What do retirement-outsourcing arrangements look like in the real world? Some examples of successful partnerings can shed light on how a retirement outsourcer can address specific needs and how such capabilities might logically extend to a total retirement-outsourcing solution.
For example, a large U.S.-based manufacturer with multiple locations sought to motivate its eligible nonparticipants to enroll in its defined contribution (DC) plan, and encourage existing participants to contribute more...especially those contributing below the company match level of 4% of before-tax income -- and simplify the concept of diversification by introducing lifecycle fund options.
In this case, the outsourcing firm's ability to provide an integrated communications and educational campaign proved essential. It organized as many as 30 employee meetings at multiple locales; created targeted letters from the vice president of HR highlighting the importance of participating in the plan, plus postcards, posters and table-tent cards to promote the meetings; and provided asset-allocation worksheets, wallet cards and enrollment forms to aid employees with plan enrollment.
The impact? The on-site meetings were attended by 32% of the employee population¿¿an impressive response when considering attendance, although encouraged, was optional, and the majority of employees were hourly employees attending before or after their shifts.
The number of employees who elected to use a new automatic deferral feature to get to the company match level increased nearly three-fold, and there was an 80% increase in the number of participants who elected to invest 100% of their retirement savings in a single pre-diversified portfolio.
As for defined benefit (DB) plans, an outsourced solution should be able to address extensive database needs. For example, a global consumer-product manufacturer with approximately 140,000 employees had maintained several DB plans, covering most active employees and many former vested ones.
The company sought to centralize its DB database to reduce redundancy and increase data integrity, support its plan administration through a service center and offer employees self-service and decision-support tools via the Internet. In this case, the outsourcing partner was able to store all the pension data for the company's HRIS in a centralized database and deploy a strategic pension administration system featuring Web access for administrators, participants and consultants.
Such integrated solutions as these should be typical of retirement-outsourcing partnerings, but there is no reason to assume that an outsourcer will be able to provide them efficiently and effectively unless the provider's capabilities are total and proven.
At a time when the issue of retirement security is under the microscope and future retirees are under mounting pressure, there is nothing more important than total capability.
Source(s): Mercer, LRP Publications