Biotronik/Micro Systems Engineering 401K Plan

As a producer of cardiovascular and endovascular devices and monitoring equipment, Biotronik/Micro Systems Engineering, in Lake Oswego, Oregon, has many high-earning employees. And, says Josh Ulmer, managing director – institutional consulting director with Morgan Stanley – Graystone Consulting, they understand the value of the 401(k) plan.

Participation is 94% to 96%, and only 2.6% of active employees do not receive the full match. New hires are automatically enrolled at 5%, but, with an average savings rate of 10.2%, many participants are engaged and choose to increase their savings on their own.

“While automatic enrollment is effective, employees are taking the reins and ratcheting their savings up over time,” Ulmer says.

Employees have average incomes of $105,000, and many have their own brokerage account, so the company wanted to take its 401(k) investing options and education to the next level.

One thing that makes the plan stand out is the after-tax Roth conversion option. “We had hundreds of people who were hitting the 402(g) limit [$22,500 this year, plus $7,500 if age 50 or older] who have the desire and capacity to save more,” Ulmer says. The company started allowing for after-tax contributions to the plan in 2015, in addition to Roth and traditional 401(k) contributions, which permits participants to save up to the 415 limit—$66,000 this year.

“What you can effectively do is save in that after-tax bucket, and, if you immediately convert that money to a Roth, you have changed the classification of funds from after-tax to Roth 401(k) and thereby are subject to no additional taxation,” he says. “But you have to make sure that each of those contributions is converted immediately to the Roth.” Any earnings on the money before the conversion can be taxed.

“We were an early adopter of that provision, and it has created millions of dollars in tax savings,” Ulmer says of his advisory firm. “It has contributed to the high rates of savings and a greater level of engagement in the plan.”

“It’s not uncommon to have one of their financial advisers call me,” to find out more about that opportunity, says Rich Frazier, senior director of human resources for Biotronik.

But not all the employees at Biotronik are high earners. “Our plan has not just been about one demographic; it’s about how do we get the right plan that benefits everybody,” says Frazier. “It may be pretty basic for some, and for others it’s more advanced. We didn’t just want to be a dumbed down 401(k) to save the bare minimum you can for retirement—we give them really good options once they’re in the plan.” The 5% auto-enrollment helps them all start saving early and get the full match, and few employees opt out, he notes.

Morgan Stanley’s financial wellness service offers eight educational meetings each year for participants of all experience levels; topics range from basic investing and retirement concepts to the more advanced wealth planning, investing and back-door-Roth accounts. “The first piece is educating those who are new to their career, and those who are in their career but are not really high earners, about the value of saving for retirement,” Frazier says. “That is so important to maximize first what we have available.”

Participants can also get individualized consultations with Morgan Stanley advisers. “The level of engagement is pretty incredible,” Ulmer says.

Further, Empower Retirement, the plan’s recordkeeper, offers participant advice services. Biotronik expanded its investing options, and 50% of participants are in a professionally managed solution.

Biotronik recently has added a number of biomedical engineering graduates just starting their careers. While they are receiving good paychecks, some have substantial student loan debt. Biotronik recently partnered with SoFi to help them manage that debt, plus it also offers a generous tuition reimbursement program; both provisions are being offered to help those workers afford to save more for retirement, Frazier says.

—Kimberly Lankford