PSNC 2015: Best in Class Plan Design

Which plan design elements have had the most influence on the MasterCard and Land O’ Lakes Best in Class designees?
PLANSPONSOR’S “Best in Class” designation was given for the first time this year to 401(k) plan sponsors that met the highest standard of excellence, as judged by our research and editorial teams. These 29 retirement plans were selected from the 401(k) plans that responded to the 2014 PLANSPONSOR Defined Contribution (DC) Survey. Two of the plan sponsors—Jeanette Wickoren, senior retirement analyst, Land O’Lakes, Inc., and Matthew Adamson, senior business leader, MasterCard—discussed their plan design challenges and recent successes, at the 2015 PLANSPONSOR National Conference in Chicago.

According to Wickoren, Land O’ Lakes has a wide range of eligible employees—7,025, in total. “We have production employees who work in a mill; then we have a broad spectrum of marketing, business staff, scientists and IT [information technology] people. It’s tough to target communications because they are a diverse population.” Despite that, Land O’Lakes has a 98% participation rate, and 96% to 97% actively contribute to the plan. An additional 3,000 participants have left the company but retain their accounts there. Their average deferral rate is 8.3%.

MasterCard has 10,000 employees globally and about 4,600 in the U.S., says Adamson. The work force is mostly white collar, but it is diverse in a different way. “We have tremendous generational diversity. In the last seven years, not only has our population doubled in size but our Millennial population has grown from 5% of the population to 40%. Even though they are all white-collar, the generational differences have played a large part in where we are as a retirement plan.” About 1,000 participants have left the company and retained their balances in the MasterCard plan. Their average deferral rate is 7%.

As to how Land O’ Lakes defines plan success, Wickoren says the company’s recordkeeper, Aon Hewitt, does a retirement readiness study every third year, and the company has seen improvement over the last two studies. “We’ve added advice through Financial Engines, and we’ve added HelloWallet as part of a wellness plan, but,” she says, “I think it’s the automatic features we use that do the most.”

Adamson says, “We felt being named a Best in Class plan defined success for us. But it’s also the engagement of our participants—it’s the high account balances, high participation and the high utilization of the tools we offer.”

When Adamson started with the company seven years ago, the plan sponsors relied on general email communications. But as the company grew more technology-oriented, it added electronic billboards, which it uses along with broad email blasts, directed to its different populations. “We can track progress through our providers, allowing them to slice and dice the information.” The company uses Voya as its recordkeeper, and a year ago it also implemented Financial Engines as well as ACO Investment Group for financial planning services.

“Until this point, we’ve been sending out home mail to participants,” Wickeroren says. “We do direct mail, including a quarterly newsletter, an annual Financial Engines campaign. Segmenting communications is one of our upcoming challenges: the white collar participants versus the factory workers. We don’t rely on technology because half our population is not in front of a computer all day.”

Both companies auto-enroll at 6%. At Land O’ Lakes, the auto-escalation maximum recently increased from 10% to 15%. MasterCard’s maximum is 10%.

“We’d like to move our auto-enrollment percentage up to 10% and auto-escalation to 15%. Because our match is 125% on 6%, even where we are today, we’re close to 14%,” says Adamson. “But I want to bump it up more. We’ve been learning from the PSNC conference that we need to [do that], so somewhere in between 15% and 20% is where I want to end up.”

Both plans have generous plan design, but, in addition, part of their success is where their retirement plan is ranked compared with other company initiatives.

Wickoren says, “Land O’ Lakes is a paternalistic company that has been in existence for more than 90 years. Our committee has guiding principals including helping employees optimize through retirement, and we retain best practices in governance, plan design and in investments, so we do have buy-in from the top.”

Likewise, Adamson says, MasterCard has buy-in from management. After recently terminating a cash balance plan “the attitude is, this is what we’ve got, so let’s give it our all.”In regard to new initiatives, in January Land O’ Lakes implemented a Roth option. Up to 5% of participants have adopted it, to date. Forty percent have signed up for a HelloWallet password, and 20% have revisited the site. HelloWallet brings principles of wellness to those without computers, Wickoren says, adding, “Even if production workers don’t have computers, they often have a smart phone.” Twenty percent of Land O’ Lakes participants use a managed account, and 8% use online advice.

Twelve percent of MasterCard’s participants are in a managed account, and Adamson is confident that the more his department communicates about this option, the larger the number will become.

Both plans have very simple investment lineups in common. Land O’ Lakes’ has 12 funds with the index funds recently added, plus a target-date fund (TDF) series. “We’ve always wanted to stay uncluttered,” Wickoren says. They are in the process of looking at white-label funds, so there may be fewer funds in the near future.

MasterCard has a legacy lineup. “We may be the only plan on the planet that does not use a target-date fund,” Adamson says. “Instead we have 10 funds plus asset allocations, with the conservative allocation serving as the default. But it’s a legacy thing, and they are all white label funds. We also use a mutual fund window. It’s not the number of funds but their quality that is important to us.”

Land O’ Lakes offers Income Plus within Financial Engines, and so far the uptake has been very low. Two participants take advantage of this feature, Wickoren says, adding that at this point only 20% are active in the company’s frozen defined benefits (DB) plan. But the firm is interested in pursuing additional income solutions.

Adamson says that MasterCard has used Hueler’s annuity Income Solutions for 20 years, outside the plan. Again, few participants have shown interest, but this may be attributed to the recent closing of the company’s cash balance plan.

Both plans have just a very small percentage of participants who do not contribute to the plan. Wickoren says that Land O’ Lakes recently “pulled the trigger” on a re-enrollment. Adamson said this discussion has not come up. It is his belief that, for this population, there may be simply nothing to do.