PSNC 2015: What Success Looks Like

Going by what Plan Sponsor of the Year winners say, “success” means continuous improvement.

At the 10th annual PLANSPONSOR National Conference, it is quickly becoming clear that sponsors and their plans have come a long way—even in the past few years. Maintaining a well-functioning plan is one thing, but sponsors have no guidelines for engaging participants—or compensating for their negligence. Recent PLANSPONSOR Plan Sponsors of the Year came together to share what has worked for them, and what they are working on now.

Kit Brady, vice president of human resources (HR), education and guest experience, Gillette Children’s Specialty Healthcare, recounted how her plan altered its match formula, simplified the investment lineup and re-enrolled all participants into a target-date fund (TDF) at the new default deferral rate. Since these changes were implemented, plan assets increased 27% and participation rose 17%. She also recommended having a well-developed participant communication strategy—especially targeted communications—to inform individuals what they need for retirement.

Tim Atkinson, chair, City of Austin Deferred Compensation and Austin Police Pension, is unable to automatically enroll or re-enroll participants into the plan. Instead, the city of Austin asks individual employees to speak to their peers about how the plan has benefited them—and rewards them with a bonus day off work. All are guaranteed a pension, but participation in the 457 plan has seen a major increase since that initiative began, Atkinson said. Similarly, he found that emailing newsletters through a third party was not producing the intended effect. By having a city employee send out the same notices, the response—and traffic in his inbox—increased significantly.

Stephen Best, vice president, director of compensation and benefits, JE Dunn Construction, saw his plan raise the automatic deferral rate so that all participants would immediately receive the full company match. Beyond plan design, though, he stressed the importance of having a well-respected leadership team. Participants may know that the plan is meant to operate in their best interests, but the plan sponsor would do well to earn their trust, too.

All three spoke in favor of having three tiers to the plan lineup: a default option for the “do it for me” crowd, a simplified core menu for the “do it with me” group, and a brokerage-window “do it myself” option for more sophisticated investors. Best also said he hopes to develop a more holistic financial wellness focus for his plan, to show participants how various financial goals interrelate, and how reducing early distributions can have a meaningful impact in the future.

Atkinson would like to add an in-plan annuity to Austin’s 457. By showing participants how their savings translate to retirement income, he hopes to motivate them to contribute more, he said. When the plan design allows for automatic escalation, though, Best and Brady agree that it likely will not be met by negative participant feedback. Best’s company ties the retirement plan escalation to annual compensation increases, so participants rarely perceive the change as a loss.

Finally, when it comes to Roth features, Atkinson found them to be especially popular with Millennial investors.

When Roth investors look at their distribution options, Best said, “You at least have an option, then, at retirement, as to what bucket is the right one to choose from.” Participants who have only the one, pre-tax bucket fail to get this choice.