Iowa Fluid Power

What distinguishes the Iowa Fluid Power (IFP) 401(k) plan is how seriously and professionally the plan sponsor takes the plan governance and how that has led to better decisions for the plan. The corporation, headquartered in Cedar Rapids, Iowa, designs, prototypes, manufactures and services “any conceivable motion control system” for industries ranging from forestry to aerospace, food and beverage to the military.

Last year, two of the seven-person retirement plan committee achieved Certified Plan Sponsor Professional accreditation from the Plan Sponsor Council of America. The company attends conferences such as the PLANSPONSOR National Conference (PSNC) to learn about industry trends and best practices, as well as the Annual Fiduciary Summit of its retirement plan adviser, Qualified Plan Advisors.

At IFP, “they are a real sponge for information, and this has resulted in their adopting best practices and amending their plan’s design to include automatic enrollment and automatic escalation,” says Scott Liggett, director of Employee Retirement Income Security Act (ERISA) oversight at Qualified Plan Advisors, which has served as the sponsor’s adviser since 2012. The committee also includes two workers from various production departments.

“We want our committee to be highly trained and diversified so we can stay on top of new developments in retirement plans and implement changes to better our plan quickly,” says Valerie Burns, human resources (HR) director for IFP and the plan’s administrator.

For instance, Liggett says, IFP recently reduced the one-year employment requirement to be able to join the plan to three months. The company also increased the plan’s automatic-enrollment deferral default percentage from 2% to 4% and has arranged with plan recordkeeper Fidelity Investments to refund revenue-sharing fees directly back to applicable participants’ accounts, he says.

Another effort with Fidelity has been to encourage participants, via a recurring communication campaign, to create or update beneficiary designations, Liggett says. The sponsor is currently exploring offering customized managed accounts. “Especially with its committee being so well-trained, we’ve been able to keep IFP at the forefront of best practices,” Liggett notes.

He describes the sponsor as “very conscientious and deliberate about its plan decisions, constantly asking us for new ideas and wanting to understand the pros and cons of each. Their proactive approach is a breath of fresh air. I wish I could find more clients that engage with their plan the way Iowa Fluid Power does.”

As to why the committee includes rank-and-file workers, Burns cites a desire for mutual understanding—“so we can learn about what they think is important to have in their plan, and so they can be ambassadors to explain the plan to their peers. Both of these benefits from their participation are incredibly helpful.”

The plan gives its employees a match in its 401(k) plan as well as profit sharing. The 2% match is stretched as a 25% contribution on an employee’s first 8% of deferrals, which has proven to be effective: The plan’s average deferral rate is 8%. On top of that, IFP gives its employees profit sharing, which, over the past three years, has averaged 9.23% of each employee’s earnings; in some years, it has been as high as 13%.

Burns also points out that the 81-year-old owner of the company meets one-on-one with each participant annually to underscore the importance of participating in the plan and of a strong work ethic. He tells them that the more profitable IFP is, the higher their profit sharing will be, she says.

—Lee Barney