Total Retirement Offering

Health Care Service Corporation

Gene George
Division Vice President, Financial Benefits/Plan Administration
  • Plan(s)
    401(k); DB
  • Total Plan Assets
    $2.3B in 401(k); $2.0B in DB
  • Number of Participants
    33,000 in 401(k); 26,000 in DB
  • Participation Rate
  • Average Deferral Rate
  • Default Deferral Rate
  • Default Investment
    Prudential GoalMaker
  • Automatic Enrollment
  • Automatic Escalation
  • Employer Contribution
    100% of the first 1% + 50% of the next 1%–5% (maximum of 3.5%)
  • Provider(s)
    Recordkeeper, Prudential Retirement; Adviser, Willis Towers Watson
  • Financial Wellness Educator(s)
    Prudential Retirement

Eighty-eight percent of participants are registered for, and use, the website and its tools.

Today’s defined contribution (DC) plans often have pressure put on them by employers and employees to deliver something similar to a defined benefit (DB) plan’s outcome for participants, says Gene George, division vice president – financial benefits/plan administration at Health Care Service Corporation (HCSC) in Chicago. To address this, the health insurer chooses to sponsor both an active pension plan and a 401(k) plan.

The company, which serves more than 16 million members across five states, revised the two plans to operate in sync more than 20 years ago. “The defined benefit plan was designed to be a companion plan to our 401(k),” George says. “The pension benefit is tempered to deliver a moderate defined benefit, and our thinking was that it would work hand in hand with a reasonable match- and deferral-based benefit that participants in the 401(k) will accumulate.” The idea is that these two plans, together with Social Security, will give retiring employees a basic level of retirement income.

The pension plan, which has a benefit formula based on compensation and does not target a particular percentage of replacement income, remains fully funded. These days, most employers don’t offer both types of retirement plans, but HCSC sees the pension plan as playing an important role in employees’ ability to retire on time. “And we’ve tailored it so that it’s affordable for the company,” George adds. The 401(k) gives employees a chance to enhance their savings, plus helps the company recruit new employees. “The 401(k) is the ‘glamour’ item: It’s the one everyone knows,” through which participants are reached, he says. HCSC matches 100% of the first 1%, then 50% of the next 1% through 5% of pay deferred, with a maximum total match of 3.5%.

Part-timers are eligible to participate in both plans. “We have a manageable proportion of part-time employees,” George says. “Everybody is treated the same: We let the amount of pay they get drive the [employer contribution] equation.” Additionally, full-time employees may be eligible to participate in a retiree health plan, based on criteria that include years of service and age at which the person retires.

The 401(k) plan has immediate eligibility and a two-year vesting schedule: Participants are 25% vested after one year and 100% after two. “It’s in keeping with our goal of making sure that people have what they need as quickly as possible,” says Retirement Plans Coordinator for HCSC Lindsay Dent.

In June 2018, participation and deferrals got a boost when the plan did a re-enrollment. “We re-enrolled everyone who was eligible for the plan and not contributing, or contributing at a level less than 6%,” Dent says. Of the employees re-enrolled, 51% stuck with the 6% deferral, she adds.

The 401(k) has now reached a 94% participation rate despite an educational challenge: About 28% of the employees work from home, and approximately the same percentage work remotely part of the week but not from a permanent home base. “It’s much more difficult when you don’t have a common place for them to come for a meeting,” Dent observes.

The education effort starts with HCSC’s extensive onboarding program for new employees, Dent says. The company has a day-one meeting for them, at its offices or by WebEx for those who can’t attend on-site. Before the work start date, they’re required to participate in an online learning program that completes their orientation, she says, and that includes a video explaining the retirement benefits.

The company also offers quarterly webinars on retirement and financial wellness issues. “We explain to employees that the 401(k) is where the rubber meets the road,” Dent says of motivating them to save in the plan. “That’s the one retirement benefit they can actively participate in, and should.”

—Judy Ward

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