LSG Sky Chefs

TOTAL PLAN ASSETS/PARTICIPANTS: $364 million/5,600

PARTICIPATION RATE: 82%

AVERAGE DEFERRAL RATE: 7%

DEFAULT DEFERRAL RATE: 3%

EMPLOYER CONTRIBUTION: 50% on 6%

The LSG Sky Chefs U.S. nonunion plan has seen participation jump from 24% in 2011 to 82% currently. A recordkeeping shift, plan-design changes and communications targeted to non-saving and low-saving employees help explain the turnaround.

LSG Sky Chefs—a subsidiary of Germany’s Lufthansa Group—provides catered food to airlines as well as retail convenience stores. The company’s U.S. work force is diverse. “We have about 40 languages spoken in all our facilities, with employees of over 100 nationalities,” says Tobi Junker, vice president, human resources (HR) total rewards. The U.S. work force includes 10,000 unionized employees, along with the nonunion work force of approximately 500 hourly and 1,000 management employees.

The company made a big step toward improving its U.S. retirement plans when it brought together all of Lufthansa’s U.S.-based 401(k) plans on a common recordkeeping platform in 2011. “This harmonization led to an almost 50% average drop in recordkeeping fees for the plans and up to 75% for the smallest plan,” Junker says. The harmonization came with the move to Bank of America Merrill Lynch as the new recordkeeper.

That same year, LSG Sky Chefs implemented automatic enrollment for all nonunion new hires at 3%. “Based on the success of the new plan design, and with LSG’s concerns about employees not wanting to be auto-enrolled having been alleviated, LSG then decided to add auto-increases,” Junker says. Effective January 2012, nonunion new hires, and existing participants contributing 1% to 5%, began getting automatically increased 1% yearly. The auto-escalation has a 6% ceiling.

The recordkeeper change also has helped LSG Sky Chefs do more targeted communications utilizing Bank of America Merrill Lynch’s resources, says Shannon Urpani, LSG Sky Chefs senior benefits specialist – retirement plans. “Targeted campaigns are ongoing and pushed out monthly for both nonparticipants and low savers,” she says.

Low savers includes any employees contributing at a rate below the 6% employer match, she explains. A monthly targeted message gets sent electronically to employees who have provided email addresses; otherwise a print message gets mailed to employees’ homes.

For non-savers, the communications convey the message that “Savings percentage doesn’t matter. Starting sooner at a rate you can afford is better than starting later at a higher rate,” Urpani says. Low-saving participants receive communications that stress the importance of contributing enough to maximize the match.

The targeted communications campaign has produced results. Between last January and October, for example, 1.96% of non-savers who received targeted print communications signed up for the plan, and 14.83% who received emails did. Additionally, 4.28% of low savers who got a targeted print communication increased their deferral, and 10.46% of those who got email did.

Junker hopes to see a further increase in the current 82% participation rate for the Sky Chefs nonunion plan. “LSG’s goal is to get the participation rate to around 90%,” he says. “We feel this is a realistic goal over the next three years, with ongoing participant-education meetings and plan promotions.” —Judy Ward