The Dime Bank

When asked about the success of The Dime Bank’s 401(k) plan, Jill George deflects much of the praise to its providers. “We have such a good relationship with both our recordkeeper, Fidelity Investments, and adviser, L.R. Webber,” explains George, chief human resources (HR) officer at the bank’s operation center in Honesdale, Pennsylvania. “I never hesitate to call on them. We have a great practice to, for example, discuss the pros and cons of plan features. We’re a three-legged stool of retirement [planning], and this has made the plan the one it is today.”

That solid working relationship was beneficial when George and the providers first discussed automatic enrollment—and, more importantly, automatic escalation. “This isn’t just any auto-escalation,” notes Tom Muldoon, who was an adviser with L.R. Webber at the time, and is now assistant vice president, relationship manager, with FNB Wealth Management in State College, Pennsylvania. “It’s a ‘leave no participant behind’ escalation feature, where every year that you’re below a 15% deferral rate, your savings rate would be increased 1%.” The rate gets raised even if the person has just enrolled in the plan or made an affirmative election, he says.

A participant could opt out in any given year but would still receive an escalation notice in subsequent years and need to keep opting out.

This strategy of defaulting the participants was repeated when the plan made other improvements. For one, it moved everyone enrolled into a new target-date fund (TDF) when the committee redesigned the investment menu with consolidated investment options and zero revenue share classes. The plan also defaults participants, when they retire, into an installment distribution schedule.

“I have worked with many banks like The Dime Bank that have an internal brokerage person or division,” Muldoon says. “When it comes to discussing participant distribution options, the banks’ committee members can be conflicted” and offer only a lump-sum distribution option designed to gather more individual retirement account (IRA) rollovers from retiring participants. But The Dime Bank’s plan is designed with retiree flexibility in mind, offering partial distributions and installment payments, he notes.

The Dime Bank is a Pennsylvania-chartered commercial bank. It has been operating since 1905, when it began with one office. There are now seven branches, including Honesdale, spread over three counties. The bank’s retirement plan committee is composed of 10 members: one board member and the entire C-suite, plus four employees who serve for four years, receiving exposure to plan meetings, as well as providing a voice for their colleagues.

“What I like about the investment committee is that Jill included frontline employees who have a seat at the table,” says Steve Canty, director/relationship management with Fidelity Investments in Boston. “It’s truly a grass roots approach, which you don’t often see—especially in [the bank’s] peer group of plan assets.”

With the employees’ retirement readiness in mind, The Dime Bank’s plan pays Fidelity’s entire administration cost.

George has been managing the 401(k) ever since the bank started offering one, in 1990, and over the last 15 years she has pushed, in earnest, for education.

Beginning 10 years ago, she requested that Fidelity send an education specialist to the bank once or twice a year. “I split up the offerings,” George says. “We’d have sessions for the younger employees: a session on budgeting and sessions on saving for all the things that people in their 20s and 30s need to save for. We also held sessions targeting employees [of ages] 55-plus, for their approaching retirement.”

“Jill will gauge what the front-and-center topics relevant to participants are,” Canty says. “For example, ‘Preparing for a shortfall—strategies to budget for the unexpected’ and ‘Best ways to get access to your retirement assets.’ Each and every year, the education consultant who comes out to Honesdale will discuss a myriad different topics.”

The plan’s statistics are outstanding in not only how they compare with those at similar-size plans, but at similar-size plans within the bank’s peer group and sector, Canty says. Participation is at 97.9% compared with the peer group’s average of 70%. The peer group’s top performers are at 95%, so The Dime Bank even exceeds all other top performers in that group. ”That is saying something,” he observes.

Fidelity gauges employee deferral rates by way of its income replacement score and has determined that 60% of Dime Bank employees save 15% or more—deferral and employer match combined, Canty says. This equates to 85 of the plan’s 141 active enrollees today. The maximum amount they could defer is 21%, so Dime Bank employees defer 200% more than the other top performers in their employer’s peer group, he says.

“In most plans, employees’ highest deferral rate is 5%. That’s just not the case with The Dime Bank.” Forty-four employees—31%—contribute 10% to 15%, vs. an average 19% at peer plans. Only 12 active participants contribute less than 10%, Canty says.

“I’ve been in the financial industry for over 26 years, and 15 in the defined contribution [DC] arena, and I’ve been privy to a lot of data and information—this ranks up there among the very best.”

To keep participants challenged to save, Muldoon instituted a system of handing out “report cards,” George recalls. “I had our department upload all of the information on everything about the participant—age, investment option chosen, deferral percentage—and he came up with a report card that looked like what you received in school. You’d get graded from an ‘A’ to ‘F,’ and you didn’t get an A unless you were deferring 15% or more. You also didn’t get an A in your investment options unless [they] were age appropriate and diversified.”

Since then, every year, participants receive their report card at the adviser’s annual education meeting. The adviser immediately follows up with participants, one-on-one, to discuss their grades. “People really don’t like it when they get a C, D or F, so they work hard, and they’re advised on what is needed to get their grade up,” George says.

Canty points to the variety of demands placed on HR directors, the multiple competing roles they play but calls George “by far, one of the most diligent stewards of the 401(k) that I deal with on a day-to-day basis.”

Citing her attention to detail and the thoroughness of her efforts to engage employees with the plan, he says, “She genuinely cares about her employees’ financial well-being. She constantly makes sure they are informed, educated and take advantage of all the plan has to offer. She wants to be sure they’re retirement ready. The way I see it, she treats her employees as if they’re her own children. You don’t always get that, but that’s what you get from Jill.”

—Judy Faust Hartnett