Four months before the new year, Joe DeBello, now vice president of Retirement Plan Services at OneDigital, and his team were faced with an ultimate task: creating and designing a cohesive retirement plan for 1,800 participants by January 1.
The client, a private equity-backed, specialty pharmacy company, had acquired seven entities and wanted to merge all the plans into one. The plan designs couldn’t be more unalike—some had both a pension plan and a 401(k), while others had none. Some of the organizations had non-elective contributions that did not require employees to participate to receive the employer match. Others had no match at all.
With only four months to coordinate a vendor, create a request for proposal (RFP), and find a recordkeeper—not to mention work with the employer to devise an appropriate game plan that provided a competitive and secured plan for a now larger enterprise and organize seven payroll systems into one, DeBello and his team hit the ground running.
“They brought this project to us in September, so it left us all of a few months to get this completed, so it was a big lift to get these plans all moving,” said DeBello. “Vendor recordkeeping files had to be done, benchmarking of plan design had to be done, multiple conversations with multiple stakeholders of seven different organizations—it was a really big lift and a big project in terms of coordinating amongst different cultures and different belief systems with 401(k)s.”
“Those little things, where we tried to customize the education in their own employer’s branding, we found a much bigger uptake in folks actually opening mail, opening email communications, and attending webinars.”
Joe DeBello
A concerted plan design effort
DeBello admits that getting the RFP out the door to vendors and setting up meetings was the easiest part of the entire transition. Ultimately, the employer selected Prudential Retirement as its recordkeeper (since acquired by Empower).
The real work started after that. The OneDigital team coordinated on designing and organizing plan documents before regulatory notice deadlines. This meant speaking to several groups, understanding their former plan design (if there was one at all), and how an updated one would impact and benefit a larger group of distinctive workers.
“It really forced our team to take a consultative effort and bring together different cultures, spend time with each of these groups to understand what their plan design was today, what had worked for them, what hadn’t worked for them, what their goals were for bringing these together, and ultimately, bringing some of that benchmarking data to the client, to show what their competitors were doing,” DeBello added.
Ultimately, the team landed on an automatic enrollment plan design—a dicey move considering none of the plans had implemented auto-enrollment features before. Additionally, some employees among the groups were moving from a non-elective plan, where they were used to receiving contributions without participating. Understandably, the employer was nervous about how its participants would react to such a change in their plan, especially for those who never contributed to a plan at all. The company would also have a select amount of low-income remote workers who were not in front of a human resource (HR) or benefit team to voice their anxieties over a 401(k) plan, and especially automatic enrollment. “That took some risk [from the employer], where now you’re telling people that you need to participate,” DeBello said.
The employer was also concerned that highly compensated employees (HCEs)—of whom made about 20% of the employee base—would be susceptible to taxable refunds, since many were enrolled in safe-harbor plans. Based on the work and research that the OneDigital team did, they identified that without adding a safe harbor plan and auto-enrollment at a higher default rate, that issue would likely persist. Ultimately, the employer trusted their consulting and advice, and agreed on OneDigital’s approach.
“The benefits being a really core part of the total rewards package, it was so important and so obvious talking to everyone from the chief financial officer to chief HR officer, all the way down to HR generalist, this was vitally important to get right and to be seen as the shining star of that rewards package,” DeBello remembered.
The groups settled on implementing auto-enrollment at 3% while using a safe-harbor plan design that allowed them to keep some of the components of traditional plan designs, such as vesting schedules that they had with some groups and ensure that highly compensated employees (HCEs) could maximize their contributions.
Strong communications among different spaces
OneDigital’s financial education team took a number of multi-media approaches when it came to teaching employees about the plan while promoting the new design, including print and communications and webinar-based content. The employer was also working on rebranding the organization, therefore OneDigital created a custom transition website. Instead of going to the recordkeeper website, the customer URL would take participants to their employer’s landing page. Not only did OneDigital want to promote the rebrand, they also wanted to give credit to the company’s efforts for organizing an updated plan with the employee in mind.
“All of the websites that many employees see typically had a recordkeeper’s name, and so we really feel that the employer, who is putting a tremendous amount of resources and effort in this, should get a lot of the credit,” DeBello said.
The OneDigital team created the URL with the employer’s name instead, and as a result, generated even higher open rates from employees.
“Those little things, where we tried to customize the education in their own employer’s branding, we found a much bigger uptake in folks actually opening mail, opening email communications, and attending webinars,” he continued.
Resembling much of a modern workforce today with hybrid approaches and remote workers, OneDigital offered regular access to webinar-based activity and provided a direct contact line to a fiduciary advisor at OneDigital, in the case a participant would want to reach out with questions or for advice. These participants were also given opportunities to speak with their recordkeeper to help further their education on the plan.
With 1,800 participants merging into one plan, OneDigital knew the transition would be exclusive to each employee. The team therefore sought out to create tailored, educational content for employees in each group. Since every plan would have a distinct circumstance and come from a different vendor with a specific design, all the education had to be modified. “That was the unique aspect,” DeBello said. “It wasn’t as if we just ran one webinar that covered the entire group. That was a big part of lowering the anxiety.”
The results
OneDigital’s efforts were widely successful, as 92% of the 1,800 employees now participate in the plan with an average income replacement score of 91%. For context, just 30% of all employees across the seven plans were participating before the merge in 2020. Even when the COVID-19 pandemic hit just three months just after the plan went live, DeBello notes there was no dip in auto-enrollment or savings rates.
DeBello credits such an increase to the role auto-enrollment played coupled with the continuing education the team provides in the form of a financial academy series, which OneDigital offers to all its plan sponsor clients.
According to DeBello, one in four participants in the plan who are engaging in the financial wellbeing platform have increased their contributions, and one in three have increased it to the level to meet their employer match, which requires participants to contribute 6% before obtaining that match. Moreover, participants engaging with these tools were reported to have nearly double the savings rate and double the account balance compared to those who do not.
Speaking of savings rates, DeBello said it has tripled since the plan was implemented three years ago, at about 6.1% compared to 2%. The plan sponsor had also implemented a stretch match in the form of a qualified automatic contribution arrangement (QACA) plan; therefore, employees are incentivized to save at least 6%.
“That was important to the employer as well,” DeBello said. “Between automatic enrollment and that stretch match, is how we’re achieving such high savings rates, and that number is ticking year-over-year.”
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401(k) Specialist Issue 1, 2023 – Profiles in Participant Outcomes
Amanda Umpierrez is the Managing Editor of 401(k) Specialist magazine. She is a financial services reporter with over six years of experience and a passion for telling stories and reporting news. Amanda received her degree in journalism and government and politics at St. John’s University. She is originally from Queens, New York, but now resides in Denver, Colorado with her partner. In her free time, Amanda enjoys running, cooking, and watching the latest drama show.