Switch To Match From Automatic Contribution Leads To 100% Participation At Not For Profit
The Director of HR and Operations at a small not for profit (NFP) attending a TPSU program at Marylhurst University in Portland, OR explains how a change in their contribution method led to increased participation.
Joining the organization three years ago, the Director noticed that their 403b plan had been neglected and suffered from low participation. The organization provided 3% contribution into the plan regardless of whether the employees contributed.
Switching to a 3% match, participation soared to 100%. Education and engagement was needed which was relatively easy because the organization is small focusing with discussion focused on leaving money on the table.
Some companies think they are being generous by contributing to their defined contribution (DC) plan regardless of whether the employees contributes when in fact they may be fostering bad behavior. Companies can use the match in 401k and 403b plans to increase contribution to get workers to the 12-15% deferral rate. Taking the case of the NFP at Marylhurst, if they stretched the match from 100% of 3% to 50% of 6% or even 25% of 100%, employees would end up with 12% or 15% to get the full match.
While it worked for this NFP because of their size, matches do not effectively increase participation which is best realized through automatic enrollment. But matches do dramatically increase deferral rates.
The HR Director got value from TPSU feeling more confident about her role as administrator with access to more resources like 401kTV when needed. That confidence comes from interacting with peers in a carefully scripted pure educational program. Do you think that these methods might also work for employees overwhelmed by jargon and difficult financial decisions by speaking with peers, especially those that are more successful?
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