Members 1st Federal Credit Union

CULTURAL AND REBRANDING EFFORTS at Members 1^st Federal Credit Union (FCU) a few years ago inspired the company to rethink its retirement plan.

What this meant was terminating its long-standing defined benefit (DB) plan and moving to a defined contribution (DC) plan. But the organization, whose home offices are in Mechanicsburg, Pennsylvania, wanted to make sure its employees stayed well-provided for. The resulting plan gives its 1,000 participants a 200% match of up to 5% of pay, automatically enrolls participants at 5% and increases their saving rate by 1% a year, up to 10%.

“As a credit union, we’re really focused on our three-legged stool, and that’s composed of our associates, our community and our members,” says Sara Kennedy, senior vice president of associate experience at Members 1^st.

Instead of describing its workers as employees, the company calls them each other’s “associates”—a testament to how Members 1^st sees its people, says David Hinderstein, a senior vice president in OneDigital’s Retirement + Wealth division, who has served as the credit union’s financial adviser for 10 years. “[Members 1^st is] always looking for improvement, because the better it can be for itself, the better it can be for its associates and community,” he says.

When Members 1^st underwent its retirement program transition in 2019, the focus was on educating the associates about the termination and about the changes the new 401(k) would bring. But the planning for how to approach that began 12 months earlier, in the summer of 2018.

“[We] started with these conversations about plan design, communication, education and engagement, and with a goal of making sure our associates really understood the change in their retirement benefits,” notes Kennedy. “When participants are going through a pension termination and they don’t understand what’s happening, then that in itself is a risk to their retirement goals.” To help ensure clarity, Members 1^st worked to be as transparent as possible to its teams, notifying each associate several months before the transition and explaining the overall process

Members 1^st involved several layers of its leadership—all the way up to President and CEO George Nahodil—to engage with its associates during the transition. Six months before the DB termination, in June 2019, the company hosted a series of video meetings where Nahodil announced what changes would occur in the plan. He also facilitated group meetings with the company’s retirement planning manager and longest-tenured staff. Later that same month, all associates were invited to open-office-hours to speak with Nahodil and the benefits team about the transition.

“He could explain what an annuity is, the transition credits; he could talk about what the timeline would look like, why we picked Principal [Financial Group as recordkeeper], why the decision was being made,” Kennedy says. “To have the president and CEO that well-versed about the process built the employees’ confidence about the change.”

Allowing for open dialogue, including letting the associates interact with the providers and familiarize themselves with the new website, helped them consider what changes they wanted to elect in the new plan, Kennedy says.

When the time to choose an option for their pension account had arrived, early last year, the pandemic was already shuttering the workforce. As the company went remote, Kennedy and her team followed participant responses, to track whether an associate had made an active decision before his June 30th distribution date.

Lisa McCardell, a retirement planning manager at Members 1^st before she herself retired last November, called each associate who had not yet enrolled in the 401(k). “She personally enrolled associates,” Kennedy recalls. “She drove our engagement to less than 20 associates not enrolled in the plan.”

While the company had already obtained over a 90% participation rate in its DB plan, it leaned on OneDigital for solutions to further increase engagement. OneDigital had advised the retirement plan committee that an annual re-enrollment and increase features could assist those associates not already contributing to the plan. Members 1^st agreed, and just one year after the pension plan’s termination, the 401(k) has a participation rate of 98.6% and an average deferral of 7.85%.

Daniel Casella, a senior retirement plan consultant for OneDigital, was a top adviser for Members 1^st during the transition. After terminating the DB plan, the retirement plan committee—composed of the company’s CEO, chief financial officer (CFO), vice president of human resources (HR), general counsel, and outside ERISA [Employee Retirement Income Security Act] counsel decided to offer transition credits to the associates. Based on the person’s age and years of service, the credits are given to cover any anticipated gap in retirement savings caused by the move to the DC plan.

“We presented the option. They saw it as the right thing to do and made the financial commitment to do it,” he says. “They don’t want the associates to have a negative change. They want a positive outcome.”

The 401(k) benchmarks its investment fees quarterly, and its administrative, advisory and all-in fees annually. A 2015 recordkeeper request for proposals (RFP) resulted in a 50% administrative fee reduction, when the credit union changed providers. The plan also uses fee leveling, whereby any revenue sharing is credited back to those participating in that fund. All participants are assessed an equal fee to pay for plan administrative services, and any unused excess revenue is credited back to them annually, says Kennedy.

Members 1^st planned a range of events for this year, all related to financial and general wellness. For example, in March, the company held a beneficiary campaign to encourage associates to review, add or update their beneficiaries; in August, it will focus on health savings account (HSA) engagement; and, in October, it will educate associates who turn 50 next year about catch-up contributions.

In the future, the company is aiming to focus on mental health and on customizing educational materials to fit the needs of its various workforce demographics. This year, it organized a well-being committee that emphasizes mental health and its relationship to financial health. “We’ve evolved from having a financial wellness program to having a well-being program,” Kennedy concludes. “Our theme is really mental health and how our financial well-being is part of that.”

—Amanda Umpierrez