Total Plan Assets:  $5,969,325.92
Total Plan Participants:  180
Participation Rate:  67%
Average Deferral Rate:  Pre-tax average: 8%; post-tax average: 7%
Automatic Enrollment:  No
Automatic Escalation:  No
Default Investment:  TIAA-CREF Lifecycle Index target-date fund
Default Deferral Rate:   N/A
Employer Contribution:  8.5% nonelective

Kokua Kalihi Valley (KKV) in Honolulu is a community-based service organization founded 47 years ago by area residents who wanted to tackle longstanding health inequities. David Derauf, M.D., MPH, executive director at Kokua Kalihi Valley says the first four employees were local women who went door to door to ask what was going on in people’s lives and what would be helpful. They learned that people had trouble finding culturally friendly and affordable medical and dental care.

KKV now provides not only that, but behavioral health care, a 100-acre nature park to grow food for the community, services for the elderly to age in place, and various services for youth.

The generosity of KKV extends to its employees’ retirement benefits. The organization offers an 8.5% nonelective contribution to its 403(b) plan, for which employees are eligible after two years of service; it is 100% immediately vested.

“We made the decision about 25 years ago that we’re not being a good employer if we don’t find a way to help participants save for retirement,” Derauf says, noting that KKV is in one of Hawaii’s lowest-income communities. “Over the years, both managers and our board members have asked us to cut this benefit and use it to increase hourly wages. We haven’t because retirement is important.”

But KKV understands that financial wellness prior to retirement is also important. The organization engaged the services of Asa Kajihiro of Retirement Benefits Group (RBG), its plan adviser, to implement a financial wellness program to help employees with specific financial stresses. Derauf says KKV is very generous in allowing paid time for employees to engage in group and one-on-one meetings with the adviser.

Janet Lee Watanabe, director of human resources (HR) at KKV, coordinates with Kajihiro on communication strategies and content. She schedules meetings across the organization’s three separate locations to ensure that all participants are served. Last year, KKV gave over 58 hours of financial wellness and retirement plan education to its employees.

Part of that education was due to an overhaul of retirement benefits. KKV recognized it needed to comply with IRS 403(b) regulations, including the remedial amendment period that ends March 31, 2020. The benefits team itself needed education—one reason the organization hired RBG. With the assistance of Shawna Christiansen of RBG, it went through a competitive process to select a new recordkeeper—OneAmerica.

After OneAmerica came on board, KKV adopted a prototype 403(b) plan document and hired a 3(38) investment manager. The plan utilizes either the least expensive or most efficient share class for the approximately 20 funds offered—a mix of indexed and actively managed funds—and utilizes index target-date funds (TDFs) as the qualified default investment alternative (QDIA). The investment manager “uses a really robust methodology for benchmarking performance, whereas, in the past, we didn’t have a way to easily benchmark objectively,” Derauf says.

KKV’s participants owned individual annuities from multiple vendors. Part of the plan overhaul was to move from individual annuities to a group annuity. Derauf says many of participants’ annuities were still on a surrender schedule, and it took many hours to educate and communicate the pros and cons of moving to a group annuity vs. staying with individual ones.

During education meetings, participants learned about their unique surrender schedules and which fees to compare; they were also offered help in filling out forms to move assets. “KKV’s participants pay, on average, one-third of what they were paying before the plan design change,” Derauf says. In addition, through this transition process, participants were reunited with “lost” individual contracts that were in place prior to the 403(b) regulation changes.

Another issue the plan faced was that participant loans were noncompliant with IRS guidelines. Loans had been financed by the participant’s annuity provider, with high interest rates.  Further, because the loans were not repaid through payroll deductions, many defaulted. To remedy this, the sponsor paid off and re-amortized half of the outstanding loans through a single low-interest loan with OneAmerica. Loan repayments are now made via payroll deduction.

Derauf says the fact that 67% of eligible employees now contribute to the plan is a testament to how much work has been done to teach employees about saving for retirement. While 67% may not seem high, it surpasses the average rate for 403(b) plans overall and is impressive considering employees receive 8.5% on their salary, whether they defer or not.

Derauf notes that automatic enrollment and automatic escalation have not been implemented, a decision made to keep participants from being overwhelmed with plan changes. But KKV may implement those features and an employer match in the future, he says. —Rebecca Moore
E_NOTICE Error in file single-awards.php at line 22: Undefined variable: pid