Badger Mining Corporation

The mostly blue-collar workforce at Badger Mining Corporation (BMC), a family-owned producer of industrial silica sand products, headquartered in Berlin, Wisconsin, has some impressive retirement-savings numbers. The 401(k) plan has a 99.4% participation rate; the deferral rate of non-highly compensated employees (NHCEs) averages 10.28%; and participants have an average account balance of $155,019.

Jennifer Johnson, the company’s associate development leader, arrived at the company in 2016, after working in banking. “When I came to Badger, I was astonished at the participation rate and the average contribution rate,” she says. “I really do think those things are because of the plan design.”

The company’s employees average 43 years old, and most work at BMC’s mines or in its sand-processing facilities. “Maybe one-third of our workforce is college-educated and professional employees,” says Lynn Sweet, benefits associate at Badger Mining. “Our main workforce is high school graduates, and they’re out working in the field.”

Many Ways to Help

The plan’s NHCE average deferral rate of 10.28% compares to a 12.97% rate for highly compensated employees (HCEs). All Badger Mining associates who are 20 or older and work at least one hour annually may participate in the plan, and participants get 100% immediate vesting.

Badger Mining first implemented automatic enrollment for the 401(k) plan in 2008, subsequently upping the default deferral rate from 3% to 6%. Using plan design to show BMC employees a path to saving and investing for their retirement has worked out well for them. “The majority of our employees are blue collar, and they don’t understand finance and investing,” Sweet says. “They really just want someone to tell them what to do.”

The company gives 20% of its annual profits back to its employees: 10% goes to a quarterly cash bonus for all, and 10% is put into a pool used for discretionary cash bonuses paid for accomplishments such as completing a special project.

“We noticed, a few years ago, that we weren’t seeing many of our associates take advantage of putting that extra money away for their retirement,” Sweet says. “We said, ‘We need to help them put in more.’ That’s when we went to the automatic increase.”

So the plan added 1% automatic escalation, in 2014. “The first year, we had some concern that people would be upset, but I never heard a peep from anybody,” Sweet says.

Adds Johnson, “I believe that, with the auto-increase, if you gradually take them up by 1% a year, it’s less of a burden on their paycheck. And all of a sudden, they get to a 10% deferral.”

About 35% of the plan’s participants opt out of auto-escalation, but many of those associates already make deferrals at double-digit rates, Sweet says. If they stick with 1% auto-escalation, they could defer up to a cap of 90%. “We said, ‘Why stop it ourselves? They can stop it anytime they want, so let it keep going until they want to stop it,’” she explains. “We’re using inertia to help them.”

Automatically enrolled participants are defaulted into Vanguard Target Retirement Funds, but, for participants who want more clarity on their investments’ risk level, the menu also includes risk-based model portfolios designed by the plan’s adviser, Spectrum Investment Advisors. “We have seven model portfolios, and they go from very conservative to very aggressive,” Sweet says. “The most conservative fund has 25% in equity and 75% in fixed income, and the most aggressive fund has 95% in equity and 5% in fixed income.” The portfolios are rebalanced annually.

Sweet says Badger Mining includes risk-based funds on the investment menu because some participants may feel they do not understand a target-date fund (TDF)’s risk level. “We weren’t sure that associates always understand that the target-date 2060 fund is much more aggressive than the target-date 2020 fund, whereas these model portfolios tell them the risk level exactly,” she says. “They are labeled for every risk level, such as ‘aggressive.’” Participants who want to invest in a risk-based fund talk with the plan’s adviser about the best model portfolio for their individual risk tolerance.

The Role of One-on-One Meetings

Badger Mining utilizes its recordkeeper Fidelity Investments’ tools to help participants calculate their retirement readiness. Spectrum also comes on-site, during work hours, to meet with employees. “They’re required to attend a one-on-one meeting with our adviser at least every third year, but they can do it more often if they want,” Sweet says. “This is hard work, and many of our employees are interested in early retirement. This way, they can work with Spectrum to see the probability of that.”

It is important for BMC employees to talk periodically with an expert about where they stand on their retirement readiness, Johnson says. “If you’re not looking at it, how do you know if you’re on track?” she says. “If you look at it at least every three years, you’re able to make some adjustments before it’s too late.”

Besides recognizing the personal benefit, the company also sees the business benefit of letting employees take time during their workday to meet with Spectrum. “We are in a pretty dangerous occupation: There’s a lot of heavy equipment,” Sweet says. “So we need for people to be at the top of their game at all times. We don’t want our associates to be worrying about money while they’re working.”

Other associates like to talk to Spectrum about broader financial issues, such as saving for a child’s college education. “The people who come on-site from Spectrum are CFPs [Certified Financial Planners], so they can help associates with their whole financial picture,” Sweet says. Badger is also considering arranging for Spectrum to help any employees who would like one put together a holistic personal financial plan.

One of the plan’s biggest challenges is to overcome employees’ impulse to move their account balance to a local financial adviser who wants to handle their assets, Sweet says. “Our plants are located in very rural areas, and these are the kind of towns where everybody knows everybody,” she says. “Our company has a reputation for having a very good retirement plan, and many of our people contact us to say they’re interested in taking an in-service distribution and placing that money with an outside adviser. They’ll tell us something like, ‘Joe Blow, who I know because I play softball with him, says he can get me a better return.’”

Badger Mining responds by suggesting that these participants contact the plan’s adviser to get a clearer sense of decision factors such as the fee differential. “Spectrum gives our associates unbiased advice, and Spectrum gets a flat fee, which we pay,” Sweet says. “We encourage those associates to call Spectrum, so they can understand what situation they’re moving their money to, and what situation they’re moving their money from. In the end, we have maybe only two or three of those people a year who take their balance out and roll it into outside assets.”

—Judy Ward