Best Ways to Engage Employees Best Ways to Engage Employees in Their Retirement Planin Their Retirement Plan

Emily Talley, CEBSEmily Talley, CEBSBenefits ManagerBenefits Manager

Tanner Health SystemTanner Health System

The Starting LineThe Starting LineTanner Health System in 2002Tanner Health System in 2002–– Regional healthcare systemRegional healthcare system–– 1,600 employees1,600 employees–– Transitioned from DB to DC plan in 1987Transitioned from DB to DC plan in 1987–– 401k Plan401k Plan

1.5% Non1.5% Non--elective Contributionelective Contribution3% Matching Contribution3% Matching Contribution7 Year Graded Vesting7 Year Graded Vesting13 Investment Options13 Investment OptionsAnnual Education Meetings Annual Education Meetings

On Your MarkOn Your Mark…… Marking Off the Starting LineMarking Off the Starting Line

Analyzing plan performanceAnalyzing plan performance–– Are we engaging our employees in the plan?Are we engaging our employees in the plan?–– Are employees saving enough for retirement?Are employees saving enough for retirement?–– Are employees investing appropriately? Are employees investing appropriately?

Evaluate key metricsEvaluate key metrics–– Participation Rate Participation Rate –– 62%62%–– Average Deferral Average Deferral –– 3%3%–– Average Balance Average Balance –– $14,940$14,940–– Asset Allocation Asset Allocation ––

68% with 3 or Fewer Funds68% with 3 or Fewer Funds

Get SetGet Set…… Setting Plan GoalsSetting Plan Goals

Determine Areas of ImprovementDetermine Areas of Improvement–– Improve key metricsImprove key metrics

Participation levelParticipation levelContribution LevelContribution LevelDiversificationDiversification

–– Enhance employee appreciationEnhance employee appreciationof planof plan

–– Improve attractiveness of plan as a Improve attractiveness of plan as a recruitment toolrecruitment tool

Get SetGet Set…… Setting Plan GoalsSetting Plan Goals

Analyze demographics and identify Analyze demographics and identify barriers to plan participationbarriers to plan participation–– 85% Female85% Female

Many primary wage earnersMany primary wage earners

–– Average Age 40Average Age 40Often no prior retirement savingsOften no prior retirement savings

–– Largest job classification Largest job classification –– RNRNGenerally altruistic vs. financiallyGenerally altruistic vs. financially--motivated motivated

Get SetGet Set…… Setting Plan GoalsSetting Plan Goals

Establish Specific GoalsEstablish Specific Goals–– Achievable, QuantifiableAchievable, Quantifiable–– Goal 1: 5% Average DeferralGoal 1: 5% Average Deferral–– Overall improvement in other areasOverall improvement in other areas

ParticipationParticipationDiversificationDiversificationEmployee AppreciationEmployee AppreciationRecruitmentRecruitment

GoGo…… Our First Steps Our First Steps –– Plan DesignPlan Design

Goal: Increase ParticipationGoal: Increase Participation–– Added Automatic Enrollment FeatureAdded Automatic Enrollment Feature

Most powerful tool for increasing participationMost powerful tool for increasing participationDetermining contribution levelDetermining contribution level

–– Match, vesting schedule & turnoverMatch, vesting schedule & turnover–– Minimum of 3% required for QACAMinimum of 3% required for QACA

To grandfather or not to grandfatherTo grandfather or not to grandfather2% contribution after 30 days 2% contribution after 30 days

–– Reduction of 1 year waiting periodReduction of 1 year waiting period

Our First Steps Our First Steps –– Plan DesignPlan DesignGoal: Increase Deferral RatesGoal: Increase Deferral Rates–– Realigned Employer ContributionsRealigned Employer Contributions

Most powerful tool for increasing deferral rateMost powerful tool for increasing deferral rateEliminated 1.5% nonEliminated 1.5% non--elective contributionelective contributionIncreased employer match from 3% to 5%Increased employer match from 3% to 5%

How Much Do You Save?

0100200300400500600700800

Lessthan2%

2% 3% 4% 5% 6% to10%

Greaterthan10%

# Em

ploy

ees

Our First Steps Our First Steps –– Plan DesignPlan DesignGoal: Enhance Plan Appreciation &Goal: Enhance Plan Appreciation &Recruitment EffortsRecruitment Efforts–– Communicating Plan Design ChangesCommunicating Plan Design Changes

Branding planBranding planManager briefingManager briefingEmployee newslettersEmployee newslettersEmployee meetingsEmployee meetingsNew Hire materialsNew Hire materials

The Next Leg The Next Leg –– InvestmentsInvestments

Goal: Make Diversification EasierGoal: Make Diversification Easier–– What wasnWhat wasn’’t working?t working?

Annual education meetings re: asset Annual education meetings re: asset allocationallocation

–– Phase 1: Lifestyle FundsPhase 1: Lifestyle FundsPros and ConsPros and Cons

–– Phase 2: Age & Risk Based PortfoliosPhase 2: Age & Risk Based PortfoliosBased on Underlying FundsBased on Underlying FundsPros and ConsPros and Cons

The Next Leg The Next Leg –– InvestmentsInvestmentsGoal: Make Diversification Easier (ContGoal: Make Diversification Easier (Cont’’d)d)–– Phase 3: Default to Moderate Risk AgePhase 3: Default to Moderate Risk Age

Based PortfolioBased PortfolioTo grandfather or not to grandfatherTo grandfather or not to grandfather

–– Managed Account AlternativeManaged Account AlternativePros and ConsPros and ConsSelecting a providerSelecting a providerMonitoring performanceMonitoring performance

Turning Up the Heat Turning Up the Heat -- Automatic Contribution IncreasesAutomatic Contribution Increases

Determining amount & timing of increaseDetermining amount & timing of increase–– Annual raises, market adjustmentAnnual raises, market adjustment

Determining maximum percentageDetermining maximum percentage–– To qualify as QACA must be 1% per year to 6%To qualify as QACA must be 1% per year to 6%

OptOpt--in vs. optin vs. opt--outout–– Financial considerations includingFinancial considerations including

vesting, match & turnovervesting, match & turnover

Using Targeted Education Using Targeted Education to Turn the Cornerto Turn the Corner

Making Group Education EffectiveMaking Group Education Effective–– Enlist support of senior managementEnlist support of senior management

Following mention in annual CEO meetings,Following mention in annual CEO meetings,9% of EE increased contributions9% of EE increased contributions

–– Make it currentMake it currentAddress impact of recent economic Address impact of recent economic events on your participantsevents on your participants

–– Make it relevant to your Make it relevant to your demographics and culturedemographics and culture

You take care of others, You take care of others, itit’’s time to take care of yourself.s time to take care of yourself.

Using Targeted Education Using Targeted Education to Turn the Cornerto Turn the Corner

Making Group Education Effective (ContMaking Group Education Effective (Cont’’d)d)–– Target by age groupsTarget by age groups

Seminar: Seminar: Within 10 Year of Retirement?Within 10 Year of Retirement?What the current economy means for you.What the current economy means for you.

–– Target by participation Target by participation or deferral ratesor deferral rates

Comparing impactComparing impacton savings/takeon savings/take--homehomepay at various pay at various contribution levelscontribution levels

Using Targeted Education Using Targeted Education to Turn the Cornerto Turn the Corner

Making Group Education Effective (ContMaking Group Education Effective (Cont’’d)d)–– Take advantage of provider resourcesTake advantage of provider resources

Using a trainUsing a train--thethe--trainer approach to stretch trainer approach to stretch the communications budgetthe communications budget

–– Take advantage of community resourcesTake advantage of community resourcesFree education offered byFree education offered bylocal financial plannerslocal financial planners

–– Tip: Be sure to preview toTip: Be sure to preview toavoid sales presentationavoid sales presentation

Using Targeted Education Using Targeted Education to Turn the Cornerto Turn the Corner

Making Group Education Effective (ContMaking Group Education Effective (Cont’’d)d)–– Address common retirement pitfallsAddress common retirement pitfalls

LoansLoansRebalancingRebalancingKeeping longKeeping long--termtermperspectiveperspective

Using Targeted Education Using Targeted Education to Turn the Cornerto Turn the Corner

Making Group Education Effective (ContMaking Group Education Effective (Cont’’d)d)–– Piggyback on other communication effortsPiggyback on other communication efforts

Using health fairs to improve financial healthUsing health fairs to improve financial health

–– Provide for immediate actionProvide for immediate actionHave forms/phones/computers onHave forms/phones/computers on--sitesite

Building Up Speed Building Up Speed with Online Toolswith Online Tools

Taking advantage of ProviderTaking advantage of Provider’’s web site s web site and online calculatorsand online calculators–– Use direct intranet links to make tools readily Use direct intranet links to make tools readily

accessibleaccessible–– Demonstrate tools in group meetingsDemonstrate tools in group meetings–– Feature in employee newslettersFeature in employee newsletters–– Provide personal walkProvide personal walk--thrusthrus–– Serve as a pilot for newServe as a pilot for new

education/planning toolseducation/planning tools

Passing the Baton to Passing the Baton to Financial AdvisorsFinancial Advisors

Offering personal financial planningOffering personal financial planning–– Selecting a providerSelecting a provider

IndependenceIndependenceFormat Format –– online, telephonic, inonline, telephonic, in--personpersonComprehensiveness Comprehensiveness –– spousal/external savingsspousal/external savingsFee structureFee structure

–– CommunicationCommunicationGroup meetingsGroup meetingsIndividual meetingsIndividual meetingsImportance of remindersImportance of reminders

Approaching the Finish LineApproaching the Finish LineDistribution PlanningDistribution Planning–– Targeting those approaching retirementTargeting those approaching retirement

SeminarsSeminarsIndividual meetingsIndividual meetingsTargeted communicationTargeted communication

–– Taking advantage of providerTaking advantage of provider& community resources& community resources

–– Monitoring retirement incomeMonitoring retirement incomeoptions in the marketplaceoptions in the marketplace

Evaluating SuccessEvaluating SuccessEvaluating Key Metrics as of 2008Evaluating Key Metrics as of 2008–– Increased participation: 62% to 96%Increased participation: 62% to 96%–– Increased average deferral: 3% to 5%Increased average deferral: 3% to 5%–– Increased average account balance: Increased average account balance:

$14,940 to $24,250$14,940 to $24,250–– Improved diversification: Improved diversification:

68% to 50% invested in68% to 50% invested in3 or fewer funds3 or fewer funds

Evaluating SuccessEvaluating SuccessEvaluating Employee Appreciation Evaluating Employee Appreciation and Recruiting Effectivenessand Recruiting Effectiveness–– Employee Opinion SurveyEmployee Opinion Survey–– Surveys following CEO MeetingsSurveys following CEO Meetings–– Applicant CommentsApplicant Comments–– Feedback at Job FairsFeedback at Job Fairs

Lessons LearnedLessons LearnedWhat has worked?What has worked?–– Plan design changesPlan design changes

AutoAuto--enrollmentenrollmentRealigning employer contributionsRealigning employer contributions

–– EducationEducationTargeted education utilizing supportTargeted education utilizing supportof Senior Management, provider and of Senior Management, provider and community resourcescommunity resources

–– InvestmentsInvestmentsDefault into asset allocation fundDefault into asset allocation fundProviding access to account management Providing access to account management servicesservices

Lessons LearnedLessons LearnedWhat hasnWhat hasn’’t work?t work?–– Failure to fully engage new hiresFailure to fully engage new hires

Inertia following autoInertia following auto--enrollmentenrollment

–– Difficulty in further increasing deferralsDifficulty in further increasing deferralsPerception: Match = Target contribution levelPerception: Match = Target contribution level

How Much Do You Save?

0100200300400500600700800900

1000

Lessthan2%

2% 3% 4% 5% 6% -10%

Morethan10%

# Em

ploy

ees

The Race IsnThe Race Isn’’t Overt OverNext areas of focusNext areas of focus–– Targeting new hires to increase deferralsTargeting new hires to increase deferrals–– Evaluating success of autoEvaluating success of auto--escalation escalation

featurefeature

Developing wish listDeveloping wish list–– Increasing autoIncreasing auto--enrollmentenrollment

percentagepercentage–– Subsidy for preSubsidy for pre--retirementretirement

distribution planning distribution planning

Engagement ChecklistEngagement ChecklistAnalyze current plan performanceAnalyze current plan performance–– Is the plan meeting employee and employer needs?Is the plan meeting employee and employer needs?–– What key metrics will we use to measure engagement?What key metrics will we use to measure engagement?

Determine goalsDetermine goals–– Are our goals quantifiable and achievable?Are our goals quantifiable and achievable?–– What intangible goals are we seeking?What intangible goals are we seeking?

Select tools/strategiesSelect tools/strategies–– What plan design changes would help reach our goals?What plan design changes would help reach our goals?–– What provider resources and tools are available?What provider resources and tools are available?–– What community resources are available?What community resources are available?

Tailor tools/strategies to our needsTailor tools/strategies to our needs–– What adaptations are needed to meet the needs of our What adaptations are needed to meet the needs of our

demographics/culture?demographics/culture?–– How should we target our communication efforts?How should we target our communication efforts?

Evaluate successEvaluate success–– What progress was made on key metrics and intangible goals?What progress was made on key metrics and intangible goals?–– What barriers were encountered?What barriers were encountered?

Determine further opportunities for engagementDetermine further opportunities for engagement–– What areas can and should be immediately addressed?What areas can and should be immediately addressed?–– What longerWhat longer--term goals are we striving for?term goals are we striving for?

The Road to Retirement is a The Road to Retirement is a Marathon Marathon …… Not a Sprint!Not a Sprint!

Emily Talley, CEBSBenefits ManagerTanner Health Systemetalley@tanner.org