Benefits March 6, 2024

Dawn Foods Boosts Employer 401(k) Matching Contribution

Michigan-based Dawn Foods Inc. changed its contribution matching formula to increase the total and reduce participants’ confusion.

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Dawn Foods Inc. raised to 5% from 4% of salary the maximum amount the company will match of an employee contribution to the company’s 401(k) defined contribution retirement plan, effective January 1.

Dawn made the change based on feedback from employee surveys—in two successive years—which showed its 401(k) plan participants were confused by the employer’s old formula, explains Brian Coleman, Dawn Foods’ vice president of total awards.

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Using Dawn’s prior formula, the 401(k) matched 100% of a participant’s first 3% of retirement contributions and 50% of the next 2%, “so [participants] had to contribute 5% to get 4%, [and] now we’re going to very easy, back-of-the-napkin math to understand [a] 5% [match],” Coleman says.

Confused participants were less engaged with the retirement plan and “more hesitant to come participate,” Coleman says. “With the challenging times that we’re in, we want as many folks as we can to save, save often and save as much as they can afford.”  

The Dawn Foods Retirement Savings Plan includes $206.12 million in retirement assets for 1,564 plan participants, according to the most recent 401(k) plan data from Dawn.

Simplifying the match formula gives participants the chance to save more for retirement, Coleman explains.

“It is simpler to communicate [and] simpler to understand,” he says.

In communicating the increase to employees, Dawn started gradually due to an October 2023 change in recordkeeper, according to Coleman.

“In December, we went to a full phase communication, because we also had migrated from Prudential Financial to Empower [recordkeeping] at the end of October, so we couldn’t do anything earlier than that,” he explains. “We made it effective [with], a month and a half grace [period from the last day of open enrollment into the plan], just in case we had any problems with the migration.”

Empower acquired the full-service retirement business of Prudential Financial in 2021.

The company declined to disclose how much the increased match will cost, but the change is important to the future of the Jackson, Michigan-based company, Coleman says.  

“We’re a 104-year-old company,” Coleman says. “We’re also looking at [recruitment], because those family [members of current employees] are going to be future employees with us, eventually, too.”

The robustness of an employer’s matching contribution to the defined contribution retirement plan is a significant factor in recruiting and retaining staff, according to Allison Cole, a postdoctoral fellow at the National Bureau of Economic Research, when she spoke at the November 2023 DCIIA Academic Forum.

Dawn Foods is also considering incorporating a re-enrollment sweep of unenrolled participants, aiming for the end of the second quarter or the start of the third quarter, Coleman says. Dawn currently automatically enrolls new hires at a contribution equal to 3% of their salary, Coleman says.  

Dawn communications to these participants will emphasize the matching 401(k) contribution: “It’s free money, why are you leaving it on the table?” Coleman says.

Currently, 70% of Dawn Foods’ participants defer to the retirement plan from salary at the full match or greater, compared with 59.5% in 2022 and 72.5% in 2021. Currently, 14.3% of participants contribute more than 10% of their salary, compared with 20.4% in 2022 and 21.7% in 2021, according to data provided by Dawn.

Data and Research March 6, 2024

Gen Z Employees Show Affinity for Increased Personalization in TDFs

Young 401(k) participants were the most likely to share personal information to help tailor their retirement investments to their needs and goals, according to new Cerulli data.

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Updated with correction.

As young 401(k) investors show the most willingness of all generations to share personal data, compared new Cerulli research suggests that Generation Z employees are in the driver’s seat when it comes to demand for more tailored retirement investments. 

Nearly half of Gen Z survey respondents in “The Cerulli Edge—U.S. Retirement Edition” said they are “very comfortable” sharing their current and/or projected spending plans with their 401(k) providers. 

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The Cerulli report argued that greater personalization allows 401(k) participants’ retirement assets to “become more dynamic over time” and helps meet the unique long-term investing goals of individual investors.  

Creating an inefficient portfolio at a young age can lead to delaying full retirement by a few years, adjusting withdrawal amounts once retired or making drastic changes to asset allocations after the fact, Cerulli argued. 

Sharing information like health and family history data with recordkeepers can “better calibrate the ratio of stocks to bonds to cash/cash equivalents and other asset classes” in a retirement account, according to the report, and can ultimately help participants better plan for when they want to retire.  

More so than other generations, Gen Z participants were willing to share information like smoking status, expected retirement age, current and/or projected spending and nonretirement savings and account balances.  

Information like a participant’s health status can prompt a change in asset allocations. For example, if a participant’s health status changes from “good” to “poor,” it may warrant a shift to a more conservative asset allocation—especially if that change in health results in early retirement or an earlier need for investment income. 

Meanwhile, many target-date-fund managers are starting to prioritize customization in their TDF offerings, as 10% of managers currently offer customization to 401(k) participants, and another 40% plan to include customization in the next year.  

Cerulli also found that 45% of TDF managers surveyed already allow participants to transition from a TDF to a managed account at a specific threshold, such as age or account balance. A recent NEPC survey found that while 43% of plans offer managed accounts and fees have come down by about 20% to 40% over the second half of 2023, only 5% of participants use the accounts.  

A plurality of fund managers that Cerulli surveyed (47%) said a leading benefit of personalized TDFs is the ability to help participants achieve more appropriate risk profiles, and 42% said participants like the idea of having a solution customized to their circumstances.  

As TDFs remain the preferred qualified default investment alternatives for most plan sponsors, with assets reaching $3 trillion in 2023, the Cerulli report argued that asset managers and recordkeepers should capitalize on this upward trajectory by incorporating more personalization.  

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