Headquarters: Chicago, Illinois
Total Plan Assets/Participants: $427,000,000 /7,769
Participation Rate: 93.5%
Average Deferral Rate: 6.54%
Default deferral rate: 1%
Default Investment: TIAA target-date funds
Employer Contribution: 100% match up to 5% of employee deferrals
Additional Plans: DB, frozen; 457(b)
In some ways, 403(b) plans have been slow to adopt new trends in defined contribution (DC) plan design or administration, as the past half-decade has been spent ensuring compliance with Internal Revenue Service (IRS) regulations passed in 2007. Not so with Ann & Robert H. Lurie Children’s Hospital, which has been a pioneer of sorts in adopting best practices.
In 2006, before the Pension Protection Act (PPA) made automatic enrollment more acceptable for defined contribution plans, and coinciding with changes in Illinois payroll laws, Lurie Children’s implemented auto-enrollment for new hires. Participants were defaulted at 1% of pay into TIAA-CREF (now TIAA, due to a company name change) target-date funds (TDFs).
When the hospital’s defined benefit (DB) plan was frozen as of January 1, 2014, says Steven Koob, senior employee financial benefits consultant, the hospital also increased its match to 100% up to 5% of employee deferrals and did a re-enrollment at 1% of salary of all employees not already in the 403(b).
Koob adds that, for future re-enrollments, Lurie Children’s is considering using default deferral percents that are tiered, based on years of service. Employees reaching 100% vesting, at three years, will be enrolled at 5%. Those with one year of service would be enrolled at 3%; those with two years, at 4%. The hospital also considers bumping up the auto-enrollment default deferral percent for new hires to 2%.
“Knowing that people come in and out of our organization, we want to tie auto-enrollment to a retention strategy,” says Tom Rylko, director of compensation and benefits. “Also, for budget reasons, enrollment to receive the maximum match will be phased in.”
The hospital was also ahead of its DC plan peers in offering advice and overall financial education. In 2014, the hospital started a monthly financial-IQ quiz contest. Koob notes that employees can take a different quiz every day for a month to accumulate points and have a chance to participate in a raffle for an iPAD.
Also that year, Lurie Children’s implemented an income replacement ratio measure for 403(b) participants. Based on current calculations, and including expected Social Security benefits, 93.6% of participants are in range or on track to meet the income replacement ratio goal of 80%. Participants also receive a plan outcome assessment annually from TIAA.
For 2016, Rylko says, the hospital is taking a more deliberate approach to education. The benefits team is evaluating what worked and what didn’t, and sending checklists to employees to remind them to save more, take advantage of the match and actively choose their retirement plan investments. “We came up with five types of employees, from those living paycheck to paycheck to those getting ready to retire, and we will be sending relevant education, including financial wellness education, to these groups,” he says.
For those nearing retirement, Koob also holds retirement transition meetings.
Rylko adds that Lurie Children’s is more actively reaching out to near retirees to counsel them about what their future will look like. Meetings are held for participants close to 60 years of age. Once they reach 65, they will get a phone call, and planners from TIAA will be available for retirement counseling.
Looking out for participants’ future after work is also a component of the plan. While many DC plan sponsors may be afraid to dip their toes into in-plan guaranteed retirement income, Lurie Children’s 403(b) plan has annuities built into it. In addition, TIAA provides counseling to help participants with retirement income. —Rebecca Moore
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