PLANSPONSOR - June/July 2018 - 21

in a fairly short time frame-90 days or less. He suggests that
some plan sponsors may want to work with Employee Retirement
Income Security Act (ERISA) counsel. And, because Southeastern
uses a prototype plan document, changes are easily made by
filling in numbers and checking boxes in the adoption agreement.
The firm added auto-escalation at the same time to help
employees get to the match point. Shaver says about 92% of
participants accepted the auto-escalation, and soon thereafter
the average deferral percentage moved from 6% to 7.1%.
Both Workman and Reed agree that auto-escalation is a
great feature to pair with a stretched match.
4
Loan Repayments After Termination
A loan, hardship withdrawal or cash-out upon termination-together
known as plan leakage-can also keep a plan
participant from accumulating adequate retirement savings. For
an employee leaving his job, a loan can create a double whammy:
If, on termination, he is forced to default on the loan, it will
be treated as a deemed distribution, so not only does he lose a
percentage of retirement savings, he will have to pay taxes on the
additional income.
A solution to this weighty problem is to let
participants pay back loans after termination. Only
about one-quarter (26.2%) of DC plan sponsors
that responded to the 2017 DC Survey said this
feature has been or will be added to their plans.
An additional 5% are considering adding the
feature in the future.
According to Reed, participants find the
feature valuable; with this design element in place,
they can follow a schedule to pay back the loan, like they
did when still with the company, not needing to repay the
loan in full when exiting or have it count as a taxable distribution.
If a plan wants to allow participants to make loan repayments
after leaving employment, the question is whether the
recordkeeper can accommodate this, Reed points out.
He notes that plan sponsors adding the feature will need to
modify their plan loan policies accordingly.
Great River Energy (GRE), another 2018 PLANSPONSOR
Plan Sponsor of the Year finalist in the Corporate 401(k)
>$100 million to $800 million category, allows participants to
repay loans after termination of employment.
Lisa M. Orpen, manager, compensation, retirement and
human resources information system (HRIS), and Brady Skaff,
rewards and talent specialist, both at GRE, in Maple Grove,
Minnesota, say the firm is deeply committed to its employees,
including those who terminate their employment, for whatever
reason. " Allowing for participants to continue their loan
payments after separation can help remove some of the anxiety
and uncertainty that may come with ending employment and
making a transition elsewhere, or to retirement, " they say.
For the initial implementation of the change, GRE sent out
several forms of communications to participants. The firm also
made a concerted effort during this time to provide more education
about the risks of taking loans from a 401(k) account and the
impact on plan balances.
When a GRE employee terminates, Fidelity Investments,
the company's recordkeeper, triggers a communication notifying
the participant that action is needed on his loan and outlines the
options he has to continue repayment after termination. Fidelity
works with the participant to determine his next steps. If the individual
chooses to continue his loan/s after separation of employment,
payments will be sent directly to the recordkeeper via
Automated Clearing House (ACH) transactions from his bank.
GRE, in general, has extremely low turnover, and, with the
few terminations it has, even fewer have an outstanding loan
balance in the 401(k). However, since the plan design change
was implemented, a year ago spring, 75% of separated participants
with an outstanding loan have opted to continue their loan
payments, say Orpen and Skaff.
5
Targeted Communications/Education
" Targeting communications is critical in my opinion. It has
proven to be one of the better ways to engage participants, "
says Reed. " If a communication doesn't apply to me,
I'm not going to read it, " he says.
Although it does not guarantee action,
targeting makes communications more meaningful,
Reed notes.
Workman says Principal, like many other
recordkeepers, has made an investment in
targeted personalized communications. DC plan
sponsors can use predicative analytics to identify
participant segments such as top, normal and noncontributors,
which gives insight into what might help
them save more.
Most often, the recordkeeper will create the targeted education,
which can be offered in several forms including pushed
messaging, face-to-face meetings based on demographics, and
personalized videos. At Principal, and other recordkeepers,
targeted education is generally provided at no cost.
Workman says Principal is hearing from plan participants
that they want personalized, tailored communications like
they receive in the retail space, such as from Amazon. " If we
don't communicate in a way that resonates with them, they will
delete the communication and not pay attention, " Workman
contends.
Principal offers a tool called My Virtual Coach, which asks
individuals a few questions about what they know they need
help with. It then sends custom communications. Workman
says use of this tool results in a 30% higher deferral rate among
employees and a 10-point higher retirement wellness score.
Providing targeted education is good, but if participants
have to go elsewhere to take action, the likelihood of making a
change is lower, Workman says. So targeted education needs to
include a way to take action, right then. -Rebecca Moore
PLANSPONSOR.com June-July 2018 21
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