From the participant’s viewpoint, the part of the Cox Smith 401(k) plan revamp that paid the greatest dividend was one-on-one advice for the firm’s 500 employees. “The consultants came in and answered individual questions about participants’ retirement plans and their retirement planning. That added a lot in terms of tightening awareness of the plan and conveying the message as to why it’s important,” says Jamie Smith, chairman of the Austin-based law firm, which is involved in all aspects of business law and litigation.
What began as a search for asset-allocation education and a desire to lower plan pricing led to the hiring of a new plan consultant and an entire plan critique. The new consultant, Henry Yoshida, a principal at The Maresh Yoshida 401k Group, also in Austin, helped remake the plan to address costs, education and participation in several ways.
Yoshida recommended that Cox Smith remain with its existing recordkeeper, Fidelity Investments, but that the firm make significant changes to its plan design. Cox Smith updated the fund lineup, including the addition of Vanguard’s target-date funds (TDFs); re-enrolled participants into the Vanguard funds; and implemented automatic enrollment, at a 5% default, and automatic escalation, increasing deferrals 1% per year up to 10%.
As to the decision to select Vanguard’s suite of target-date funds, Yoshida says, “Cox Smith, as a professional service firm, has a higher than average age and income. When we did our due diligence, we looked at funds that had a higher equity path along the glide path and had a landing point that was much later than age 65. Plan sponsors need to be able to explain the selection of a target-date fund. Cox Smith has reasoning behind its decision.”
Since the plan changes, 63% of plan participants now have savings rates in excess of 10% of salary, well above national averages, Yoshida says. Also, engagement has increased, with 88% of participants using online tools or taking action in their plan accounts, compared with 49% the 12 months prior to the change.
“Cox Smith has meaningfully moved the needle to get its participants to appreciate, actively engage and take the reins to control their own ability to be retirement ready,” says Yoshida.
—Judy Faust Hartnett
« 2014 PSOY – Draper, Inc.