PLAN DESIGN: Cabot Corp.’s 25-year-old employee stock ownership plan (ESOP) expired at year-end 2013, and the employer also decided to then freeze its cash-balance plan as part of a broader retirement-benefits redesign. That led the Boston-based specialty chemicals and performance materials company to simplify and enhance its 401(k) in January 2014.
“We really had a complicated program,” Retirement Plans Manager Judi Leccese says, referring to variables such as a complex match formula and multiple plans, all of which could overwhelm employees. The changes helped. Participation grew from 90.3% in January 2013 to 93.8% as of January this year.
Today, the $611.8 million plan has an average employee deferral rate of 9.53%. Its match is now dollar for dollar up to 6% of an employee’s contribution, made in cash, compared with the previous system’s 75% of up to 7.5% of salary, paid in Cabot stock. The company also started making an additional quarterly employer contribution of 4% of an employee’s eligible compensation. The employee deferrals have no vesting period, while the company’s contribution now vests in two years, versus the prior five-year graded vesting schedule. Cabot even added a Roth 401(k) feature.
This two-year process began with employee focus groups, which led the redesign committee to come up with three “guiding principles” for Cabot’s retirement benefits: simplicity, both in terms of participant understanding and plan administration; competitive positioning and cost-effectiveness; and shared responsibility for retirement readiness between Cabot and its employees.
Cabot officials also chose to communicate frankly to company workers about the retirement-benefit changes. “We were straight-up with employees that this would be somewhat of a takeaway,” Leccese says. “We wanted [them] to do more with less.” Workers appreciated the honesty, she says.
To facilitate that, Cabot also decided to pay for The Ayco Company L.P., a financial counseling and education provider affiliated with Goldman Sachs, to give employees broader help. So far, more than one-third (35%) have utilized the financial wellness program, versus a 5% to 25% benchmark among similar companies.
To keep it simple for participants to get involved, Cabot employees who visit Ayco’s website for the first time take a five-minute quiz that helps pinpoint any financial wellness concerns. Employees may then talk by phone with an Ayco counselor to decide on their specific area of focus, and they arrange subsequent phone conversations to continue working on that issue.
“Our financial wellness benefit includes things like wills and estates, life insurance and college planning,” Leccese says. “Everybody is at a different stage of their lives, and different things are important to them.”
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