TOTAL PLAN ASSETS/PARTICIPANTS: $38,592,759/1,439
PARTICIPATION RATE: 97.5%
AVERAGE DEFERRAL RATE: 6.7%
DEFAULT DEFERRAL RATE: 4%
EMPLOYER CONTRIBUTION: 50% of 12% for the first six months of the calendar year and 13% for the second, capped at $2,500 of match, annually
HubSpot, a developer of products for inbound marketing in Cambridge, Massachusetts, boasts a healthy participation rate of 94.6%, with an average deferral rate of 6.2%. But it was not always that way. In 2013, the firm held a participation rate of less than 35% even as the company was undergoing rapid expansion.
Alyssa McLaughlin, who heads people relations at the firm and runs day-to-day operations for the plan, says that is when her team decided to take a new approach to educating participants. “What we found was that we were loading too much information on too soon,” she recalls.
So rather than overwhelm new hires with a seminar detailing all of their benefit options, the firm decided to dedicate a 30-minute session to its 401(k) plan alone. Taking place a week after new employees begin their first day, and after their information has been processed by Fidelity, their recordkeeper,, the focus is on the basics of a 401(k), how to invest, and how the plan benefits participants.
McLaughlin says one of the program’s most powerful features is visuals that show employees how much investments can grow over a set period of time. “It spikes employee’s interest to see the end outcome.”
HubSpot’s 401(k) adviser, Retirement Resources, notes that the seminar emphasized how much employees could be missing out. “We show young workers that retirement saving is no longer optional,” explains Retirement Resources President Jim Phillips. “The safety net is not really safe anymore. During the introductory 401(k) seminar, we ask new employees to raise their hands if they think Social Security is going to be generous when they retire. Almost nobody raises their hand.”
He adds, “It’s very eye opening to see that you could be $1,500 to $4,000 a month short.” Still, Phillips acknowledges, it can be very difficult for employees to contribute to a 401(k), especially younger workers. “The company has a fair share of recent college graduates. And, between the high cost of living in Cambridge and with student loans to pay off, it’s tough for these employees to think ‘retirement.’”
Of course, the news is not all bad. These programs also focus on the benefits of compound interest, and how saving a little now can mean a lot down the road. To make this message stick, HubSpot utilizes ongoing communication.
Following the seminar, employees can sign up for individual sessions with advisers from Retirement Resources. The firm also holds what it calls 401(k)offee hours, where advisers set up near the cafeteria in HubSpot headquarters and accepts walk-ins.
“It really helps to personalize the experience. I feel like it’s helpful to chat with someone, one on one,” Mclaughlin explains. “There is a greater sense of trust there.”
McLaughlin also credits engagement to automatic enrollment features introduced in 2014, which, she says, they emphasize as an option. “We make it very clear that it’s voluntary, but we also make it very clear how beneficial it could be,” she says. “Much of it is being able to present the right information and give employees the opportunity to make decisions on their own.”
As a result, 70% of HubSpot participants opt out of the default investment and instead make their own investment choices. The next stop is looking beyond retirement planning and building on feedback gathered from employee surveys.
Phillips says the firm is building a one-stop informational website, covering various personal finance topics ranging from budgeting and investment basics to finances surrounding estate planning and caring for an aging parent. —Javier Simon
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