Increasing employee retirement contributions can be difficult when workers worry about reducing their take-home pay. Thoughtful plan design, however, can make higher savings rates feel less disruptive.
During a recent TPSU program at Kansas State University’s Olathe campus, Fred Barstein spoke with Paige, an HR director whose organization aligned its optional 401(k) auto-escalation date with annual employee raises.
Instead of increasing contributions on January 1, the company selected August 1—the same date employees receive compensation increases. An employee receiving a 4% raise, for example, might see 3% added to their paycheck while directing 1% toward their 401(k).
With education and individual support from the organization’s advisory team, approximately 30% of employees have opted into the feature.
It is a practical example of how plan design, communication and advisor engagement can help employees improve their retirement readiness.
Read the Full Transcript Here:
Fred: Greetings. This is Fred Barstein, founder and CEO of 401kTV and TPSU. We just completed a program at Kansas State University’s Olathe campus, just outside Kansas City, and I’m here with Paige. Welcome, Paige.
Paige: Thank you.
Fred: Before I ask you a few questions, please tell the audience a little about yourself and your organization.
Paige: I’m an HR director, and our organization has approximately 90 employees.
Fred: Today, you mentioned that your organization changed the way it handles auto-escalation. What did you do?
Paige: Previously, we only used auto-escalation in combination with automatic enrollment. However, our recordkeeper introduced a new feature that allows anyone to opt into auto-escalation.
We also had the opportunity to customize the date in the system. Historically, I had seen auto-escalation scheduled for January 1, but we wanted to align it with the date our employees receive their compensation increases. For us, that date is August 1.
Fred: How did employees react, and what were the results?
Paige: Employees have to opt into the program, so we worked with our advisory team to communicate the change and educate our employees.
Many employees also meet individually with the advisors. During those meetings, they can sign into their accounts and select the option to participate.
We have had a good acceptance rate. Approximately 30% of our employees are using the auto-escalation feature, and it has been working beautifully.
It operates behind the scenes. When August 1 arrives and an employee receives, for example, a 4% compensation increase, they may see approximately a 3% increase in their paycheck while their 401(k) contribution increases by 1%.
Fred: That sounds great. Congratulations.
Paige: Thank you.
Fred: Finally, what are a few things you learned today, and would you recommend TPSU?
Paige: Yes, I would highly recommend the program. It was a fantastic use of my time.
Being a fiduciary is an important part of my job, although it is not something for which I receive a great deal of formal education. Attending today’s program allowed me to hear from retirement industry professionals about plan trends.
I also had the opportunity to learn from my peers and hear about strategies that have been successful within their organizations. It was very educational.
Fred: Thank you for coming.
Paige: Thank you so much.
Fred: And thank you for watching 401kTV. Please stay tuned.
