PARTICIPATION RATE: 98%
AVERAGE DEFERRAL RATE: 8.3%
DEFAULT DEFERRAL RATE: 6%
DEFAULT INVESTMENT: American Funds Target Date Retirement Series
AUTOMATIC ENROLLMENT: Yes
AUTOMATIC ESCALATION: Yes
EMPLOYER CONTRIBUTION: 70% of 6%
When Enterprise Bank changed recordkeepers in 2017, it also holistically rethought its plan design and fees for investments and administration. “We approached the recordkeeper conversion as an opportunity to reassess our plan as if we were creating a plan from scratch,” says Marisa Veiga, human resources (HR) operations manager at the bank, headquartered in Lowell, Massachusetts. The employer sought “to continue to strengthen our plan for retirement readiness and to validate that it remained competitive and participant-friendly,” she says.
What motivated the sponsor to move to John Hancock Retirement Plan Services last year? “Ultimately, we made the change for a more robust technology platform,” says Chief Human Resources Officer Jamie Gabriel. “We wanted that—both for our participants, to assist them in planning for retirement through tools and education, and for our plan’s administrators, to be able to utilize the participant and plan data available to support participants.”
At the same time, the plan sponsor revisited plan investments and moved to lower-fee share classes for 26 of the plan’s 29 investment options. Further, fee transparency was increased by shifting to an explicit recordkeeping fee. “We moved to a per-participant fee to eliminate revenue sharing,” providing fees, calculated individually, for each participant’s selected funds,” Gabriel explains. The $102 annual fee is collected in installments quarterly from each participant account. The bank decided to subsidize newly hired team members’ accounts until they reach a $2,500 balance or their one-year hire anniversary.
Enterprise Bank re-evaluated many aspects of the plan design. With an eye on improving employees’ retirement readiness, the sponsor increased the automatic enrollment default deferral from 3% to 6%. It also boosted the automatic escalation ceiling from 6% to 10% in 2016 and then to 15% in 2017. Other changes made included incorporating an after-tax contribution option, reducing the number of a participant’s outstanding loans from three to two and implementing a true-up match feature.
The bank incorporated employee feedback as it evaluated the plan design, and that influenced a change in vesting parameters. “Our original vesting schedule was outdated, and over time we heard from team members—especially newer ones—that our vesting schedule was complex to understand and longer than usual,” Veiga says. “We researched plan benchmarking data and amended the schedule to a four-year incremental vesting schedule. Prior to the change, it was essentially a six-year vesting schedule.”
The plan sponsor also expanded the distribution options for retirees. “We had received feedback, on a number of occasions, that retiring employees would appreciate the opportunity to keep their 401(k) account with the plan, but to have the option to take distributions at a frequency that would be financially meaningful to them,” Veiga says. “Prior to this change, retirees could keep their plan account as is or take a full distribution. Now, retirees have the option to keep their account as is, take a full distribution or take a partial distribution on a monthly, quarterly, biannual or annual basis.” —Judy Ward