andy Watha and Scott Cameron have never been busier. As retirement plan specialists
with Diversified Investment Advisors, their job is to educate employees and answer
questions about saving for retirement at their client, Trinity Health Services.
And these days, employees at the Novi, Michigan-based health
care provider have a lot of concerns about their retirement savings. Considering
40 percent of the company’s 55,000 employees are in Michigan—which has been hit
hard by a recession—many are wondering if they can really save for retirement when
they have more immediate financial concerns.
"They need hand-holding and reassurance today more than ever,"
says Watha, who along with Cameron is part of a team of 16 retirement specialists
at Diversified Investment Advisors who visit Trinity Health’s 44 hospitals across
the country. Watha and Cameron are based in Ann Arbor, at Trinity’s St. Joseph Mercy
Health System.
In February, Watha and Cameron’s team had 1,004 appointments
with Trinity Health employees, up from 841 a year ago.
As talk of an economic recession sweeps the country, more
companies are dealing with employee concerns about saving for retirement. Many workers
are thinking twice about contributing to their 401(k) plans. Some are taking out
loans while others are moving assets to more conservative investments, even if they
have 30 years before they retire.
As a result, an increasing number of employers are working
with their plan providers to proactively address employee concerns and keep them
thinking long term, experts say.
"When employees react to market volatility, they tend to sell
low and buy high and they miss a lot of opportunity," says Pam Hess, director of
retirement research at Hewitt Associates.
In January, 401(k) plan participants transferred $1.75 billion,
representing 1.44 percent of participants’ total plan balances, from equities to
fixed income. This marks the highest movement to fixed income since 1997, according
to Hewitt.
At Trinity, Watha and Cameron have their work cut out for them. In 2007, the
percentage of employees who decreased the amount they were deferring to their
401(k) plans jumped by 81 percent. In Michigan, the number of employees
decreasing their deferrals climbed by 131 percent.
At the same time, loans rose slightly from 2,662 to 2,869
for all of Trinity, and from 1,574 to 1,627 for just its Michigan employees. That
loans were relatively flat and overall enrollment is slightly up is good news and
a sign that its communications efforts to employees are effective, says Silvia Frank,
manager of defined-contribution plans at Trinity.
Seventy-seven percent of eligible employees are enrolled in
the 401(k) plan, up from 75 percent in 2006. "Our goal is to stay at least at 75
percent," she says.
Watha and Cameron are part of the support that Diversified
Investment Advisors, a Purchase, New York-based financial services company, offers
to Trinity Health as its 401(k) plan provider.
Frank meets quarterly with Watha and Cameron to assess plan
participant statistics and discuss where they might need to be proactive with regard
to communications.
"We look at where our resources should be focused," she says.
"For example, if participation rates at one hospital are not increasing as we think
they should be, we will address it."
After one of these meetings last year, Trinity sent a personalized
mailer to all 401(k) plan participants who had stopped contributing to the 401(k)
plan. The mailer emphasized how if employees just contributed $1.43 every day to
their plans, they would have a little more than $500 in a year.
To reach as many employees as possible, Watha and Cameron
e-mail Trinity staff members to advise them about site visits and invite them to
make appointments.
"We try to leave gaps for walk-ins," Cameron says.
The specialists also set up "cafeteria days," where employees
can chat during lunch breaks, and organize more formal seminars around topics like
estate planning.
"We have been doing this since 2002; people know us as Randy
and Scott, not just voices on the phone," Cameron says. "It helps to reassure them."
While many employers are trying to reach out to employees
and address concerns, few organizations have on-site reps available, Hess says.
"We are seeing more personalized messages through e-mail and
we are doing more webcasts for clients," Hess says. Webcasts are an effective way
of achieving live interaction with plan participants, she says.
Challenges
But many employers have large segments of their workforces who don’t have access
to the Internet, making timely communications almost impossible, says Linda Garcia,
vice president of human resources at Rooms To Go, a Seffner, Florida-based furniture
retailer.
"We have a lot of employees that work in our stores and warehouses
and they don’t have access to e-mail," Garcia says.
Like Trinity, Rooms To Go is in a market segment that’s in
a recession. Garcia and her team are struggling with walking that fine line between
helping its 6,500 employees think long term while acknowledging that some of them
have pressing financial concerns.
In fact, two of Rooms To Go’s sales representatives recently
resigned so that they could access their 401(k) plans, Garcia said.
In such dire situations, there’s little an HR executive can
do, Garcia says. But generally she tries to make sure that when employees come to
her about taking out a loan, they understand the consequences, she says.
Plan sponsors and providers must be sympathetic to employees’
needs versus wants, Cameron says. While they want to make sure workers understand
the implications of taking out a loan from their retirement savings, some workers
have good reason for needing that money immediately.
But for employees who just want to increase the amount of
cash available, Cameron and Watha try to convince them not to stop contributing
to their plans. "A lot of people think they will go back to contributing after a
year, but often they don’t do that."
Because of the economic downturn, Rooms To Go has delayed
plans to automatically enroll employees into its 401(k) plan. "We have warehouse
workers who make $10 to $12 an hour, and if they see $50 out of their paychecks,
they are going to really feel that," she says. "We may look at it again a year from
now."
Some companies don’t want to start a conversation about stock-market
volatility with plan participants if they aren’t hearing any concerns from them.
"We don’t want to cause an issue if there isn’t one," says
Laurie Augustyn-Fier, director of compensation benefits and HRIS at NES Rentals,
a Chicago-based provider of construction and industrial rental equipment.
Some plan sponsors are wary of communicating about a recession
for fear of being sued, says Ethan Kra, chief actuary for retirement at Mercer.
Companies may think if they tell employees there is going
to be a recession and there isn’t one, employees might come back and say the company
misled them, he says. "It’s dangerous in this litigious society," Kra says.
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