PLANSPONSOR SERVICE STARS

Charles Schwab

Michael Culp and Marianne Thompson help a plan sponsor get comfortable with automatic contribution increases

RECORDKEEPER EMPLOYER:  Charles Schwab
TEAM MEMBERS:  Michael Culp, Marianne Thompson
TENURE WITH COMPANY:  A combined 43 years
BIOs:  A 24-year Schwab veteran, Michael Culp has worked that entire time in retirement services, attending to the needs of all market segments from small to mega plans. Marianne Thompson has worked in the financial services industry for more than 26 years. Her entire 19-year career at Schwab has been in client services, working with midsize to large plans.
CLIENT:  Karsten Manufacturing Corp.
CLIENT INDUSTRY: Sports-equipment manufacturing
CLIENT HEADQUARTERS:  Phoenix, Arizona
CLIENT PLAN ASSETS:  $165 million
CLIENT PLAN PARTICIPANTS:  1,011

Karsten Manufacturing Corp. started automatically enrolling employees in its 401(k) plan about 15 years ago. “We were really early adopters,” Chief Financial Officer (CFO) Michael Trueblood says. “We’re privately owned, and our owners are very paternalistic.”

But, concerned about employee pushback, the maker of Ping golf clubs and other golfing equipment held back for years on implementing automatic contribution increases. Each year, when the team from recordkeeper Charles Schwab came on-site to do a plan review, “They would say, ‘You guys really look great against your industry—with the exception of an auto-savings increase,’” Trueblood remembers.

In 2015, after years of such discussion, the Schwab team convinced the sponsor to implement 1% annual auto-increases on its 6% initial deferral, up to a 15% ceiling. The sponsor also opted to begin doing annual re-enrollment, starting at a modest 1% deferral.

“We’ve enjoyed basically no turnover on the team that works with us, since we moved to Schwab in 2004. We have a strong camaraderie, and it allows for a level of candor,” Trueblood says. “And it’s clear to us that they are very focused on getting our participants financially prepared for retirement.”

Marianne Thompson, senior client service manager, is the key contact in the recordkeeper’s work with Karsten. Her other Schwab colleague on the team was Managing Director Michael Culp.

Besides performing plan-benchmarking comparisons, Schwab helped make Karsten officials comfortable with auto-increases and annual re-enrollment by presenting the sponsor with data on the potential impact. The recordkeeper did an analysis that projected that the changes would be cost-neutral for Karsten. It shared data from its other client experiences showing that auto-increases typically see 80% acceptance by participants, with little employee pushback. And Schwab’s team talked to the sponsor about how the plan’s 6% deferral rate would not put employees on track to save enough for retirement.

“We showed them our ERISA [Employee Retirement Income Security Act] consulting team’s research that finds people no longer need to save 6% to 8% to retire,” Thompson says. “It’s double digits.”

By 2015, Trueblood and others at Karsten felt increasingly optimistic that employees would not reject the changes to the plan. “We realized, why not just do this in small increments and see if employees accept it?” he says. “While this doesn’t achieve the goal of getting them [to sufficient savings rates] quickly, it at least gets them on the road.” With Karsten employees’ tenure currently averaging 16 years, many remain long enough that they could reach 15% savings.

The plan did the first 1% auto-increase in 2015, and about 95% of participants have allowed them to continue, Thompson says. Only about 5% of re-enrolled employees have chosen to opt out of the plan since last year. “To us, that’s success,” she says. —Judy Ward
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