Changing 401k Record Keepers Led to Big Plan Improvements
The former HR Director at a 50,000-employee company, now with a smaller employer, attending a TPSU program at Virginia Tech in Arlington, VA explains how his company’s changing 401k record keepers was the catalyst to improve participation by 50% and engaging senior management in the plan.
The 100 year old international company had been using the same record keeper for 70 years predating ERISA and 401k. The HR director noticed that there was a lack of energy and excitement about the plan – participation was stagnant at 66%. Through a series of efforts including town hall meetings, videos, emails, technology and, of course, auto enrollment, the participation leapt to 89.6%. The plan also used auto-escalation.
But beyond the methods used, senior management became re-engaged in the plan because of the provider change. Not taking it lightly, the Board and C-suite executives were involved in the process of changing providers which got them excited about the benefit and saw how it could help with recruitment and retention. They spoke about the company’s retirement plan when they travelled to various locations communicating the importance of the 401k to the company and employees.
Sometimes just the process of making a change can lead to an awakening of senior management whether it’s a request for proposal (RFP) for the plan’s record keeper or advisor even if the result is staying with the incumbent. According to a 2017 survey conducted by TPSU and NAPA with plan sponsors, those that found their advisor through an RFP were twice as satisfied with service.
The HR director at the Arlington TPSU program who attended last year came back to learn about updates on the DOL fiduciary rule which can be a good means to engage senior management who have no doubt been reading about it. The stakes for hiring and monitoring 3rd parties that provide service to defined contribution plans will only get higher – engagement by senior management in this process can only lead to better results.
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