Best Ways to Engage Employees in Their Retirement Plan. Emily Talley, CEBS Benefits Manager Tanner Health System

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1 Best Ways to Engage Employees in Their Retirement Plan Emily Talley, CEBS Benefits Manager Tanner Health System

2 The Starting Line Tanner Health System in 2002 Regional healthcare system 1,600 employees Transitioned from DB to DC plan in k Plan 1.5% Non-elective Contribution 3% Matching Contribution 7 Year Graded Vesting 13 Investment Options Annual Education Meetings

3 On Your Mark Marking Off the Starting Line Analyzing plan performance Are we engaging our employees in the plan? Are employees saving enough for retirement? Are employees investing appropriately? Evaluate key metrics Participation Rate 62% Average Deferral 3% Average Balance $14,940 Asset Allocation 68% with 3 or Fewer Funds

4 Get Set Setting Plan Goals Determine Areas of Improvement Improve key metrics Participation level Contribution Level Diversification Enhance employee appreciation of plan Improve attractiveness of plan as a recruitment tool

5 Get Set Setting Plan Goals Analyze demographics and identify barriers to plan participation 85% Female Many primary wage earners Average Age 40 Often no prior retirement savings Largest job classification RN Generally altruistic vs. financially-motivated

6 Get Set Setting Plan Goals Establish Specific Goals Achievable, Quantifiable Goal 1: 5% Average Deferral Overall improvement in other areas Participation Diversification Employee Appreciation Recruitment

7 Go Our First Steps Plan Design Goal: Increase Participation Added Automatic Enrollment Feature Most powerful tool for increasing participation Determining contribution level Match, vesting schedule & turnover Minimum of 3% required for QACA To grandfather or not to grandfather 2% contribution after 30 days Reduction of 1 year waiting period

8 Our First Steps Plan Design Goal: Increase Deferral Rates Realigned Employer Contributions Most powerful tool for increasing deferral rate Eliminated 1.5% non-elective contribution Increased employer match from 3% to 5% How Much Do You Save? # Employees Less than 2% 2% 3% 4% 5% 6% to 10% Greater than 10%

9 Our First Steps Plan Design Goal: Enhance Plan Appreciation & Recruitment Efforts Communicating Plan Design Changes Branding plan Manager briefing Employee newsletters Employee meetings New Hire materials

10 The Next Leg Investments Goal: Make Diversification Easier What wasn t t working? Annual education meetings re: asset allocation Phase 1: Lifestyle Funds Pros and Cons Phase 2: Age & Risk Based Portfolios Based on Underlying Funds Pros and Cons

11 The Next Leg Investments Goal: Make Diversification Easier (Cont d) Phase 3: Default to Moderate Risk Age Based Portfolio To grandfather or not to grandfather Managed Account Alternative Pros and Cons Selecting a provider Monitoring performance

12 Turning Up the Heat - Automatic Contribution Increases Determining amount & timing of increase Annual raises, market adjustment Determining maximum percentage To qualify as QACA must be 1% per year to 6% Opt-in vs. opt-out out Financial considerations including vesting, match & turnover

13 Using Targeted Education to Turn the Corner Making Group Education Effective Enlist support of senior management Following mention in annual CEO meetings, 9% of EE increased contributions Make it current Address impact of recent economic events on your participants Make it relevant to your demographics and culture You take care of others, it s s time to take care of yourself.

14 Using Targeted Education to Turn the Corner Making Group Education Effective (Cont d) Target by age groups Seminar: Within 10 Year of Retirement? What the current economy means for you. Target by participation or deferral rates Comparing impact on savings/take-home pay at various contribution levels

15 Using Targeted Education to Turn the Corner Making Group Education Effective (Cont d) Take advantage of provider resources Using a train-the the-trainer trainer approach to stretch the communications budget Take advantage of community resources Free education offered by local financial planners Tip: Be sure to preview to avoid sales presentation

16 Using Targeted Education to Turn the Corner Making Group Education Effective (Cont d) Address common retirement pitfalls Loans Rebalancing Keeping long-term perspective

17 Using Targeted Education to Turn the Corner Making Group Education Effective (Cont d) Piggyback on other communication efforts Using health fairs to improve financial health Provide for immediate action Have forms/phones/computers on-site

18 Building Up Speed with Online Tools Taking advantage of Provider s s web site and online calculators Use direct intranet links to make tools readily accessible Demonstrate tools in group meetings Feature in employee newsletters Provide personal walk-thrus Serve as a pilot for new education/planning tools

19 Passing the Baton to Financial Advisors Offering personal financial planning Selecting a provider Independence Format online, telephonic, in-person Comprehensiveness spousal/external savings Fee structure Communication Group meetings Individual meetings Importance of reminders

20 Approaching the Finish Line Distribution Planning Targeting those approaching retirement Seminars Individual meetings Targeted communication Taking advantage of provider & community resources Monitoring retirement income options in the marketplace

21 Evaluating Success Evaluating Key Metrics as of 2008 Increased participation: 62% to 96% Increased average deferral: 3% to 5% Increased average account balance: $14,940 to $24,250 Improved diversification: 68% to 50% invested in 3 or fewer funds

22 Evaluating Success Evaluating Employee Appreciation and Recruiting Effectiveness Employee Opinion Survey Surveys following CEO Meetings Applicant Comments Feedback at Job Fairs

23 Lessons Learned What has worked? Plan design changes Auto-enrollment Realigning employer contributions Education Targeted education utilizing support of Senior Management, provider and community resources Investments Default into asset allocation fund Providing access to account management services

24 What hasn t t work? Lessons Learned Failure to fully engage new hires Inertia following auto-enrollment Difficulty in further increasing deferrals Perception: Match = Target contribution level How Much Do You Save? # Employees Less than 2% 2% 3% 4% 5% 6% - 10% More than 10%

25 The Race Isn t t Over Next areas of focus Targeting new hires to increase deferrals Evaluating success of auto-escalation feature Developing wish list Increasing auto-enrollment percentage Subsidy for pre-retirement retirement distribution planning

26 Engagement Checklist Analyze current plan performance Is the plan meeting employee and employer needs? What key metrics will we use to measure engagement? Determine goals Are our goals quantifiable and achievable? What intangible goals are we seeking? Select tools/strategies What plan design changes would help reach our goals? What provider resources and tools are available? What community resources are available? Tailor tools/strategies to our needs What adaptations are needed to meet the needs of our demographics/culture? How should we target our communication efforts? Evaluate success What progress was made on key metrics and intangible goals? What barriers were encountered? Determine further opportunities for engagement What areas can and should be immediately addressed? What longer-term goals are we striving for?

27 The Road to Retirement is a Marathon Not a Sprint! Emily Talley, CEBS Benefits Manager Tanner Health System etalley@tanner.org