COFCO International USA

IF PLAN SPONSORS need proof that their match is a critical factor affecting participants’ deferral rates, they need look no farther than the 401(k) plan of COFCO International USA, an agriculture supply chain company, headquartered in Chicago, Illinois. The plan’s 15.3% average deferral rate is largely due to its qualified nonelective contribution (QNEC) of 3%, plus a 50-cent match of all that an employee defers—with no cap.

How this match came to be stems from the company’s formation: Two companies merged—one with a 100% company match with no cap, the other with a 3% safe harbor contribution but no match, explains Sharon Kacsits, director of human resources (HR) North America at COFCO.

The effects of the match are profound, she says. “It encourages some people to go all in. Come January, suddenly I’ll see some people receive paychecks for zero dollars because they’re putting all of their money into the 401(k),” she says. “They max out at the beginning of the year. Others make the maximum contributions throughout the year. This is why we don’t pair automatic enrollment with automatic escalation. Our 92.6% participation rate and [our] deferral rate are amazing. We’re very proud of what people are saving.”COFCO has also worked hard to streamline the resulting complexities from the merger, she says. “When I started with the company, in 2018, we had three 401(k) plans, two advisers and two third-party administrator [TPA] companies filing our Form 5500.” She brought in Benefit Partners Financial Group to run a request for proposals (RFP), and the firm helped the sponsor switch recordkeepers to John Hancock, chosen for its participant services and tools. “And we put together a pretty strong retirement plan committee that, in our quarterly meetings, continually discusses how to improve the plan.”

Kacsits says Russell Warye, an adviser with Benefit Partners, also helped COFCO improve its plan design. “We’re committed to the retirement preparation of our employees,” she says. In support of this commitment, the company opens the plan to workers after their first 60 days of employment and starts contributing 3% to the safe harbor on the first of the month following their hire date. “Everyone is 100% vested immediately,” she notes.

Warye, too, remembers the extensive administrative streamlining that the plan initially required. COFCO hired him the same year as Kacsits, to help with the merger. Adding to the complexities she mentioned, the company was working from three locations and had two separate investment lineups, he says.

“It was a big effort from all parties to pull this together, but the company had some new committee members who were motivated to improve the plan for the participants,” Warye recalls. “We were charged with the responsibility to review the current plans, to complete a full cost and service benchmarking evaluation, and to then present our findings to the retirement plan committee.” Along with John Hancock, the committee chose Hessel & Associates, a Chicago TPA, to provide the plan document and TPA services. The plan consolidation was completed on January 1, 2019, he says.

After the foundation for a revamped plan was laid, the committee earnestly worked with Benefit Partners to institute several important plan improvements, Warye says. These included establishing a committee charter to formalize the committee’s work; offering committee members annual fiduciary training; and implementing an investment policy statement (IPS) that coordinated with their investment performance reporting program, he says.

COFCO then consolidated the investment lineup and moved it to an open architecture platform so the company could offer best-in-class funds with zero revenue sharing, he says. This lowered the average expense ratio for participants by nearly 30 basis points (bps), Warye says.

Further, the company began automatically enrolling participants at a 6% deferral rate—which, he says, was a definite enhancement—and added a Roth option. And it elected to pay the plan’s TPA and recordkeeper costs, as well as for participant education. “The only cost to participants is the mutual fund expense ratios applicable to the investments they select,” Warye notes.

In response to participants expressing interest in environmental, social and governance (ESG) investing, Kacsits says, “Last year, we added several Calvert socially responsible investment funds, which lines up with our corporate culture of sustainability, and we adopted an investment committee charter and did fiduciary training for our retirement committee.”

Jen Bierly, strategic relationship manager at John Hancock, further points out that COFCO implemented an investment policy statement (IPS) that coordinates with the company’s investment performance reporting program and consolidated the investment lineup for all of the participants. “On our platform, they moved to open architecture with zero revenue sharing, which lowered the average expense ratio for the participants by almost 30 basis points [bps],” she says.

In-plan advice and financial planning services were added last year with the rollout of the John Hancock Personalized Advice Program, a managed account service. “If an employee signs up, one of our professional financial advisers assists with ensuring that [his] account is reviewed and maintained on a regular basis,” Bierly says.

Warye sums up COFCO’s various efforts by saying, “As you can see, this plan sponsor takes pride in its retirement benefit program. The committee makes thoughtful decisions always in the best interest of the participants.”

—Lee Barney