retirement plan services
case study:
heavy manufacturing
it's all about the outcomes.
about the company
industry: manufacturing
size: 3,000 employees
retirement plan offered:
401(k) profit sharing plan
building a successful plan
A leading heavy manufacturing firm in the Midwest recognized early on that the success of their 401(k) Profit Sharing Plan could not be judged merely by participation rates, the performance of its investment options, and low cost structure. A retirement plan must be judged by the number of its participants attaining successful retirement outcomes.
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Yet a 2011 aggregate review of the Plan revealed that only 19% of participants were on track for retirement success, defined as maintaining the same standard of living during your retirement years as you were accustomed to during your working career. The participation rate in the plan stood at 75.4%, with an average contribution deferral rate of 4.7%, but the average participant had a retirement income gap of 37%.
plan statistics: initial results (2011)
on track for retirement
needed income being replaced
average income gap
participation rate
average deferral rate
contributing 6% or more
contributing 10% or more
2011
19%
63%
37%
75%
4.7%
42.3%
9.8%
major concerns
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general participant retirement readiness
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number of employees not participating
-
low participant deferral rates
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poor asset allocation
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overwhelming the participant with too many funds
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participants “setting-and-forgetting" contribution rates and asset allocations
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delivering the advice services that participants desired and needed
progress with participation
Working with intellicents in 2012, this heavy manufacturing company adopted an Education Policy Statement (EPS) emphasizing employee retirement readiness through plan design, high touch communication, and advice services to educate and empower participants. It mandates an annual benchmarking of retirement readiness scores at both the aggregate plan level and individual participant level, and calls for a 90-10-90 goal to be annually monitored – 90% participation rate, 10% average deferral rate, and 90% use of an advice component offered by the Plan. The underlying objective – improve retirement outcomes – with a targeted goal of 75% of participant on track to a successful retirement.
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By the end of 2013, just over one year after the adoption of their EPS, the use of risk-based asset allocation strategies offered by the plan increased to 89%. After mandatory onsite group meetings and one-on-ones, the Company’s participation rate jumped up to 94.9%, with a 7.0% average deferral rate. Consequently almost 40% of their employees were now on track to achieve a successful retirement outcome, and the average participant retirement gap had shrunk to 26%.
plan statistics: progress (2015)
on track for retirement
needed income being replaced
average income gap
participation rate
average deferral rate
contributing 6% or more
contributing 10% or more
2011
19%
37%
63%
75%
42.3%
4.7%
9.8%
2015
43%
78%
22%
95%
7.7%
63.4%
12.9%
performance with process
Today, due to auto enrollment and auto contribution escalation (up to 12%) plan design features, greater than 84% of participants now contribute at least the 6% contribution necessary to receive the Plan’s maximum matching contribution, the average deferral percentage has climbed to 8.8%, and over 35% of participants are now contributing more than 10% of their total pay to the Plan. Custom target date funds composed out of the Plan’s core fund menu have been added resulting in 92.1% of participants (representing almost 76% of total plan assets) using some component of plan provided advice service.
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Never forgetting the human touch, participants can sign up for intellicents-provided quarterly onsite one-on-one consultations, annual preretirement group meetings are held for employees age 55+ and their spouses, mandatory one-on-ones have been held twice (most recently in 2018), and intellicents opened a branch office just off the town square to handle participant financial questions and needs.
on track for retirement
needed income being replaced
average income gap
participation rate
average deferral rate
contributing 6% or more
contributing 10% or more
4.7%
42.3%
9.8%
75%
37%
63%
19%
2011
12.9%
63.4%
7.7%
95%
22%
78%
43%
2015
58%
83%
17%
98%
8.8%
84.6%
34.5%
2019
participant statistics: 8 years of improvement
participant 1
2011
2019
deferral rate
projected end balance
projected odds of sucess
participant 2
2.9%
$260,000
52%
8.0%
$707,000
88%
2011
2019
deferral rate
projected end balance
projected odds of sucess
4.9%
$280,000
31%
8.0%
$1,200,000
95%
a dedication to
continuous improvement
And what’s next… beginning Q1 of 2021 the Company is making financial planning an employee benefit by providing an intellicents intellisteps foundational financial plan to all employees via both hardcopy and app, with the option of getting an integrated comprehensive financial plan from an intellicents CERTIFIED FINANCIAL PLANNER™.
we can help you find a smarter way
Information provided from Perspective Partners Employer Aggregate report. The information, data, analyses and opinions contained herein do not constitute investment advice offered by intellicents or Perspective Partners, LLC, is provided for informational purposes, and is not an offer to buy or sell a security. Intellicents and Perspective Partners, LLC can not guarantee that any particular investment selection or suggested solution, if implemented, will be profitable or solve an identified concern. Source of historical returns used in this analysis is Ibbotson Associates’ study of returns from 1926 – 2013. Future investment returns may be higher or lower than information provided. The calculation used is based on historical returns, thus past performance does not guarantee future results. Tax implications were not considered in this analysis.