HEADQUARTERS: Bismarck, North Dakota
TOTAL PLAN ASSETS/PARTICIPANTS: $727 million/ 7,346
PARTICIPATION RATE: 94.6%
AVERAGE DEFERRAL RATE: 7.74%
DEFAULT DEFERRAL RATE: 3%
DEFAULT INVESTMENT: Target-date fund
EMPLOYER CONTRIBUTION: 50% match of the first 6%
ADDITIONAL PLANS: DB and nonqualifed plan
What’s it like running a retirement plan for 7,346 participants in a company whose electric and natural gas utility distribution business lines range from construction materials to utility companies and are scattered throughout 48 states? And has long-term employees as well as seasonal employees? “Challenging, but a lot of fun,” says Lisa R. Schlafmann, director of benefits and compensation for MDU Resources Inc.
In 2015, MDU took on two plan issues. The organization wanted to see a rapid boost in online beneficiary assignments, and was determined to increase the deferral rates of the 94.6% of employees who participate in the retirement plan. Real-life stories about what can happen if an employee passes away without designating a beneficiary helped participants understand the importance of making elections, Schlafmann says.
When lack of computer access at some locations hampered online beneficiary assignments, Schlafmann created a competition with employee rewards. “We offered a small surprise for companies that increased their online participation percentage, provided results over a three-month period, and gave gifts to the HR person and cookies to the employees,” she explains. The program produced an overall rise of 5.6% in participation—more than 400 employees—in three months. The top two operating companies saw increases of 60% and 53.4%.
Patrick Verderico, regional vice president and executive relationship manager at John Hancock Retirement Plan Services in Boston, and MDU’s recordkeeper, says MDU shines at making plan changes, thoroughly investigating both short- and long-term impacts—a perspective that many companies simply miss. MDU’s structurally sound process incorporates due diligence, solid research on how the potential change will affect the plan as well as the participants, and ends with a recommendation from the committee, according to Verderico.
Plan sponsors don’t always think as carefully as MDU about the ramifications of a plan change, Verderico adds. When looking into using the auto increase plan feature, for example, the company examined several options, such as whether the bump should be an annual increase for the entire plan or done on the participant’s anniversary. They methodically analyzed what would be best for participants and how to handle it most efficiently from an administrative perspective, he says.
While the construction industry typically has lower participation and less engagement, MDU has managed to keep its numbers high, which Schlafmann attributes to the plan’s use of automatic enrollment and automatic escalation. Overall, more than three-quarters of MDU’s participants are on track to replace 70% of their income when they retire. Each operating company’s participation is monitored, with a goal of at least 80% participation by each unit. The plan also monitors how many participants opt out of automatic escalation, how many escalate deferrals, and the aggregate results of the escalation on the deferral percentage.
MDU’s robust participation rate, benchmarked frequently using PLANSPONSOR industry data, among others, and scrutinized quarterly at benefits committee meetings, is a plan priority, according to Schlafmann. “The committee is diligent about talking about what we can do,” she says. “But the outcome isn’t so much the benchmarks, but are your participants going to have enough money when they walk out the door.” —Jill Cornfield
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