PARTICIPATION RATE: 90.6%
AVERAGE DEFERRAL RATE: 7.10%
DEFAULT DEFERRAL RATE: 6%
DEFAULT INVESTMENT: T. Rowe Price Retirement Date Trust Funds
AUTOMATIC ENROLLMENT: Yes
AUTOMATIC ESCALATION: Yes
EMPLOYER CONTRIBUTION: 50% of 10%
Among a variety of impressive retirement plan improvement initiatives in the past few years, Southeastern Freight Lines, Inc., in Lexington, South Carolina, has devoted significant time and resources to reconsidering “the distribution question.”
Alvin Shaver, director of compensation and benefits of this privately owned American lighter-than-load (LTL) trucking company, admits it has been a challenging effort but one that employees have greatly appreciated. To this end, Southeastern Freight was one of the earliest adopters of T. Rowe Price’s Retirement Income Manager offering when it became available six or seven years ago. Its purpose: to help participants determine exactly how much income they will need in retirement and then create a specific drawdown strategy for their savings.
Once added to a plan, participants of any age can use the solution to estimate, by accounting for certain variables, the amount of income their current plan assets might support in retirement. Pre-retirees use the tool to see the impact their contributions, annual increases and asset-allocation choices might have on their estimated future retirement income stream. Armed with this information, down the line, near-retirees can more easily establish an automatic installment payment program, select an investment strategy, and set regular withdrawals from their 401(k) account until the assets are depleted.
“It really is a great product,” Shaver says. Important to note, with the ongoing changes brought about by the Department of Labor (DOL) fiduciary rule reforms, T. Rowe Price recently had to step back and pause the offering of the Income Manager. This is actually still an unfolding effort, but, Shaver says, the solution will be rolled back out to participants “very soon.”
While it probably would be easier just to walk away from the offering, Shaver says, the company instead is doubling down, meanwhile working with T. Rowe Price and the plan’s consultant, Aon Hewitt, to make the retirement plan more functional for those who have left the work force.
“We feel it is very important to keep working to give people retirement income options [such as Income Manager] within the plan,” he says. “We don’t want people to feel like they have to leave our program upon retirement just so they can have more flexibility in structuring their income. We know the redesigned retirement Income Manager product will give a lot more flexibility to folks and really free them up to remain in the plan and take advantage of its great design as long as possible.”
Asked to explain the plan’s strong performance relative to regional and national peer employers, Shaver says fairness of compensation is very important to leadership. “Above all, we don’t like people to leave retirement dollars on the table,” he says.
It helps that the employer matches 50% of the first 10% of pay—a classic example of a stretch match that motivates full participation.
“We want people to be ready and able to retire at the appropriate time,” Shaver continues. “We have a lot of long-tenured associates, given our industry. We have some truck drivers who have been working with us for over 50 years. Because of our culture and the special place this is to work, we really do feel that paternalistic responsibility to help our people plan for retirement.”
In an effort to promote transparency and fairness, the company has transitioned to a level fee model across the plan participant population. Rather than waiting for participants to ask for this change, Southeastern Freight’s plan committee led the charge on this, Shaver says.
“Aon Hewitt really helped us make this level-fee vision a reality, and we really feel like it was the right thing to do from a fairness standpoint,” he concludes. —John Manganaro