At a TPSU program held at the University of South Florida in Tampa where almost 30 plan sponsors were represented, the Treasurer at a 680 person company explains how his company’s retirement plan evolved from a profit sharing plan started in the 1950’s to a mordern 401k plan, one that is adopting new techniques to adjust to a “401k world”.
The company, started in 1921, had all investments directed by trustees and had done their own record keeping. Looking to offload fiduciary responsibility, they outsourced these tasks to 3rd parties 15 years ago.
Five years ago, they started auto-enrollment and have achieved 94% participation rates. Not satisfied, they instituted auto-escalation this past January and found that 97% did not opt out. Based on what the treasurer heard at the Tampa TPSU program, he plans to investigate the stretch match pushing the auto-escalation cap higher.
Another brilliant move by the company is to use champions within the ranks to talk about their personal experiences with the 401k plan. At one meeting, a machinist stood up and said that people would be crazy not to join the company’s 401k plan. The treasurer saw that these kinds of peer-to-peer interactions affect people emotionally and make them feel like they have a voice in the plan.
Lessons learned? Plan sponsors need to keep up with the latest trends in plan design and participant engagement which will only accelerate with growing use of big data and technology as well as a greater use of behavioral science which inspired the Ideal Plan using auto features.
The big takeaway is how to better engage participants. Adults don’t learn by listening and they don’t trust experts. Most are too intimidated to speak up at larger meetings. Having a 401k champion discuss their successes might be better as is breaking people up into smaller groups of peers – either by age or job type. Simple, effective and not costly. Or we can keep doing what we also did and not evolve.
