A defined contribution (DC) retirement plan (most commonly a 401(k)) plays a vital role in many organizations for helping their people secure a well-earned retirement.
But your defined contribution plans also give you an opportunity to increase engagement, anticipate staffing needs and reward high performers—provided you have the expertise to use the data generated by the DC plans.
The information contained within your organization’s defined contribution plans acts like a window into the overall retirement readiness of your people. The analytical techniques we’ve developed allows you to use this data to see which subsections of your people lag behind in their retirement savings and what problems you can address to help get them back on track.
This means your people can feel confident about their futures and remain focused on their work, instead of worrying about spending their golden years in poverty. Maximizing the effectiveness of your defined contribution plan also ensures your people retire when you need them to—not too early and not too late—so your organization has a healthy flow of new, motivated talent into leadership positions.
Below is a concrete example of how our strategic defined contribution analytics saved an organization both revenue and talent by vastly improving engagement with the group’s 401(k) plan.
A global aerospace company recognized the potential value in the defined contribution plan it offered as both a business-planning tool and a recruitment/retention tool. Management saw both high participation rates and high balances relative to an individual’s projected retirement age as measures of success in the 401(k) offering.
Overall reports from the administrator showed that participation in the plan was good but not excellent, with 75% of the employee population contributing to the plan. Contributions viewed as a percentage of payroll were above the 50th percentile (averaging 6.5% of payroll), but the number of outliers and the contribution range among them painted a less consistent picture.
We took a deeper dive into the data than the plan’s provider could was able to do. Our analysis yielded information that identified the largest group of consistent outliers: a shortfall was specifically occurring with female employees in a certain location.
Plotting the participation data by age of the outliers from the analysis showed an inverted bell curve with the lowest point in the dip from ages 30 to 39.
We partnered with HR to better understand why this specific cohort might be under-participating, and created participant profiles to help HR, as well as the actual employees, understand their behavior relative to others. We also examined other economic factors tied to that location that could potentially affect the 401(k) plan participation behavior, and we found that childcare costs were higher than expected and childcare options were limited in the area.
With this information in hand, HR reached out to a cross-section of the group to address the issues and asked for their partnership in finding workable solutions. Initial meetings, which included a member of our team, demonstrated the long-term value of the 401(k) plan via projections and also presented research on options for lowering employee expenses to allow higher payroll contributions to the plan.
Employee relations/engagement has improved thanks to the company outreach suggested by our team, with the overall participation rate now at almost 90%.
To enjoy similar benefits in your organization, get in touch with someone from our team today.Contact Us
Don't miss out. Join 16,000 others who already get the latest insights from Segal.