simplifying Decisions
Asked about the sponsor’s decision to default participants 55 and older into IncomeFlex, Coleman says that many Dawn team members have expressed their nervousness about selecting 401(k) investment options and trusting those with all their savings. “Our team members do not always have the skill set to invest,” he says. “We wanted to give them another option. For those team members uncomfortable with planning their future, they can have something that guarantees them a stream of income for their lifetime.”

Currently, 35% of plan assets for participants 55 and older are in IncomeFlex, he says, adding, “I’m ecstatic about that.” Across the plan, overall, 57.4% of assets are in the GoalMaker default.

In terms of how to educate participants about a retirement-income option, Coleman says, “The first piece is always to make sure the option is explained very simply: what the program is, what the positives and negatives are. Everything in our communications plan is written to about a fifth-grade level. The key for income products is to point out that they do exist and can be utilized by the average person.”

With participation, deferrals and investment in the default having increased, Dawn has intensified its focus on reducing leakage in the 401(k) plan. That happened when Prudential started as the plan’s recordkeeper, in 2013, and the sponsor looked more closely at plan data. “We started to see that, beyond our issues with contributions, there also are real loan issues,” Coleman says. The sponsor previously had made plan-design changes to curb loans, including allowing participants to have no more than two outstanding and limiting the amounts to participants’ own contributions, not the employer-match money.

Those moves helped reduce the drain a little, but the sponsor wanted more improvement. “We were still not happy,” Coleman says. Dawn did not opt to further reduce participants’ two-loan limit. “That’s one of the things that was grandfathered into the plan, so we did not want to change it,” he says.

The sponsor knew the reason for much of the borrowing  was to make big-ticket item purchases. So last year, Dawn partnered with the PayCheck Direct employee-purchase program to help team members make major household purchases without touching their 401(k) money. Through the PayCheck Direct program, Dawn employees may shop for thousands of items such as a big-screen TV or refrigerator, and, if they buy something, the money gets taken directly as a payroll deduction.

In the year since the program started, “We were able to lower loan utilization by 3%,” Coleman says. “Is it a good start? Yeah. Is it where we want to end up? No.”  

Focusing on Financial Wellness
Coleman hopes that an upcoming financial-wellness education program will help reduce loans more. The Prudential Pathways series, which Dawn plans to roll out in April, will include four 90-minute seminars over consecutive weeks and on-site, but outside of business hours so participants’ spouses may attend. Participants may take the program for free.

The seminars will focus on financial-wellness basics such as: living within a budget; how participants can develop a plan and an income strategy for their retirement years; utilizing options such as insurance to protect assets; and practical tools to use in pursuing financial wellness, including Prudential’s LifeStage Folio tool to compile and organize financial information.

Dawn faces the same obstacles to encouraging retirement saving as companies with similar employee demographics do, says Robert Rooks, a Chicago-based Prudential vice president who works closely with the plan. “The challenges are the competing goals that employees have at their different life stages,” he says. “It’s not just talking about the 401(k) and saying, ‘Hey, you need to save 10%,’ but looking at the fundamentals of their finances.”

Coleman wants those who attend the seminars to come away with more knowledge about their options when facing unanticipated budgetary demands. “It’s about how to save money, and how to plan for those unexpected and scary expenses, like, ‘I came home and my freezer had died,’” he says.

Dassatti attributes the improvements in plan statistics over the past few years largely to the persistent and patient efforts of Coleman and his staff to educate the company’s employees. “Brian has put tools in place to help people who typically would not know how to benefit from the plan,” he says. “He teaches people how they can be better savers.” —Judy Ward

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