EBSCO Industries, Inc.

EBSCO Industries, Inc., headquartered in Birmingham, Alabama, has been in business since 1944 and is one of the largest privately held and family-owned companies in the U.S. It started out as a small subscription agency but grew to become a pioneer in the library services industry. It also encompasses a broad spectrum of other unrelated businesses. With selling at the core of what EBSCO does, the company puts an emphasis on people and values relationships—including those with its own employees.

“EBSCO went through an extensive fiduciary exercise to examine the health of its retirement plan according to demographics, participants and earnings,” says Michelle Zevola, senior relationship director at Principal Financial Group, the plan’s recordkeeper since last July. It also renewed its focus on ensuring that workers can retire with sufficient replacement income. “The company wanted to modernize its plan design and employee offerings. After significant analysis, it decided to transition from a trustee-directed plan to a participant-directed  plan,” Zevola says.

From the mid-1990s until last July 1, plan participants could make payroll deferrals into the 401(k) plan; however, all plan assets were in one collective asset investment pool and were professionally managed by investment managers selected by the administrative committee, explains Terri Deneen, EBSCO’s plan administrator. Each participant had the same allocation and investment returns.

Since the changeover, average employee deferrals have reached 9%, and over 31% of participants have committed to contribute 10% of earnings annually. Further, EBSCO employees’  average account balance rose 34% from prior to the transition, and EBSCO provided a 14.3% company contribution to encourage employees to reach their retirement goals, Zevola says.

The transition allowed greater precision for inspecting the plan’s health and participants’ retirement readiness, she says. Examining the plan’s health consisted of “doing an extensive study on the workers’ age groups and compensation ranges, incorporating Social Security as well, to see that they’re going to reach their retirement goals,” she says.

“The important thing,” says Deneen, “is the data show that our 20- and 30-something employees are on the correct path to reaching their targeted retirement wellness goals—presuming they stay with the plan and retire at the normal retirement age.” The analysis examines whether current plan designs serve employees well throughout their career, whether changes should be made and whether participants are going to retire with replacement income, she says.

An automatic re-enrollment to the new plan was implemented to supplement automatic enrollment and automatic escalation for those who make an affirmative election. The auto-re-enrollment will be repeated each year and should be particularly effective in increasing employees’ retirement readiness, Deneen says. “We realized that participants were generally not going to take any action, but they’ll let you do it for them through auto-enroll and auto-sweep,” she says, adding that, once participant-direction was provided, the vast majority of plan assets remained in the plan’s QDIA.

The EBSCO internal communications group worked with Principal to distribute information that explained the plan conversion to participants; this prompted a high level of engagement, Zevola says. The group created web pages with interactive features. By way of these, participants could submit their plan-transition questions, which a company representative then answered, says Wanda Lauderdale, manager, plan administration, at EBSCO.

EBSCO focuses on retirement income replacement by taking participant demographic and employee and employer contribution data and projecting forward to age 65. “Ultimately, we’re looking for 80% and higher income replacement rates, and at the present time, we have one-third of all plan participants at the 70%-and-above level,” Lauderdale says.

The focus on income replacement led to a review of retirement plan decumulation methods, resulting in expanded payout options and a partnership with Principal and CAPTRUST to give employees access to financial wellness programs and investment counseling. The plan allows for systemic withdrawals so retirees may receive recurring smaller payments rather than just a lump sum. This allows further flexibility for financial planning with volatile market conditions, Zevola points out.

Before the systematic withdrawal feature was added, when an employee retired, he could choose one 100% or two 50% payouts, but “sometimes the person didn’t need that much,” Lauderdale notes.

—Noah Zuss