Hopelab Foundation, Inc.

About 75% of staff members have participated in Hopelab’s financial wellness education lunch-and-learn events.

Hopelab Foundation, Inc., in San Francisco, has learned to apply its organizational culture to its retirement plan.

“We are a social-innovation lab that creates behavior change interventions, based in technology, to improve kids’ health,” Chief Operating Officer (COO) Dan Cawley says.

Adds Senior Manager, People and Culture, Brian Rodriguez, “We develop interventions that contain behavioral ‘nudges,’ so we decided to apply the same thinking to our employees’ finances. We want to be consistent with the work we are doing.”

In 2016, Hopelab started automatically enrolling new hires at 6% into the default T. Rowe Price Target Date Funds (TDFs). It also re-enrolled all current employees at that time at the same 6% deferral, unless they opted out.

Hopelab was founded in 2001 by Pam Omidyar, wife of eBay founder Pierre Omidyar, and has a substantial employer contribution. “Hopelab is very generous with our contribution: We contribute 10% of an employee’s compensation each year, regardless of whether they contribute,” Cawley says. “But we realized that didn’t motivate employees to contribute, themselves.” The nonprofit has about 30 employees, with 75% between the ages of 30 and 50. It also has a high concentration of employees who have advanced degrees and backgrounds in such fields as psychology or specialized technology.

In 2015, Needhi Parikh, then Hopelab’s finance director, helped get the momentum started for the organization to make design changes to its retirement plan. “We realized our employee base was not really focused on saving for the future,” Cawley says.

Hopelab considered a 3% deferral rate, but opted to go with 6%. Based on research Parikh found on best practices for saving, she felt that the 6% level would put employees on a better path for retirement readiness and that Hopelab could clearly explain to employees that they have the option to move to a lower deferral if they prefer. “As it turned out, most of the staff just went with it,” Cawley says of the 6% deferral. The plan also added 1% automatic escalation, up to 12%.

As the new plan-design features debuted in 2016, plan adviser Praxis Consulting educated employees on the new auto-enrollment features. “It was an issue of explaining to them, ‘Where do you expect that your resources will come from, later in your life?’” Cawley says of motivating employees. The advisory firm helped employees understand that, despite the generous employer contribution, they also have some responsibility to save in order to retire with enough money. “It wasn’t a hard sell,” Cawley adds. “[Praxis] explained, ‘This is about creating resilience in your financial well-being.’”

The plan also has moved to fee levelization, and it implemented a flat per-participant fee last year. Any revenue sharing paid by plan investments gets rebated back to the participants invested in those funds, Cawley says.

Education by Praxis has helped employees stick with auto-enrollment and auto-escalation since their implementation, Rodriguez says. “They talk to employees in much plainer language about saving” than the previous adviser did, he says. “And they make it clear to our employees, ‘If you don’t know what to do, we can help you.’” Praxis comes on-site twice a year to do group and one-on-one employee meetings, and those meetings can include both education and investment advice, he says.

The Hopelab plan now has 100% participation. With the 10% nonelective employer contribution plus the 9.31% average deferral, participants currently have an average balance of $150,000. Eighty-five percent of participants are invested in an age-appropriate target-date fund. And though the plan allows loans, it currently has zero loan utilization. Says Cawley, “Praxis has explained to our employees, ‘Hey, a 401(k) loan may not be the best place to start.’”

—Judy Ward