Headquarters: Pittsburgh, Pennsylvania
Total Plan Asset/Participants: $4.5 billion/24,000
Participation Rate: 90%
Average Deferral Rate: 8%
Default Investment: TIAA lifecycle funds; Vanguard indexed TDFs
Employer Contribution: 100% of 8%; after participant is vested,
150% of 8%
Additional Plan: DB, frozen
How does a 403(b) plan get a 90% participation rate and an average 8% employee deferral rate without automatic enrollment?
Having a generous match doesn’t hurt: The University of Pittsburgh matches 100% of 8% of deferrals, and, after a participant has been enrolled for three years—thereby satisfying the three-year cliff vesting—it matches 150% of 8% of deferrals. In addition, according to John Kozar, the university’s assistant vice chancellor, there is an accelerated option for participants who are vested and at least age 52; they can receive an additional 14.5% match up to 8% of deferrals for 10 years, though not past age 65. These participants may elect at what age this accelerated match will start, the latest being 55 to get the full 10 years.
Besides being a generous employer, the University of Pittsburgh has an extensive and effective communications campaign that contributes to the high participation and deferral percentages. For one thing, the university provides advice to participants at no cost to them through its provider TIAA (formerly TIAA-CREF).
“We supply a lot of education, starting at when an employee is hired,” Kozar says. This includes weekly orientations for new staff and faculty and monthly orientations for union employees. As part of the orientation sessions, the university’s medical and other benefits are discussed. Retirement benefits are highlighted “because we think they are really good,” he says. While younger employees are encouraged to sign up, the university’s many mid-career employees, who immediately recognize the value—and significance—of the match, need less encouragement.
Beyond that, TIAA has office space on campus where employees can come to get advice, plus established schedules to communicate with certain departments. The university also conducts education sessions when participants become vested to teach them about investments and what it means to be vested.
There are workshops on campus targeted at women and lunch-and-learns for the Staff Association Council (SAC)—an organization that resembles a union, for nonunion employees—who then pass on information to other staff.
In addition, Kozar says, the university senate has about 12 sanctioned committees on campus. TIAA speaks to the welfare and benefits committee, one of them, which then passes the message to the respective departments.
Jay Mahoney, Pittsburgh-based senior relationship manager at TIAA, says targeted communications based on life stages have been sent to employees in the past. The university is in the process of providing employees’ email addresses to TIAA to make those communications simpler. He says the communications target those living paycheck to paycheck to those closer to retirement.
Speaking of the latter group, Kozar notes that a Retirement Symposium sponsored by TIAA, every other year, is always sold out. Employees and spouses are invited, and the university’s insurance carrier talks about post-retirement health benefits. A long-term-care insurance provider is also invited. The symposium includes breakfast, a full lunch, speakers and workshops.
The university rolled out automatic enrollment this month at a 3% default deferral. According to Kozar, the university recently froze its defined benefit plan, and new hires have only the option of the 403(b). While a large number of employees already voluntarily enroll in the plan, auto-enrollment will ensure anyone who “forgets” will be enrolled. “It’s a safety net to make sure no one gets left behind,” he says.
Mahoney says, ideally, the committee would have set the auto-enrollment deferral higher than 3% but has to contend with budget constraints surrounding the match—the university is public and gets little state funding. “We want to continue to engage with employees so they’ll select a higher percent,” Mahoney says.
“Promoting retirement benefits is part of our culture,” concludes Kozar.
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