Centre Lane Partners

Quinn Morgan, co-founder and managing director; Rory Kirkpatrick, managing director

In September 2017, when Baltimore-based HighTower Fiduciary Plan Advisors began to work with Centre Lane Partners, a private equity firm that currently has ownership stakes in 20 companies, “our first goal was to look at all the companies in their portfolio and make sure we had the right plan design for each of them,” says Jania Stout, practice leader at the advisory practice. “I was impressed with how involved Quinn Morgan and Rory Kirkpatrick were in making sure the proper plan design was in place to help the employees save for a better retirement.”

Centre Lane and HighTower decided to introduce automatic enrollment at a 6% deferral rate paired with a 1% annual escalation up to a 15% cap. Quinn Morgan,  Co-Founder and Managing Director at Centre Lane, wanted to make sure the portfolio companies were using the correct design to encourage savings and prepare for retirement. “Quinn and Rory were 100% behind this plan design,” Stout says, adding that it is highly unusual for a private equity firm to take an interest in the retirement readiness of the employees in the companies in which it invests.

Centre Land and High Tower’s second goal “was to streamline the investment options in all of the plans and to strip out all revenue sharing from the funds” she says. “We implemented a fund lineup across the board that we felt set participants up for the most success.” High Tower also selected Vanguard target-date funds as the plans’ qualified default investment alternative (QDIA).

After issuing a request for proposals (RFP) in the summer of 2017 for both a recordkeeper and fiduciary advisor, Centre Lane Partners selected Vanguard as the recordkeeper for all of the plans. Centralizing High Tower as the plans’ 3(38) fiduciary adviser and using Vanguard as the consistent recordkeeper for all the plans has reduced fees borne by the participants on average of about 40% % to the tune of six figures, Stout notes. “This has been a huge win for the employees,” she says.

Centre Lane Partners, founded 12 years ago, began to more actively oversee the retirement plans of the companies in which it invests about seven years ago, says Rory Kirkpatrick, Managing Director of the firm. It made sense to the firm because “we are consistently involved in the major decisions of our portfolio companies,” he says. “While this initiative doesn’t result in a direct financial impact on the portfolio companies’ bottom lines, it has significant indirect impacts, is meaningful to portfolio company employees, and aligns well with our focus on employee engagement and satisfaction. We have received very positive reactions from both the companies and their employees.”

Ten of the companies in Centre Lane Partners’ current portfolio have implemented automatic enrollment. Several of them are retail companies with high turnover and workers that are paid by the hour, for whom automatic enrollment may not be suitable, Kirkpatrick notes, which is why participation in the plans ranges from 50% to 90%.

To further facilitate participation at some of the retail companies, Centre Lane Partners has decided to combine health care and 401(k) open enrollment, Stout says. “Making it more of an event creates more traction and has convinced 1,500 workers at the retail companies” to join their plans, she says.

High Tower also offers the plans custom models and financial wellness. In 2019, it will roll out monthly webinars on various financial wellness topics, Stout says. In 2018, 10% of the employees listened to the webinars and High Tower is hoping to double that figure this year.

Each quarter, the chief financial officers and human resource executives of each company meet in one combined meeting with High Tower in order to review and potentially improve the program as well as share best practices. “Since we are a 3(38) fiduciary, the first topic is to go over how the investments are doing and whether we made any fund changes,” Stout says. “Then we cover fiduciary training for them and close out with plan demographics and success stories at some of the companies, whether it was increased participation or a financial wellness topic that got a lot of traction, such as how to become emotionally prepared for retirement.”

Stout says working with Centre Lane’s portfolio companies is inspiring because of the power of collaboration. “The energy is pretty unique,” she says.

—Lee Barney