First State Bank

By cutting participants’ investment expenses from 0.83% to 0.28%, plus assuming all administrative and advisory fees, the sponsor has fostered a jump in average deferrals from 3.8% to 7.2%.

In 2013, First State Bank began a process to improve all aspects of its 401(k) plan—notably, changing recordkeepers, reducing expenses, implementing automatic features and enhancing education. 

The sponsor, located in St. Clair Shores, Michigan, began working with Flynn Benefits Group as its adviser, acting as a co-fiduciary, to help implement these changes. At that time, there was “no process, no committee, not a … formal process,” says Mike Shearon, managing director, retirement services at Flynn Benefits. First State Bank formalized a 401(k) committee, which meets quarterly with the plan consultant to go over investments, employee education, participation, expenses and fiduciary updates. 

After an extensive search, the plan transferred its recordkeeping services to The Vanguard Group, Inc., in 2015. At that time, the sponsor was able to “substantially reduce” expenses, says April Matalavy, first vice president, human resources (HR) director. Investment changes reduced the average investment expenses paid by participants from 0.83% in 2013 to 0.28% today. In addition, the employer now pays all plan administrative and advisory/consulting fees directly, “so the employees feel more comfortable increasing their deferral,” she says. 

And increase, they have. Employee average deferrals have jumped from 3.8% to 7.2%, and the sponsor’s goal is to reach 10%. In addition, the average account balance, now at $104,000, has nearly tripled from when Flynn Benefits began working with the plan. Once the sponsor added an automatic enrollment feature, participation in the 401(k) plan soared from 61% to its current 98%. 

“The auto-enrollment got us to 90-plus participation in a hurry,” Shearon says. “The way I look at it is you just don’t want someone to say in 20 years, ‘How come nobody ever told me about this [401(k) plan]?’ So it’s a lot easier to use this auto-feature.”

First State Bank increased 401(k) contributions over the years from 4% to the 7% total today—4% safe harbor match plus up to 3% profit sharing when possible. For the 2% of employees not participating in the plan, Matalavy sends an annual letter suggesting a one-on-one meeting with the adviser. “We want to reach out at least annually,” she says. 

The sponsor also provides quarterly one-on-one financial consulting, which is 100% employer-covered. Further, First State Bank offers several online tools and educational webinars to increase awareness about the value of investing for retirement. Vanguard and Flynn Benefits both visit for individual and group meetings and provide resources from Vanguard’s learning center. 

“Our basic approach with all of our plans is that we want to, as simply as possible, try to educate [employees about] how the plan works and the benefits and purpose of it—but in that same vein, how to budget and how to plan,” Shearon says. “People don’t like to be told by others … what to do with their money. If they decide, ‘Hey, I want to get better at this,’ the tools are there.” 

First State Bank also offers to both employees and customers the company’s Financial Education Center, which was launched last year. The courses can be accessed right from the company website and cover topics such as managing money, creating a savings plan to pay for college, planning for retirement and avoiding fraud. It also provides calculators for monthly budgets, a Roth conversion analyzer, withdrawals before retirement, required minimum distributions (RMDs) and more. 

Although technology has been helpful in the plan’s transformation, Shearon says he also gives a big hand for the hard work of the committee, which, besides Matalavy, includes Chief Financial Officer (CFO) Phil Ruggeri and Chief Operating Officer (COO) Mark Jansen. From the time Shearon began working with the committee, it’s been “crystal clear” about these measuring points and achieving short- and long-term goals for the plan, he says.

—Corie Hengst