Deals and People November 30, 2023

A Governmental DC Plan Sponsor Finds a Platform to Help Others

The City of Milwaukee DC plan’s executive says its Plan Sponsor of the Year profile makes the case for allowing automatic enrollment in government defined contribution plans.

Reported by
A Governmental DC Plan Sponsor Finds a Platform to Help Others

Government-sponsored retirement plans are not subject to the Employee Retirement Income Security Act, but they must consider how state laws affect plan administration. In some cases, this means automatic enrollment into a defined contribution plan is not allowed.

Even if auto-enrollment is allowed by a state, sometimes it takes a good argument to get all stakeholders to agree to implement it. Beth Conradson Cleary, executive director of the City of Milwaukee 457(b) Deferred Compensation Plan, says winning PLANSPONSOR’s 2022 Plan Sponsor of the Year Award in the Public Defined Contribution category helped the city provide that good argument.

For more stories like this, sign up for the PLANSPONSOR NEWSDash daily newsletter.

“When we were nominated for the Plan Sponsor of the Year Award, we were excited because it was an opportunity to showcase the results of what we had done over the span of five-plus years with some plan-design changes,” Conradson Cleary says. “Getting recognition and being able to show and demonstrate the impact that we’ve had from incorporating auto-enrollment was really impactful. Because we’ve been benchmarking all those years, we were able to demonstrate the huge shift and our ability to close the disparity gaps when it came to race, ethnicity and gender groups.”

Conradson Cleary says she and her team tried to use the platform presented by the award to share their story to a wider audience.

If you work for or know of a great plan sponsor, the nomination period for the 2024 Plan Sponsor of the Year awards is now open.

Closing Disparity Gaps

“In talking with other plan sponsors, we’ve been able to help them appreciate and understand the power tool that auto-enrollment is when it comes to addressing goals related to closing disparity gaps,” she says. “We’ve been able to point to the award write-up and say, ‘Look at our plan, use us as an example if you’re trying to work with stakeholders to help them understand how to go about doing this and what design changes can help you achieve this.’”

Conradson Cleary adds that because the 2022 award profile highlighted some of the results the city achieved, other plan sponsors can use the city’s results to demonstrate the potential outcomes.

“Depending on what state your plan is in, you may or may not have obstacles when it comes to your ability to utilize auto-enrollment in terms of plan design,” Conradson Cleary says. “Every state is different in terms of how a plan sponsor may or may not have access to auto-enrollment, and in some cases, it’s only through collective bargaining or a legislative change.”

Conradson Cleary says she thinks what is unique about the City of Milwaukee plan is that her team has been both capturing and benchmarking data points that measure progress. “So that’s the other thing that we’ve been trying to help our fellow plan sponsors recognize is really important: the power of data—looking at it and tracking it,” she says.

Conradson Cleary says she has been talking to one peer plan sponsor in a state very focused on diversity, equity and inclusion initiatives. The plan sponsor was not successful in getting legislation passed to permit automatic enrollment before the pandemic. She suggested the peer use her plan’s story in conversations to show what the state would be able to achieve. “When you can position the narrative in a way that resonates with different parties and various stakeholders’ interests, it helps,” she says. “This goes back to what our board did, asking, ‘How are we doing?’ and ‘Are we living up to our mission and helping all of our employees the way that we say we want to?’”

Conradson Cleary says she feels like winning the Plan Sponsor of the Year award helped launch her plan’s story of auto-enrollment and other plan design changes even further. The plan’s recordkeeper has featured it as a case study and included it in a recent perspectives paper.

She also feels that her recent appointment to the executive board of the National Association of Government Defined Contribution Administrators will give her further opportunity to help fellow plan sponsors.

“It really boils down to best practices, and that’s what the [Plan Sponsor of the Year] awards look at,” she says. “Plan sponsors don’t have to try and reinvent the wheel. They can see what others are able to achieve and get recognized for.”

Benefits November 29, 2023

Which Matters More When Recruiting, Wages or Benefits?

Employers often have to choose between competitive wages and a robust retirement package, according to panelists at a DCIIA conference. Their choice may influence what kind of workers they attract.

Reported by

When it comes to attracting and retaining staff, the robustness of an employer’s matching contribution to their defined contribution retirement plan is a significant factor.

Allison Cole, a postdoctoral fellow at the National Bureau of Economic Research—who spoke at the DCIIA Academic Forum on Wednesday—said that when given the choice between a job that offers higher wages but no employer match and a job that offers lower wages but has an employer match, many highly skilled workers will sway toward companies that offer a generous retirement plan.

Get more!  Sign up for PLANSPONSOR newsletters.

In her research, Cole analyzed a large dataset of employee resumes that made up about one-third of the U.S. workforce. The data allowed her to directly observe employees moving from firm to firm, as well as the corresponding wages and retirement benefits each firm offered.

Cole noted that this database skewed toward high-income and more skilled employees.

“I find that workers are about two or three times as sensitive to an extra dollar of retirement relative to an extra dollar wage when choosing amongst otherwise similar jobs in the same industry applications,” Cole said.

Pick Your Benefit

In addition, Cole conducted an experimental survey, showing people side-by-side job offers in which the only thing that differed between the two was the wage and retirement offerings.

For example, one job would offer a $50,000 annual salary with no 401(k) match, and another would offer a $49,000 annual salary with an employer match of up to 3% of savings (potentially worth $1,470). Cole’s research showed that 70% of people chose the job with the higher match and lower wages.

Within higher-income employees and occupations with an older workforce, Cole found an increased willingness to forgo additional wages for better retirement benefits. However, looking at younger and lower-income occupations, Cole said employees had, largely, a higher sensitivity to wages than higher-income employees.

She said this poses a challenge for employers, as they cannot tailor retirement benefits to each individual employee due to nondiscrimination testing.

“This makes it hard for the employer to [create] the [retirement] package that’s going to appeal to the largest cross-section of workers,” Cole said.

Cole added than an employer’s benefits offerings may depend on the kind of workforce it is trying to attract. For example, if a company is aiming to attract highly skilled and educated workers who will be earning higher incomes, the employer might want to skew compensation more toward retirement.

A Plan Sponsor’s Perspective

Carissa Dunaway, the division director and pension and savings administrator at the Oak Ridge National Laboratory in Tennessee, spoke about her work overseeing a large defined benefit plan, with almost $4 billion in assets under management, as well as a defined contribution plan. Participants are able to contribute to the DB plan, and there is a 92% participation rate in the DC plan.

Dunaway explained that the company is a government contractor for the Department of Energy and is able to offer a rich package of retirement benefits. During the COVID-19 pandemic, she said many employees left the company because it did not allow for a remote-work environment, and the retirement package was no longer wanted because many found jobs in the private sector that offered 15% to 20% more pay.

“We had to work with our compensation team to get the compensation up so that we could retain our employees,” Dunaway said.

She added that the company has a large number of younger employees starting out who do not understand the benefits of a DB plan. Therefore, in order to attract and retain these workers, raising wages proved a beneficial solution.

“I found that [with] employees that are there for 10 to 15 years, at the beginning they didn’t value the DB [plan],” Dunaway said. “Then their perception changes once they’ve been there [longer], and they appreciate the [DB plan]. So it’s all about communication and education. It’s very confusing for the younger ones who don’t know what the plan is, so trying to explain that to them … is a lot to understand at an early age.”

«