PARTICIPATION RATE: 94.1%
AVERAGE DEFERRAL RATE: 6.32%
AUTOMATIC ENROLLMENT: Yes
AUTOMATIC ESCALATION: Yes
DEFAULT INVESTMENT: Custom glide path solution created from core fund lineup, constructed by SageView using Milliman’s InvestMap technology
DEFAULT DEFERRAL RATE: 2%
EMPLOYER CONTRIBUTION: 100% of 4%
To Uponor North America—a branch of a company headquartered in Vantaa, Finland—the fee equalization it implemented in 2014 is not incidental to retirement readiness, it’s a contributor to it.
The Apple Valley, Minnesota, manufacturer of piping materials for plumbing and heating systems, infrastructure and hygienic-water delivery started evaluating its approach to plan design and fees more carefully six years ago. “In 2012, we began seeing signs of growth in our business, which resulted in retention in our staff and an uptick in our hiring,” says Kara Hayft, vice president, human resources (HR). “We knew the [talent] marketplace was competitive, and we wanted to be competitive from a total rewards perspective.”
The plan’s recordkeeper, Milliman Inc., and its adviser, SageView Advisory Group LLC, subsequently gave the sponsor ideas to improve on its safe-harbor plan. In the end, Uponor North America addressed both plan design and fees by adding automatic enrollment, implementing fee equalization and moving to an explicit participant administrative fee at the same time.
As the sponsor thought about retirement readiness, “we felt like fee equalization was a piece of the retirement puzzle we wanted to spend time reviewing,” says Heidi Kent-Mack, compensation and benefits manager. “Initially, we decided to do our best to remove revenue sharing from the equation. We ultimately elected to move to the lowest ‘net’ share class of the lineup we had, and then we would rebate any revenue sharing if it did exist,” she explains. Now, six of the plan’s 14 investments still utilize revenue sharing.
To decide the fairest participant administrative fee, the sponsor began by studying the full range of the plan’s administrative costs, including advisory, recordkeeping, trust and custody costs, and even postage and communication materials. “We looked at an annualized [total administrative cost] figure and backed into various fee scenarios based on our plan’s number of participants and their assets,” Kent-Mack says. The sponsor considered a per-participant fee, an asset-based fee and a hybrid approach, as well as the company offsetting some administrative expenses.
Uponor North America decided on a hybrid annual fee: a flat $24 per participant, plus an annual asset-based fee of 14 basis points (bps). “We believe that certain aspects of the administration should be shared equally, such as the participant website and call center. These are services that must be available, and we want everyone to share a little bit in that,” Kent-Mack says. “The remainder we feel should be pro rata, based on assets, with the employees who have a higher balance paying a larger share.”
Uponor North America also decided that it would pay the entire advisory fee itself. “We wanted to share some of the costs with participants,” Hayft says, “so when asked, we could explain the importance of fees, but also let them know we are vested in helping them to achieve better results.”
This year, the employer intends to evaluate whether it should cover all administrative costs, she says. “Uponor reviews the fee allocations several times every year,” she adds, “and one option under consideration today is whether we pay all related expenses.” —Judy Ward