City of Milwaukee

In the first five years after design changes were implemented in the City of Milwaukee 457(b) plan, previously underserved employee populations clearly benefitted. Participation among women in the plan jumped from 66% to 89% between 2016 and 2021, and their average deferral rate rose from 5% to 6.3%. Among Black employees, participation grew from 62% to 87% and the average deferral rate increased from 4% to 5.6%. And among Latino employees, participation improved from 69% to 87%, while the average deferral rate advanced from 5.1% to 7%.

The 457 plan’s board of trustees voted in 2016 to approve changes to its design, including automatic enrollment of new hires and annual reenrollment of non-participants and those saving less than the 3% default deferral (unless they opted out), plus participants not in the default investment. (Excepted from the auto-enrollment and reenrollment are active unionized fire and police employees.) The changes came amid the plan’s move that year to Voya Financial as the new recordkeeper. “That transition gave us the opportunity to take a fresh look at things,” Board Vice Chair James Klajbor says. “We said, ‘Why not see what can be done to improve the plan?’” 

Prior to these design changes, plan officials heard Ariel Investments Co-CEO and President Mellody Hobson present about the disparities in financial health and retirement savings with respect to race and gender. “That got everybody’s attention,” says Beth Conradson Cleary, executive director of the City of Milwaukee 457(b) Retirement Plan. “The board decided to take a proactive look at our demographics, and realized there were gaps in savings and participation for some employee groups.”

Plan officials decided to start auto-enrollment of new hires and the annual reenrollment in 2016, in tandem with the recordkeeper transition, rather than staggering the changes. “It was a herculean effort,” Conradson Cleary says, but the plan data soon demonstrated a positive impact. “Everything started to shift, once we had those best practices in place,” she says.

The deferred compensation plan now has an 89% overall participation rate, so there’s still some room for improvement. City employees participate in an active defined benefit plan, and it can be challenging to persuade some employees to save more of their pay for their retirement.

“We encourage people to think long term,” Klajbor says. “We tell them, ‘If you contribute to the 457 plan you might have a bit of pain now, but you will save yourself a lot of pain later, if you can retire on time and have a nice retirement.’”

Among underserved groups in the plan, the automated design features have helped them see that they can save more for their retirement, as have the one-on-one meetings that recordkeeper Voya does with participants. (Voya has conducted the meetings virtually for two years, and Conradson Cleary hopes to move to a hybrid model soon, offering both virtual and in-person meetings.)

“That’s where the magic happens,” Conradson Cleary says, “when they can have those individual conversations and understand the big picture of where they are, where they want to go, and how to get there. When people learn more, they understand what’s at stake—and then they take action.”

—Judy Ward