Talcott Resolution Life, Inc.

A new plan with $0 in assets two years ago, this 401(k) has skyrocketed in its value thanks in part to a 100% match of 6% deferred, an average 9% deferred, and profit sharing.

The Talcott Resolution Life 401(k) Plan was introduced as a brand-new plan in July 2018. It had no assets, and, in less than two years, it has grown to approximately $26 million.

“Much of the growth of the plan was really across the last 18 months,” says Mark Hacker, total rewards and service delivery lead, as well as plan administrator, for the Windsor, Connecticut, company.

Hacker says there are three reasons that the plan grew so quickly. The first was a high influx of cash from rollover contributions, which make up a little over half of the assets. Second, the employer provides a generous contribution of 100% of the first 6%, besides 2% profit sharing and yearly true-up. Third, there’s a high level of employee participation, at 96%, as well as an average employee deferral rate of 9%. 

“Holistically, we say that our members want to be able to contribute 15%,” Hacker says. “When you add in the employer portion, they’re pretty much there.”

Forty percent of participants contribute at least 10% on their own, he adds. To help boost participation and deferral rates, the sponsor sits down with new hires a few weeks before automatic enrollment—which begins at 3%—kicks in. They discuss the 401(k) plan and set expectations about what will happen when they become eligible.

“They have tremendous participation. They have a very generous match, and [almost] everybody contributes,” says Amir Martin, corporate retirement director, senior vice president, with The Palancar Group at Morgan Stanley, the plan’s 3(21) fiduciary. “So you fast-forward, and all of a sudden they’ve exceeded $20 million within 15 months of their being a startup plan.”

The sponsor also has plans to change platforms—recordkeeper, custodian and trustees—to Fidelity later this year to “better assist employees with saving for retirement,” Hacker says. Amid this change, the sponsor will be adding after-tax contributions that are matched, as well as increasing the maximum deferral election and providing a separate deferral election for annual bonuses.

With this switch to Fidelity’s platform will also come enhanced education, Hacker says. “They have robust tools to provide to employees—calculators, webinars, Brainshark videos,” he says. “We would like to be able to leverage digital or online education so members can get things on their own, on demand.”

Additionally, through Talcott’s adviser, participants can receive a full financial plan at no cost to them, as it’s rolled into the advisory fee. Although not all participants have taken the adviser up on this offer, Martin estimates he’s seen 20 to 25 employees do so. The financial plan covers all types of debt, as well as life insurance and long-term care, in the form of a 12-page questionnaire. “So it’s fully detailed,” he adds.

Building a brand-new plan has been a “severe undertaking,” Hacker says, because many rollover assets were coming from former employers with mega plans to a new plan without any assets. “So how do you create something that could be comparable?”

The answer was creating an investment lineup that included a combination of actively and passively managed alternatives. “Because we have savvy investors, we need to also have actively managed funds,” he says. 

The platform under the current provider doesn’t allow for after-tax contributions, because of the limitations of being a new plan. However, the plan is actively working on enhancements to include this feature. 

With Talcott’s move to Fidelity, the sponsor also wants to provide enhanced digital options for participants.

“It’s important to leverage our analytic tools and assess our plan members and their needs,” Hacker says. “As we move to the new vendor, this is an area we will definitely be able to improve upon and have more impactful communications.”

—Corie Hengst