AUTOMATED FEATURES: Massey Services, Inc., got its retirement readiness stats up dramatically in one year—from January 2014’s 6% of employees on track to replace 80% of their income in retirement to 51% of employees today. How? A combination of plan design changes and companywide employee education.
The 401(k) participation rate “had bounced around a bit” over the years, reaching as high as 74%, says Jean Nowry, executive vice president and chief financial officer (CFO) at the pest-prevention and landscape services company in Orlando, Florida. But, by December 2013, as Massey made acquisitions and rapidly expanded its staff, the participation rate had slumped to 34%.
After the plan implemented auto-enrollment in May 2014, participation had jumped to 92% by December. Participants now defer an average of 4.31% of pay, more than double the average of 1.98% prior to the shift.
Currently, the plan has 1,325 participants and $29.5 million in assets. The company makes a discretionary match that varies year to year and has ranged from 50 cents on the dollar to dollar for dollar up to 6% of pay an employee contributes. Participants now receive a match of 62 cents on the dollar, up to 6%.
Massey plan officials had thought previously about doing automatic enrollment but failed to move forward until Chepenik Financial came on board as their plan adviser in 2013, Nowry says. “This adviser came in and said, ‘We want to talk to you about retirement readiness because that is really the overall goal of the plan.’”
Together, Massey and Chepenik looked at various design changes the plan could make to improve retirement readiness. “What it came down to was that we really wanted to get our folks participating and at the match level,” Nowry says.
So, Massey Services implemented auto-enrollment at a 4% initial deferral, with a 1% automatic increase up to 6%. It also re-enrolled employees participating at less than 4% at that new level and with the same auto-increase.
Prior to the rollout, at two meetings held at each work site, employees learned how automatic enrollment could help ensure their retirement readiness and about the benefits to them of maximizing the match.
Along with those changes, the plan reduced the eligibility for participation requirement from six months of employment to 60 days, in line with eligibility for the company’s health-care insurance. “We felt it would be the easiest transition for new team members, to have those two things happen simultaneously,” Nowry says. “Also, it is telling new team members, ‘Your financial wellness is just as important as your physical wellness.’”
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