Employee-centric strategies for overcoming staffing challenges and boosting retirement savings
A manufacturing client has a low participation rate in its 401(k) plan, with more than half of its employees choosing not to participate. As a result, it has problems passing nondiscrimination testing each year. Highly compensated employees (HCEs) have expressed their desire to defer what they want and not have deferrals returned due to failed nondiscrimination tests.
Plan design changes boost participant and deferral rates
Our client’s goal was to have an A+ plan with respect to participation and retirement readiness. Milliman’s relationship manager/consultant guided the plan committee through the steps to implement automatic enrollment, automatic increase, and a re-enrollment strategy. Consulting included plan design, industry practices, cost analysis, and operational considerations. The result? A 94% participation rate with an average deferral rate of 9.0%.
Plan design and new plan addition creates significant cost savings
A restaurant-industry client was experiencing low participation and high plan costs. The company was incurring significant costs related to the 98.8% of eligible hourly eligible employees who were not in the plan. Milliman’s relationship manager/consultant helped redesign the plan by redefining eligible employees as salaried employees and corporate hourly employees, and adding a nonqualified plan for highly compensated employees. The redirected cost was used to fund the matching contribution in the nonqualified plan. The result? A $260,000 cost reduction.
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