Members of a panel discussing auto enrollment and other auto features at the recent PLANSPONSOR National Conference in Chicago admitted advisers and consultants have their work cut out for them when it comes to getting the sponsor naysayers onboard.
“The conversation we have most frequently is defined by a corporate culture,” said Janet Ganong, Associate Vice President and retirement plan consultant at The Kieckhefer Group at RBC Wealth Management in Milwaukee. “(Sponsors say) ’We don’t want to force participants to do this. This should be their choice. If we educate them, they will come.’”
“Auto enrollment is still viewed a very paternalistic type of event,” agreed Attila T. Toth, Principal Portfolio Evaluations, Inc. “Many (sponsors) can’t get comfortable with that.”
Ganong said she sees in action in one-on-one employee meetings one problem auto plan features are supposed to combat – participant inertia. “People say ‘I remember when you were here five years ago and I thought (enrolling) was a good idea but I just never got around to it. I never got around to going online and I always meant to. I’ve come back and listened to you every year and gee I wish I had done it sooner.’”
Meanwhile, John Dixon, Manager, Employee Benefits at Joy Global, a Milwaukee, Wisconsin-based mining equipment manufacturer, said his company put auto enrollment in place in 2005 for new hires as it was freezing its defined benefit plan that would have covered them. Existing employees retained their DB benefit.
New hires were auto enrolled at 6% to get the full company match (50% match on 6%) and also received a 4%-fixed company contribution as well. Dixon said 90 to 92% of auto-enrolled new hires do not opt out.
“(New hires) were in a little bit different situation with their retirement planning, so we did not go back and pick up everyone else,” Dixon told panel discussion attendees. “We wanted to make sure we did the best we could to start people on an appropriate path to retirement.”
Dixon said all new hires now get an auto-enrollment disclosure form they have to sign on their first work day and that the practice seems to have cut down on worker opposition to auto-plan features. “It kind of helps when you don’t have much (employee) pushback because they knew about it upfront and they feel as though they have the opportunity to change their mind if they want to.”
Joy Global has even had success in getting takeup among unionized new hires – but not as much for existing employees belonging to a union. The company had one union group with a lesser DB benefit that was later auto enrolled at 6% and 90% of employees in the group stayed in the program, Dixon said.
“I think there’s a bit of a union mentality that they don’t want to go back and change something that someone has already made a decision on (i.e. for existing workers),” Dixon contended.
The audio for the auto-enrollment session is at https://s3.amazonaws.com/si-interactive/prod/plansponsor-com/wp-content/uploads/2017/05/25041049/MmediaContent.aspx_.jpg?id=6442472839.