Lifespan

Lifespan tried to cash out low-balance participants and do some administrative housekeeping, but it wasn’t until moving to its current 401(k) plan that it was able to clean things up.

Lifespan is the largest health system in the state of Rhode Island, with five hospitals, 70 ambulatory care sites and several urgent care centers. It is headquartered in Providence but operates throughout the entire state and some parts of Massachusetts and Connecticut. It is a Brown University teaching partner.

Mergers and acquisitions (M&As) created a jumble of retirement plans. “I don’t think anyone realized the burden of administering disparate plans, the cost it created, and how it was not delivering value, not creating a retirement with dignity for participants,” says Lisa Abbott, senior vice president, human resources (HR) and community affairs.

She says Lifespan tried to cash out low-balance participants and do some administrative housekeeping, but it wasn’t until moving to its current 401(k) plan that it was able to clean things up.

“When first moving to the 401(k) plan, we were in the throes of negotiations with the nurses’ union. We saw it as an opportunity to get things done,” Abbott says. “We knew a wholesale replacement of all other plans was not an option. For people here 30 years, a pension still exists, so we negotiated the notion of choice.” She explains that employees hired from the date of the 401(k) plan inception, in January 2018, are automatically enrolled in the plan, and Lifespan struck the same deal with employee unions. But the long-term employees can stay in the pension or make a one-time election to convert to the 401(k).

“The relationship and conversations with unions were instrumental in being able to freeze the last of the plans. There were certainly those wanting to stay in the cash balance plan,” Abbott says.

Employees are automatically enrolled in the plan at a 2% deferral rate. Abbott notes that the state of Rhode Island is populated by many people on Medicaid and Medicare, so the health care organization doesn’t get paid based on costs. The plan’s fiduciary committee was concerned about what employees could afford, so it chose a 2% default deferral rate. At the most recent committee meeting, however, an increase was discussed, she says.

Participants are also automatically enrolled in the plan’s automatic escalation feature, which increases employee deferrals by 1% per year up to 10%. “It’s one of the most paternalistic things we do,” Abbott says. “They have to opt out of it, and they have to do so every year.”

When Abbott started with Lifespan four years ago, there was no match in the 403(b) plan in place at the time. In 2009, during the financial crisis, the health care provider stopped its matching contribution and had never restarted it. “I told them we would never attract good nurses and staff. We worked on how to fund a matching contribution, and now we match 100% up to 6% of employee deferrals in the 401(k),” she says.

Abbott adds that the Lifespan 401(k) plan is part of the overall financial wellness effort made for employees. Fidelity Investments provides one, and sometimes two, advisers for each site on a rotational basis, as well as a student loan repayment program that offers a broad array of financial opportunities for forgiveness and repayment. “We also talk to employees about flexible spending accounts [FSAs], 529 plans and things of that nature,” she says.

Communication is not easy with a 24/7 workforce. “We do multishift presentations and work hard to meet people where they are. We stagger the benefits staff to be there during shift changes and engage managers and encourage them to create release time for people to attend meetings. We use the intranet and some paper collateral. The last thing we want is for people to have to stay late or come in early,” Abbott says.

“We knew the more seasoned employees didn’t have enough saved to retire, and we wanted to create a pathway for people to leave when they want to. If they can’t, they won’t be the most engaged and effective employees. We’re keeping that top of mind so we don’t go back to cutting benefits due to cost.”

And speaking of costs, Lifespan used the money that consolidating plans saved on administration to increase its health benefits.

—Rebecca Moore