When Range Resources Corp. switched recordkeepers last January, it took the opportunity to make some plan-design changes aimed at increasing participant savings. The result? The average deferral rose from 6.92% in December 2012 to 8.6% a year later.
The modifications included raising the initial default deferral from 3% to 6%, immediately increasing the deferral to 6% for existing participants who had been saving less, automatically escalating all participants by 1% annually up to 10% unless they opted out, and going to immediate vesting. Since the adjustments happened in sync with the move to recordkeeper T. Rowe Price Group Inc., participants already expected changes.
“We saw that as the perfect opportunity to implement these plan-design changes,” says Patti Williams, equity/retirement plans administrator at the Fort Worth, Texas-based natural gas company. “It’s a little less intrusive that way.”
The $123.6 million plan has 1,040 participants and a 97.5% participation rate. Range Resources matches dollar-for-dollar up to 6% of compensation—salary and bonus—that an employee contributes. With the average participant deferring more than enough to get the full 6% match, the company is on its way to its goal of at least 95% of employees receiving the full match.
Previously, the plan had 3% automatic enrollment and automatic escalation up to a 6% cap. “We kept hearing that people need to contribute 15% to have enough for retirement,” Williams says. “We felt that if we started people at 6%, they would get the full match from the beginning.” If participants automatically escalate up to 10%, that will mean a 16% total annual contribution to their accounts.
The company at one point had a schedule of matches vesting 50% in an employee’s first year and the remaining 50% in the second year. Moving to 100% immediate vesting increased balances for new participants faster, helping them and giving the company an effective recruiting tool, Williams says.
Participants were briefed on the changes in advance through both written communications and on-site meetings—the latter held last fall by Williams or a representative from T. Rowe Price at each company location. Explaining to employees that they need to contribute 15% annually to save enough for retirement clicked with them, Williams says. She attributes their acceptance of the changes to, as she says, “an awareness by everyone that they’ve got to be responsible for their retirement.”
None of 2013’s new hires opted out of the “auto” features, Williams says. And only about 3% of existing participants who saved less than 6% opted out of the boost to a 6% deferral and auto-escalation to 10%. “The only current participants we did not apply it to were those who purposely went in and selected zero for their contribution rate,” Williams says. “We were not going to negate what they had done, because we didn’t know the underlying reasons.”
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