Michael Culp and Marianne Thompson
help a plan sponsor get comfortable
with automatic contribution increases
RECORDKEEPER EMPLO YER: Charles Schwab
TEAM MEMBERS: Michael Culp,
TENURE WI TH COMPAN Y: A combined 43 years
BIOS: A 24-year Schwab veteran,
Michael Culp has worked that
entire time in retirement services,
attending to the needs of all market
segments from small to mega plans.
Marianne Thompson has worked
in the financial services industry
for more than 26 years. Her entire
19-year career at Schwab has been
in client services, working with
midsize to large plans.
CLIENT: Karsten Manufacturing Corp.
CLIEN T INDUS TRY: Sports-equipment
CLIEN T HEADQUAR TERS: Phoenix, Arizona
CLIEN T PLAN ASSE TS: $165 million
CLIEN T PLAN PAR TICIPAN TS: 1,011
Karsten Manufacturing Corp. started automatically enrolling employees in its 401(k) plan about 15 years ago. “We were really early adopters,” Chief Financial Officer (CFO) Michael Trueblood says. “We’re privately owned, and our owners
are very paternalistic.”
But, concerned about employee pushback, the maker of Ping golf clubs and
other golfing equipment held back for years on implementing automatic contribution
increases. Each year, when the team from recordkeeper Charles Schwab came on-site to
do a plan review, “They would say, ‘You guys really look great against your industry—
with the exception of an auto-savings increase,’” Trueblood remembers.
In 2015, after years of such discussion, the Schwab team convinced the sponsor to
implement 1% annual auto-increases on its 6% initial deferral, up to a 15% ceiling. The
sponsor also opted to begin doing annual re-enrollment, starting at a modest 1% deferral.
“We’ve enjoyed basically no turnover on the team that works with us, since we
moved to Schwab in 2004. We have a strong camaraderie, and it allows for a level of
candor,” Trueblood says. “And it’s clear to us that they are very focused on getting our
participants financially prepared for retirement.”
Marianne Thompson, senior client service manager, is the key contact in the record-
keeper’s work with Karsten. Her other Schwab colleague on the team was Managing
Director Michael Culp.
Besides performing plan-benchmarking comparisons, Schwab helped make Karsten
officials comfortable with auto-increases and annual re-enrollment by presenting the
sponsor with data on the potential impact. The recordkeeper did an analysis that projected
that the changes would be cost-neutral for Karsten. It shared data from its other client
experiences showing that auto-increases typically see 80% acceptance by participants,
with little employee pushback. And Schwab’s team talked to the sponsor about how the
plan’s 6% deferral rate would not put employees on track to save enough for retirement.
“We showed them our ERISA [Employee Retirement Income Security Act]
consulting team’s research that finds people no longer need to save 6% to 8% to retire,”
Thompson says. “It’s double digits.”
By 2015, Trueblood and others at Karsten felt increasingly optimistic that employees
would not reject the changes to the plan. “We realized, why not just do this in small
increments and see if employees accept it?” he says. “While this doesn’t achieve the
goal of getting them [to sufficient savings rates] quickly, it at least gets them on the
road.” With Karsten employees’ tenure currently averaging 16 years, many remain long
enough that they could reach 15% savings.
The plan did the first 1% auto-increase in 2015, and about 95% of participants have
allowed them to continue, Thompson says. Only about 5% of re-enrolled employees have
chosen to opt out of the plan since last year. “To us, that’s success,” she says. —Judy Ward
Marianne Thompson Michael Culp