Dawn Foods Boosts Employer 401(k) Matching Contribution

Dawn Foods Inc. raised to 5% from 4% of salary the maximum amount the company will match of an employee contribution to the company’s 401(k) defined contribution retirement plan, effective January 1.

Dawn made the change based on feedback from employee surveys—in two successive years—which showed its 401(k) plan participants were confused by the employer’s old formula, explains Brian Coleman, Dawn Foods’ vice president of total awards.

Using Dawn’s prior formula, the 401(k) matched 100% of a participant’s first 3% of retirement contributions and 50% of the next 2%, “so [participants] had to contribute 5% to get 4%, [and] now we’re going to very easy, back-of-the-napkin math to understand [a] 5% [match],” Coleman says.

Confused participants were less engaged with the retirement plan and “more hesitant to come participate,” Coleman says. “With the challenging times that we’re in, we want as many folks as we can to save, save often and save as much as they can afford.”  

The Dawn Foods Retirement Savings Plan includes $206.12 million in retirement assets for 1,564 plan participants, according to the most recent 401(k) plan data from Dawn.

Simplifying the match formula gives participants the chance to save more for retirement, Coleman explains.

“It is simpler to communicate [and] simpler to understand,” he says.

In communicating the increase to employees, Dawn started gradually due to an October 2023 change in recordkeeper, according to Coleman.

“In December, we went to a full phase communication, because we also had migrated from Prudential Financial to Empower [recordkeeping] at the end of October, so we couldn’t do anything earlier than that,” he explains. “We made it effective [with], a month and a half grace [period from the last day of open enrollment into the plan], just in case we had any problems with the migration.”

Empower acquired the full-service retirement business of Prudential Financial in 2021.

The company declined to disclose how much the increased match will cost, but the change is important to the future of the Jackson, Michigan-based company, Coleman says.  

“We’re a 104-year-old company,” Coleman says. “We’re also looking at [recruitment], because those family [members of current employees] are going to be future employees with us, eventually, too.”

The robustness of an employer’s matching contribution to the defined contribution retirement plan is a significant factor in recruiting and retaining staff, according to Allison Cole, a postdoctoral fellow at the National Bureau of Economic Research, when she spoke at the November 2023 DCIIA Academic Forum.

Dawn Foods is also considering incorporating a re-enrollment sweep of unenrolled participants, aiming for the end of the second quarter or the start of the third quarter, Coleman says. Dawn currently automatically enrolls new hires at a contribution equal to 3% of their salary, Coleman says.  

Dawn communications to these participants will emphasize the matching 401(k) contribution: “It’s free money, why are you leaving it on the table?” Coleman says.

Currently, 70% of Dawn Foods’ participants defer to the retirement plan from salary at the full match or greater, compared with 59.5% in 2022 and 72.5% in 2021. Currently, 14.3% of participants contribute more than 10% of their salary, compared with 20.4% in 2022 and 21.7% in 2021, according to data provided by Dawn.