In 2013, Eastman Chemical Co. decided to do a “deeper dive” to see what in its 401(k) plan worked well and what did not, says Becki Patterson Holmes, U.S. retirement plans manager at the Kingsport, Tennessee-based company. So, it collaborated with its recordkeeper, Fidelity Investments, to do a comprehensive benchmarking study of plan features and participants’ results.
The study projected that about 70% of company employees were on track to retire comfortably with an 85% or higher income-replacement rate by age 65, Patterson Holmes says. The company’s main defined benefit (DB) plan closed to new participants in 2007, but the study showed that, for all employee groups—including defined benefit plan participants—the 401(k) was the most significant source of employee retirement income.
The $2.8 billion plan has more than 16,000 participants and an 83% participation rate. The plan automatically enrolls new employees at 7% of salary, and participant deferrals average 7.9%. Eastman Chemical provides a 50% match on the first 7% of pay an employee saves, and the company makes a variable percentage-of-compensation contribution that does not require employees to pay in. In 2013, that was 5%.
To help participants save more, last year, it added a Roth option. In 2012, it implemented a 401(k) match “true-up” feature after looking at ways to maximize the effectiveness of its match. The company anticipated that some participants who changed their deferral during the year might not get the full match they deserved.
The true-up feature ensures that participants receive the full 50% match of their deferral that they are entitled to. “At the end of each year, we look at employees’ annual compensation, the deferrals made by each employee and the match that employee should have gotten,” Patterson Holmes says. “Then we subtract what match money the employee actually has gotten, and, if there is any missing, we deposit that amount.”
But Eastman Chemical has not relied on plan-design changes alone. “Plan design goes only so far,” Patterson Holmes says. “Employees have to be engaged in retirement readiness activities.” The plan now focuses its improvement efforts mainly on employee communication, she says.
Eastman Chemical holds workshops aimed at specific groups of employees. The company also brings Fidelity on-site to do one-on-one financial planning meetings for employees. The voluntary sessions are part of the plan’s contract with Fidelity and cost the employees nothing, she says.
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