PLANSPONSOR - April/May 2019 - 34

Taylor Guitars
Corporate 401(k) $25mm - $50mm
Plan at a Glance
TOTAL PLAN ASSETS/PARTICIPANTS: $37 million/470
PARTICIPATION RATE: 89.5%
AVERAGE DEFERRAL RATE: 7.7%
DEFAULT DEFERRAL RATE: 5%
DEFAULT INVESTMENT: RetireView asset allocation models
(managed by Morningstar Investment Management, LLC)
AUTOMATIC ENROLLMENT/ESCALATION: Yes/Yes
EMPLOYER CONTRIBUTION: 100% on 5%
again for all of Principal's defined contribution plans. About 470
of Taylor's 1,100 employees worldwide work in the United States
and are eligible for the company's U.S. 401(k) plan.
Vice President of Finance Bryan Bear
W
hile Taylor Guitars, in El Cajon, California, employs many
young manufacturing workers, most are already on track
to save enough for retirement. Eighty-one percent of those age 34
and under are projected to replace at least 70% of their income
in retirement, compared with a 25% benchmark average for all
of the defined contribution (DC) plan clients of its recordkeeper,
Principal Financial Group.
Vice President of Finance Bryan Bear largely attributes
that group's comparatively strong retirement readiness to the
401(k) plan's 100% on 5% match and other plan-design changes
implemented by the six-member plan committee. " We've put
in place a lot of things to overcome human behavior, " he says.
Overall, Principal Financial data show that 61% of employees
at Taylor, a maker of high-end acoustic guitars, are likely to replace
at least 70% of pre-retirement income, vs. a 15% benchmark,
34 PLANSPONSOR.com April - May 2019
Photo by James Rajotte
The Role of Plan Design
Taylor Guitars workers have an average age of 35, and most are
not well-versed in finance. The plan started to automatically
enroll new hires at 5% five years ago and added 1% automatic
escalation up to 10% a year later.
Despite the high cost of living, as a result of being just 20
minutes from downtown San Diego, only about 2% of Taylor
Guitars' employees have opted out of auto-enrollment. " People
don't seem to notice it because it is automatically deducted from
their paycheck starting after their 60th day of employment with
us, " Bear says. " It's all about human behavior: We put this in
place, and people don't get around to changing it. "
Payroll/Benefits Manager Teresa Piccolo meets with each
U.S. employee as his 401(k) eligibility date nears, to talk about
the plan.
" We want them to understand that getting into the plan is
very beneficial to them in the long run, but also that the impact
to their paycheck is much less than people expect it to be, "
says Shaun Paluczak, the company's vice president of human
resources (HR).
In addition to the plan sponsor matching 100% on the
first 5% deferred, it makes a discretionary profit-sharing contribution
to eligible employees' 401(k) accounts. The annual
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