Total Retirement Offering (TRO)

Farm Credit Foundations

Karen Barnes
Benefits Consultant
  • Plan(s)
    401(k); nonqualified plan
  • Total Plan Assets
    $3.3B in 401(k); $114.4MM in nonqualified; $1.8B in 4 closed DB plans
  • Number of Participants
    13,077 in 401(k); 814 in nonqualified; 7,143 in DB
  • Participation Rate
    97.9% for 401(k); 11.2% for nonqualified
  • Average Deferral Rate
    9.5% for 401(k); not reported for nonqualified
  • Default Deferral Rate
  • Default Investment
    Vanguard Target Retirement Funds
  • Automatic Enrollment
  • Automatic Escalation
  • Employer Contribution
    100% of 6% + 3% fixed contribution
  • Provider(s)
    Recordkeeper: John Hancock; Adviser: Mercer for DC and Goldman Sachs for DB
  • Financial Wellness Educators(s)
    John Hancock, Mercer, SmartDollar

For Farm Credit Foundations, headquartered in St. Paul, Minnesota, there is strength in numbers.

This human resources (HR) shared services provider for a network of 35 borrower-owned institutions that specialize in working with farmers and other agricultural providers, exists so that its member institutions can more efficiently handle all HR issues. That includes having one 401(k) plan.

“Our member size-range is from nine employees to 1,700,” says Cynthia Burkel, senior vice president of benefits. “We recognized that in order to have a benefits package to attract and retain employees and be market-competitive, we needed to be able to go to market with scale. By operating as a single employer, we have one plan with more than 10,000 participants, rather than being 35 employers with their own, smaller plans. Having one plan also helps to ensure that we make sound governance decisions to [guarantee] that best-in-class design and features are available to participants.”

Farm Credit unified its retirement plan offering as part of a broader shift 20 years ago to centralize benefits and compensation work for many of its member organizations. Previously, each of the 12 farm credit districts that it covers had its own HR department and retirement plan.

Farm Credit’s four defined benefit (DB) plans all closed more than a decade ago. That was partly due to the employer cost and partly to the organization’s goal of helping employees maximize what they can save for their retirement, Burkel says.

Having one 401(k) plan enables participants to pay lower fees. Farm Credit uses a hybrid recordkeeping fee, which it moved to in 2014 with the goal of ensuring that lower-balance participants avoid paying a disproportionately high percentage of administrative costs. “We have an asset-based fee for accounts with a balance of less than $20,000, and a [$56 annual] fixed fee for accounts with greater than $20,000,” Burkel says. “Are employees with higher account balances subsidizing administrative costs a bit for those with less than $20,000? Sure. But, as a percentage of their assets, it’s a small fee.”

The 401(k) plan’s default investment, Vanguard Target Retirement Funds, have a 7-basis-point investment fee. The core menu’s investment fees range from 3 to 72 basis points (bps). “As one plan, we have the scale of our asset pool,” Burkel says. “We’re sitting at more than $3 billion in assets, so we can get lower fees.”

The centralized approach also lets Farm Credit coordinate retirement plan and financial wellness education. The organization held 19 on-site workshops in 2019, before moving to a Zoom format during the pandemic. Its two main workshops are “Building a Strong Financial Foundation,” for early-career employees, and “Building Your Retirement,” for mid- to late-career employees.

“We’re sticking with Zoom meetings until at least the fall, and then we hope we can go back to doing in-person meetings,” says Benefits Consultant Karen Barnes. “Doing Zoom meetings has allowed us to reach more people. But there’s a certain dynamic when you get in a room with people and have a conversation—an energy in the room—that you can’t duplicate on Zoom.”

Judy Ward

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