In the 1980s, Miami Children’s Health System closed its defined benefit (DB) plan and started offering a 403(b) plan
to employees, recounts Michael Kushner,
senior vice president and chief talent
officer of the organization. At that time,
Miami Children’s contributed a nonelective 5.75% for each employee who met
eligibility requirements, and had three
vendors/recordkeepers and 67 investments. In 2004, it moved to a single
recordkeeper, Prudential Retirement, and
now the health system, covering three
southeastern Florida counties, offers 23
investments in the plan lineup.
Participation in the 403(b) plan was
low, however. About four years ago, the
health system decided it was financially
unsound for employees to neglect contributing to their accounts;
they were accruing too little savings, Kushner says. Therefore,
the system implemented a matching contribution of 100% of
up to 3% of deferred salary. At the same time, the organization
increased its nonelective contribution to 6%—a further disincentive for participants to increase salary deferrals. In 2011, the
plan had just 33% participation.
According to Anton Tansil, vice president, key accounts,
at Prudential Retirement in Hartford, Connecticut, from 2012
through 2015 the hospital began executing several strategic
initiatives to help improve the financial health of each employee.
In 2013, Miami Children’s implemented automatic enrollment at a 3% default deferral rate, and dropped the nonelective
contribution to 3% to encourage employees to participate in the
plan and save more. There was about a 9% opt-out that initial year.
In 2014, it instituted automatic re-enrollment where
employees had to opt out annually if they
wanted to avoid joining the plan, Kushner
says. “After a while, some employees just
gave up and let their money be put into the
plan.” Less than 5% opt out, from year to
year, he adds.
In 2016, the plan implemented automatic deferral escalation of 1% annually,
up to 6%. “We feel 6% of their money
plus 6% of our money will help employees
achieve the quality of life they want in
retirement,” Tansil observes.
At the same time, the health system
was able to reduce retirement plan
expenses by implementing a lower-cost
fee structure within the investment menu.
Revenue sharing generated by the fund
lineup that exceeds what is needed to cover
administrative expenses is rebated to participants. Kushner says
Miami Children’s 3( 21) investment adviser, CAPTRUST, monitors the performance of funds and works with the committee to
ensure underperforming funds are eliminated.
Improved Education Services
During the 2012 to 2015 period, employees increasingly utilized
plan-related education services, whether through a dedicated
retirement counselor at the health system or through Prudential’s
multi-media participant engagement platform. In addition, 71%
of participants use Prudential’s GoalMaker asset-allocation tool,
compared with 55% who did so in 2011. Kushner says this tool
puts participants into the appropriate lifestyle fund.
He also says that employees failed to really understand the
plan before. Now that they have a better grasp of it and are seeing
growth in their account balances, they are more engaged.
TOTAL PLAN ASSETS/PARTICIPANTS
AVERAGE DEFERRAL RATE
DEFAULT DEFERRAL RATE
100% on up to 3%, plus 3%