The Best Practices Guide: The More They Know
A focus on education turned around The Spiratex Company 401(k) plan
The Spiratex Company offers a fantastic 401(k) plan with an almost unheard-of match—50 percent on every dollar employees contribute, up to 100 percent of pay. Just two years ago, however, well over one-third of employees didn't take full advantage of the plan.
Thirty-three percent of employees simply didn't get around to enrolling. Some employees enrolled but didn't defer enough to get the full employer match. Many took out loans from their 401(k) accounts. Others were too timid with their investment selection—putting all their contributions in a money market fund investment option rather than diversifying according to their risk tolerance and goals. And once the market downturn hit, a few employees stopped contributing to the plan altogether.
The company took action. Over the course of two years, they:
- Implemented automatic enrollment and automatic deferral increases
- Added lifecycle funds as investment options
- Boosted overall education through mailings, payroll stuffers, newsletter articles and quarterly meetings on company time
- Brought in their retirement plan provider and broker to educate employees on investing in volatile markets
- Emphasized the dangers of 401(k) loans
- Added mandatory, one-on-one meetings
- A human resources representative meets one-on-one to enroll employees in the plan.
- A salaried benefit specialist from their retirement plan provider educates each employee about the value of the plan. The benefit specialist also develops a financial action plan for ongoing follow-up.
The change in The Spiratex Company 401(k) plan was dramatic. Participation went from 70 percent to 89 percent. More than 20 percent of employees opted for automatic deferral increases of one percent per year for an average of eight years.
The number of 401(k) loans had slowed but increased again during the recent extreme market downturn. However, loan amounts are small. In addition, nearly 40 percent of participants transferred their assets to the professionally managed lifecycle investment options or balanced funds. Nearly all new enrollees—especially younger employees—overwhelmingly are selecting lifecycle options at sign up.
"Because we've done this, I think our workforce is empowered," says Bob Racey, the company's president and general manager. "It really opens up a person's eyes to realize that they don't necessarily have to lean on Social Security or a pension. They can do these things themselves and become financially independent by the time they retire."
"It really opens up a person's eyes to realize that they don't necessarily have to lean on Social Security or a pension."
– Bob Racey, president and general manager, The Spiratex Company
What can you learn from The Spiratex Company?
- Automatic tools—like auto enrollment, auto deferral increases and lifecycle funds—can help overcome employee inertia and boost participation.
- Some retirement plan providers offer one-on-one guidance at no cost.
- Address employees' concerns head-on: if they're worried about market turbulence, bring in an expert to allay their fears.
About The Spiratex Company
Find out more about their benefits in The Spiratex Company's winner profile.
