Nonprofit DC <$250MM

Kendall Johnson, vice president and chief financial officerKendall Johnson, vice president and chief financial officer

General Health System

Total Plan Assets:  $143.5 million
Total Plan Participants:  2,480
Participation Rate:  93%
Average Deferral Rate:  6.58%
Automatic Enrollment:  Yes
Automatic Escalation:  Yes
Default Investment:  JPMorgan SmartRetirement Funds
Default Deferral Rate:  4%
Employer Contribution:  50% of up to 6% of salary deferred

Kendall Johnson, executive vice president and chief financial officer (CFO) of General Health System (GHS) in Baton Rouge, Louisiana, tells employees that their financial well-being is his top priority. “We’ve been working very hard at moving forward employees’ financial wellness,” he says by way of example.

The firm’s adviser, Michael C. Perry, president of Retirement Advisors LLC, concurs. “General Health System has a unique company culture that tries to do all it can to help employees, including [promote] physical fitness and financial wellness.”

The endeavor “has been a multi-year journey,” Johnson says. To start it, GHS became one of the first clients of PayActiv, a firm that allows employees to get an advance on wages earned as an alternative to predatory payday lending firms. Johnson says employees are allowed to take up to 50% of earned wages, to a maximum of $500 per pay period, for a $5 fee with no interest. They may carry the loan no longer than two pay periods. PayActiv also provides an online portal and a mobile app with education about managing money.

“We started educating employees about managing their cash flow better and were surprised by how quickly the lesson spread,” Johnson says. Only about 15% of GHS’ nearly 4,000 employees utilize PayActiv.

Because student debt interferes with saving, in 2017, GHS partnered with Vault, a student loan education platform, to help employees and their children navigate refinancing, early pay-off, consolidation and other options for their student loans.

The health system additionally started a program that provides incentives for an employee to stay with the organization for one year: It will match what the employee pays toward student loans up to a certain dollar amount, depending on his job title with GHS. “We found that employee retention has been better due to the student loan repayment program than it was from offering sign-on bonuses,” Johnson says.

Further, GHS is considering adding an emergency savings benefit to reduce 401(k) plan loan and hardship withdrawals.

A Strong Support Network

Receiving steady support is also important for employees’ financial wellness. To that end, GHS’ 401(k) plan recordkeeper, Prudential, is active at the annual benefits fair and is on-site often to answer employee questions and discuss retirement readiness.

Perry, too, is involved at the benefits fairs and has one-on-one sessions with employees.

“People are more willing to open up about their financial struggles in a one-on-one setting,” Johnson notes.

Because GHS is a 24-hour-a-day, 365-day-a-year operation, it has to be resourceful to communicate with all of its employees. For one way, it often turns to written correspondence, and the direct mail and email provided by Prudential is simply expressed and easy to read and understand, Johnson says.

According to Perry, when they decided, a few years ago, to search for a new vendor, the quality of employee education was a critical factor. It is hard in a hospital environment to reach out and touch people. Prudential recognized that and has used as many touchpoints as possible to connect with employees, he says.

Johnson also encourages leaders to speak to employees about financial wellness and retirement. “Even if an employee works 11 p.m. to 7 a.m., there are still team meetings during which leaders can talk about financial wellness,” he says. He tells them, if employees have questions the leader cannot answer, to direct those people to the retirement team, Prudential or the plan adviser.

Perry commends Johnson’s team, calling it outstanding. For example, Alicia Allement, benefits supervisor, human resources (HR) and development, handles the plan’s day-to-day operations and the interaction with Prudential. “I can’t say enough good things about Alicia,” Perry says. “She meets with all key stakeholders, including doctors and department heads, annually in an attempt to train the trainer. If she can get department heads to talk about the plan, they’ll bring it up in their meetings.”

Johnson once worked for Ernst & Young, and one of the partners there would regularly ask if he was saving enough for retirement. “He cared about my financial future; that has always stuck with me, and I’ve carried it forward at General Health,” Johnson says. “When presenting to the leadership team, I talk about being ready for retirement, and I do so with other departments that don’t report to me. When we have these conversations, it improves employees’ engagement and shows we care about them as people.”

Overcoming Unawareness

Johnson says it shocks him how little understanding people have of what is needed to plan for retirement. That unawareness is one reason GHS uses plan design to help employees get retirement ready. “If they won’t do it themselves, we’ll do it for them,” he says.

“It’s rewarding to me to watch this plan grow and mature,” says Perry. “The team actually listens to the advice of their adviser,” says Perry. “They don’t always make changes immediately, but they have, over the past few years, taken positive steps with the retirement plan, which will materially affect the quality of life employees will enjoy in retirement.”

GHS has incrementally increased the plan’s automatic enrollment default rate to its current 4%, with the intent of continuing to increase it to 6%; that way, employees will get the maximum match of 50% on up to 6% of salary deferred. The organization automatically escalates employee deferrals 1% each year—coordinated with merit increases—up to 10%.

GHS also automatically re-enrolls nonparticipants into the 401(k) plan annually. Employees have to make a conscious decision to opt out.

According to Perry, GHS provides an annual compensation statement that shows quantitatively what employees are missing when they fail to contribute up to the employer match.

He says the team at GHS works to learn about the Employee Retirement Income Security Act (ERISA) and administration and compliance of retirement plans. “Kendall is brilliant; you only have to tell him something once and he remembers. Because of his background, he understands he has to dot all i’s and cross all t’s,” Perry says.

“Alicia didn’t have the same experience, but she reads articles and asks questions and soaks up knowledge like a sponge,” he continues. “She came up with the idea to make a modest qualified nonelective contribution to help the plan pass nondiscrimination testing. She is proactive, rather than reactive, always asking, ‘How can we make the plan better?’”

Johnson says he is proud that 93% of employees now participate in the plan, when three or four years ago it was half that number. “I won’t be happy until the participation rate is closer to 100%, so we’re going to keep trying,” he says. “The next thing I want to see us do is invest more dollars in employees’ retirement.”

Perry agrees. “General is the poster child of a company that does everything right within its budget to help employees have financial wellness and be ready for retirement.” —Rebecca Moore

 

 

 


 

 

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