2019 Plan Sponsor of the Year
Total Retirement Offering

Sumitomo Machinery Corporation of America

FINALIST

Total Plan Assets: $37 million; DC; $35 million
Participants: 380 DC; 358 DB
Participation Rate: 95%
Average Deferral Rate: 8.8%
Default Deferral Rate: 6%
Default Investment: Principal Lifetime Funds
Automatic Enrollment: Yes
Automatic Escalation: Yes
Employer Contribution: 50% on 6% deferral, fully funded DB plan

The leadership team at Sumitomo Machinery Corporation of America (SMA) is committed to its employees and to making it an employer of choice. Maintaining both a 401(k) and a fully funded defined benefit (DB) pension plan through the Great Recession to the present is strong evidence.

The parent company of SMA is Sumitomo Heavy Industries (SHI), one of the largest manufacturers of machinery in Japan and the global leader in power transmission knowledge and innovation. It is about 400 years old, but SMA was formed in 1966. It’s headquartered in Chesapeake, Virginia, with four additional locations in the U.S.: Glendale Heights, Illinois; Corona, California; Louisville, Kentucky; and Verona, Virginia.

The company manufactures and markets a premium line of power transmission equipment, including the Cyclo gearmotor and speed reducer product line. When asked to explain more about the company’s products, Jim Solomon, president and CEO of SMA, says, “the product is used in a wide variety of industries and applications. Our equipment is commonly found on conveying systems for parcel handling, manufacturing, mining, food processing, etc. Our products are also commonly found on baggage handling systems and jet bridges at the airport.”  

Even with a fully funded DB plan, SMA has an average 401(k) deferral rate of 8.8% and a company match of 50% on a 6% employee contribution. Solomon says, “SMA encourages a high savings rates in the 401(k), mostly through education. We have involvement from Principal and Capital Securities Group, the third party that we hired to advise our retirement committee on the management of these plans. Even with multiple locations, we have very regular education updates at all of our facilities.”

At a time when DB plan funding is at a deficit for many plan sponsors, SMA found a way to keep the plan afloat. Solomon says, “We just made it a priority. In 2013, we made it our mission to be fully funded within three years. We were 80% funded at the time and decided it was very important for the employees and for the company to become fully funded. We informed SHI that it would take a significant amount of cash to fully fund the plan. They agreed and we did it.”

In 2011, SMA moved its DB plan to Principal, which also administers its 401(k). “We brought it into one house because we were struggling with having the 401(k) plan in one place, the pension plan in another and the actuaries in a third place. It didn’t work,” he says.

Solomon says the company has found several benefits to employing one recordkeeper. Plan benchmarking can be done using data from both the DC and the DB plans. “We benchmark internally on plan usage and within other plans recordkept by Principal. From time to time, Capital Securities Group, our adviser, pulls statistics from outside,” he says.

Plan participant retirement wellness scores that Principal provides indicate that approximately 60% of participants are on track to replace 70% or more of their income from their DC plan upon retirement. Solomon says, “We look at this information with Principal on a regular basis. And we look at the combined numbers for the DC and the DB plan. In addition, every employee can look into that on their own through the Principal website.

Either Principal or Capital Securities Group attend educational sessions with the employees as well as human resources (HR) just to keep the retirement plans top of mind. In addition, employees have access to a wide array of educational tools and services via the Principal website, and both plans can be viewed on one screen.

SMA keeps the retirement drumbeat going. Solomon says, “We talk about it all the time when we have ‘all employee’ meetings, whether it’s myself or the CFO [chief financial officer], we’re constantly bringing up the plans and the benefits they provide. We also have ‘Lunch with the Executives’ where we meet with about 12 employees at a time and go over different areas of importance or concerns to the employees. If the 401(k) and pension are not part of the conversation, we try to bring it up.”

The 401(k) plan uses automatic enrollment, and nonparticipants are re-enrolled every year with the ability to opt out of the plan. This has resulted in more employees remaining at that contribution level or higher each year, contributing to the increased deferral percentages for the group.

Melinda A. Lassiter, relationship manager for Principal,  says, “A turning point for the plan, without hesitation, was in 2013, when automatic enrollment was put into place. Participation really took off.”

SMA provides employees with one-on-one access to certified financial planners, in person and by phone, so they can receive an extra layer of high-touch while maximizing their opportunity to realize successful retirement outcomes.

The investment committee adopted an investment policy statement (IPS), using the pre-MAP 21 [Moving Ahead for Progress in the 21st Century] legislation requirements. There are nine funds in the investment lineup. Commissions and fees are evaluated by the committee using the Fi360 analysis on a regular basis and are at or below benchmarks for service received.

Lassiter considers SMA the model client. She says, “They are so attuned with the benefits. Without hesitation, we meet quarterly. They are consistently willing to provide time away from jobs so that advisers can meet with participants one on one.”

“Average employee tenure is long. Financial wellness is really important for us at SMA. Having a secure retirement plan is just one of the ways that we strive to be the employer of choice,” says Solomon. —Judy Faust Hartnett

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