Total Plan Assets:  $26,946,613.57
Total Plan Participants:  944 
Participation Rate:  98%
Average Deferral Rate:  5%
Automatic Enrollment:  Yes
Automatic Escalation:  Yes
Default Investment:  Fidelity Freedom Funds
Default Deferral Rate:  3%
Employer Contribution:  100% on first 1% of employee deferrals, and 50% on next 5% plus 2.5% of eligible salary as a nonelective contribution 

John F. Barnes IV, vice president, human resources (HR) and learning, with BioBridge Global (BBG) in San Antonio, Texas, joined the company in the fourth quarter of 2016. He brought with him an in-depth knowledge of 403(b) plans. “I gained experience in optimizing the old ‘Wild West’ 403(b) plans into new state-of-the-art ERISA [Employee Retirement Income Security Act] retirement plans,” he says.

BioBridge Global is an incorporated 501(c)(3) organization and is a holding company for three subsidiaries, all nonprofits—South Texas Blood & Tissue Center; GenCure, a regenerative medicine company focusing on gene therapies and bio-manufacturing of stem cells; and QualTex Laboratories, a blood-testing company. Additionally, it oversees the Blood & Tissue Center Foundation. Besides the San Antonio headquarters, it has main locations in Victoria, Texas and Atlanta, plus a number of small, fixed donor sites. When Barnes joined the company, it offered a 403(b) plan and a 401(a) plan with a generous 6% employer contribution after one year of service.

Barnes had worked with retirement plan consultant Pensionmark at his previous employer, which also offered a 403(b) plan, and he knew the enhancements Pensionmark could offer. The firm was hired as consultant—the first time BBG had ever brought in an outside adviser to help optimize its retirement benefit.

BBG’s 403(b) plan had 200-plus investment options and only a 17% participation rate. The investment lineup in the 401(a) plan was mainly recordkeeper proprietary funds, and employees received little to no education.

“When I came on board, BBG didn’t have an active retirement plan committee, so I formed that committee, which consisted of a board member, the CEO, the chief financial officer [CFO], general counsel, a member of my staff, and a certified public accountant [CPA] employed by us,” Barnes says. “We identified the issues with the two plans and decided to freeze the 401(a) plan, terminate the 403(b) plan and move to a 401(k).”

Barnes says the team realized BBG was providing a false sense of security for believing the  employers were providing for their retirement. His personal goal was changed in order to encourage all employees to save 15% of their compensation, and simultaneously the company changed from a 6% nonelective employer contribution to a match of 100% on the first 1% of salary deferred and 50% on the next 5%, with a reduced nonelective contribution of 2.5%.

Other retirement plan changes put into place included:
  • Enhancing the vesting schedule for employees from five-year graded to a two-year cliff on the matching contribution and three-year cliff for the nonelective contribution;
  • Allowing employees to enter the plan immediately;
  • Reducing the number of plan investments to an open architecture lineup consisting of 21 multimanager funds and a target-date fund (TDF) suite; and
  • Adding automatic enrollment at a 3% default deferral rate and automatic escalation of 1% of deferrals per year up to 6%.
The changes saved the plan and participants more than $50,000.

To prepare for the rollout of the new plan, Barnes’ team, along with Pensionmark and recordkeeper Fidelity, began with five days of meetings for the managers to ensure they could answer any employee questions. Then there were 15 days of employee group meetings, covering all 10 locations, as well as 15 additional days of one-on-ones. Further time was allotted for individual calls for those unable to attend a face-to-face appointment. Barnes also developed and distributed a calculator to help employees decide on their elective contributions to the plan given the new matching and nonelective contributions.

Barnes says he knew there would be challenges. “I was getting ready for an uphill battle to prepare the employees for retirement success.” And, as might be expected, employees did push back—especially about automatic enrollment and the reduction of the 6% nonelective company contribution. Moreover, the terminated non-ERISA 403(b) included individual annuities, and Barnes was concerned employees would not move their assets to the new plan.

Yet, “with our comprehensive education program already in place, one-on-one meetings and a lot of hand-holding we were able to overcome these issues,” he says.

The education continues every quarter, and time is allotted for one-on-ones during the year. Going forward, Barnes says, the education will focus on financial wellness, not just retirement. —Rebecca Moore

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