Plan sponsors who build retirement plans that earn the PLANSPONSOR Best in Class designation often share similar goals: to provide a retirement plan that helps employees meet their financial goals. Most of them admit also that it takes a village of staff and outside vendors. Dana Sacks, Senior Vice President of HR for Flexera, and her recordkeeper partner Joe DeSilva, Senior Vice President and General Manager of ADP Retirement Services, talked with PLANSPONSOR about how ADP’s support has helped Flexera build its Best in Class retirement plan.
PS: How did the ADP—Flexera relationship begin?
Sacks: We transitioned our plan in October 2012. We were too small for the vendor we had. We couldn’t get meeting or educational sessions from them. We felt that hurt our effectiveness. We were already on ADP’s payroll platform, and our employees were used to it. So this provided a simple way for them to manage their pay and their 401(k) plan through one portal or app. It also gave us one less data feed to worry about because we had a single platform that the indicative data flowed through and on which we could look up information about our plan.
Finally, ADP would do educational sessions for our employees. In particular, we acquired a company last year that was being integrated into our 401(k) plan. ADP came out and helped those employees understand how the retirement plan would work, what funds we had and how they worked, and how to use the plan. Getting this second communication source was an added benefit.
PS: How has the plan design evolved to give your employees the best outcome?
Sacks: We’re a software company that’s been around for about 20 years. We have all knowledge workers, with an average age of 44, and average salary over $100,000. Many of our employees have been with us almost the entire time and new hires are generally midcareer employees.
A couple years ago we hired an external investment adviser to work with our investment committee to make sure that we were making the right decisions regarding plan funds. With ADP, we have no limitations as to which fund families we can add and we wanted to do our due diligence in fulfilling our fiduciary obligation to have quality funds at the best price possible.
About four years ago we had 75% participation. Although those in the plan deferred close to 10%, employees who didn’t enroll upon joining us succumbed to inertia. So we added an auto-enroll feature for new employees, a year ago January and included
If they weren’t participating, we enrolled them for 6%; only 16 people opted-out. We also added an auto-escalation feature of 1% that operates each April 1, to coincide with merit increases.
Popular with our high-earning employees has been an after-tax feature that they can use after maxing out on their annual limits each year. Finally, for those who say, “You don’t have the funds I would like,” we have a self-directed brokerage.
We went from under $20 million in assets to almost $44 million now, so the plan has more than doubled. That is largely because more people participate and at very strong levels, including some highly compensated employees [HCEs].
PS: How was it working to implement all these plan design features with ADP?
Sacks: The biggest issue was just communicating to our employees—who get many emails each day—to make sure they knew what was happening. We targeted the ones that would be impacted, inviting them to educational sessions about the 401(k) plan. So, we spent most of our time on education. Making it happen within the ADP system was the easy part.
PS: In what ways does ADP respond to the needs of its clients when they want specific plan design and how has your service model evolved to keep up with these evolving best practices?
DeSilva: We’re proactive in developing a working relationship with our clients, like Flexera Software, so our team works to reduce the burden of plan administration so the client can better manage its 401(k) plan and meet its fiduciary responsibilities.
Using Flexera as an example, we started by understanding its business and workforce challenges, so we could support its specific needs.
We built a service experience through a dedicated client service team: a relationship manager, who leads a service team specializing in various aspects of the plan’s daily operations; a dedicated client service manager, to handle the day-to-day contacts; a retirement education channel manager, to develop the data-driven participant education; an investment services group that supports the client in performing their due diligence, to help the client monitor the plan’s investment lineup; and, finally, our risk and compliance team, to support regulatory needs.
Our plan sponsor website offers plan health metrics in a user-friendly format that keeps clients like Flexera on top of how their plan performs. Finally, we meet in person with Flexera and its 401(k) committee each year, often every quarter. That’s to talk about our offerings but also to make sure we keep meeting the sponsor’s and participants’ demands. We provide an equal level of client service support to the company’s financial adviser as well.
PS: We’re having this conversation, Dana, because Flexera was named as a Best in Class retirement plan. What does it mean for you to be considered Best in Class, and what do you think are Flexera’s Best in Class metrics?
Sacks: It’s been very validating for us that these changes, which we thought would help us become a better plan, have actually done so. We struggled with adding auto-enrollment. Would people feel we were in their business too much? We also saw people who should have been saving for retirement, but weren’t, start to save. So, this has let us make a positive impact on employees’ retirement future. Obviously you have to decide whether particular features are right for your population, but our two small changes have greatly improved the operation of our plan over the last few years.
PS: Do you have any further initiatives planned?
Sacks: The flexibility of our plan will always be something we keep our eye on. Do we have the right fund? The right number of funds? But first of all: Have we put together a plan that meets the needs for our employees? Then, as new features become available, either through legislation or automation, we’ll include them as well.
PS: Joe, looking forward with ADP and your platform and technology, what are some other initiatives the company is developing on?
DeSilva: With the success we’ve had with plans like Flexera that use auto features so effectively, we’re focused on making these more a part of our bundled product.
The second piece is overall financial wellness. As the No. 1 cost in retirement is health care, you need to coordinate those projected costs with your retirement dollars. How do we help people make more informed decisions with that in mind, early in their career, to prepare for retirement? Those are the two big topics we think about now.
The views expressed herein are those of the contributors, are intended for general information only, and are not intended to provide investment, financial, tax or legal advice or a recommendation for any particular situation or plan. ADP does not endorse; engage or compensate any financial advisor to provide advice to plans or participants; or recommend specific investment companies or products, financial advisors or service providers; offer financial, investment, tax or legal advice or management services; or serve in a fiduciary capacity with respect to retirement plans. Nothing herein or in the attached materials is intended to be, nor should be construed as, advice or a recommendation for a particular situation or plan. Please consult with your own advisors for such advice.