RE-ENROLLMENT: Its search for all-new plan providers in late 2012 and early 2013 was good timing for Community Blood Center/Community Tissue Services (CBC/CTS) to address some plan design issues. The 501c(3) nonprofit organization, which provides blood and tissue to hospitals, had to face the reality that too many participants contributed too little to maximize the match and that some participants lacked sufficient investment diversification. “We knew that wouldn’t serve them well in the long term,” Chief Financial Officer (CFO) Julia Belden says.
So, in conjunction with its switch to recordkeeper Transamerica Retirement Solutions in late 2013, the Dayton, Ohio-based company conducted a two-pronged re-enrollment. This process increased the contributions of participants not maximizing the match and defaulted those who had not chosen their own investments into custom target-date funds (TDFs).
The plan also increased its match from 50% of up to 4% of pay contributed to 50% of up to 6%. Additionally, it implemented automatic escalation at 1% a year, with a 10% ceiling. The organization gives employees a 4% profit-sharing contribution, regardless of whether they participate, after one year with CBC/CTS. The $28 million plan has 555 participants and a 95% participation rate.
Increasing the number of participants maximizing the match cost the organization about $100,000 a year in additional funding, Belden says. CBC/CTS also decided to pay all plan administrative fees, which was another $100,000 annually. The retirement plan committee simply realized that making these changes “was in the best interest of participants,” she says. Only a handful of employees opted out of the re-enrollment.
As a new default investment, CBC/CTS decided to offer custom target-date options composed of the funds within its core investment menu; this way, the sponsor felt more confidence in the quality of the underlying investment options, compared with the prepackaged funds it formerly used. The company hired ProCourse Fiduciary Advisors LLC as a 3(38) investment manager, giving it discretion in overseeing the plan’s investment options. “We still have to monitor them to make sure they’re making good choices,” Belden says. “But we get a higher level of expertise.”
The plan’s success metrics already have improved as a result of the changes. For example, 84% of the plan’s participants now save enough to earn the maximum match. Between the employer and participant contributions, “within four years, all but a few employees[—i.e., those who opted out—]will save 17% a year for retirement,” Belden says. Because the industry usually pegs appropriate savings rates at 10% to 15%, she says, “our employees should be in good shape by the time they retire.”
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