Employers Use Automatic Tools to Jumpstart Participation and Saving in 401(k) Plans
Schwab Sees Increased Adoption and More Creative Use of Auto Features Among
401(k) Clients
The Charles Schwab Corporation - Press Release 9/5/2007
SAN FRANCISCO, Sept. 5 /PRNewswire-FirstCall/ -- With employers across the
country paying more attention to the retirement planning needs of their
employees, Charles Schwab is reporting both a dramatic increase in the use of
automatic retirement plan features and more creative application of the tools
by its 401(k) plan clients.
"The number of our clients choosing to offer different automatic plan
features continues to grow very rapidly," said Clare Bergquist, Charles Schwab
director of 401(k) strategies. "Automatic enrollment alone used to be
considered innovative and almost 'Big Brotherish,' but today, it is viewed as
more conservative and almost protective. Today's employers are going the extra
mile to help ensure their employees are doing all they can to save enough for
retirement."
Insights into the current use of automatic retirement tools include:
- More than 20 percent of Schwab's Retirement Plan Services clients
now automatically enroll employees into a 401(k) plan, a four-fold
increase from two years ago
- Forty-five percent of plans administered by Schwab Retirement Plan
Services are automatically selecting investments by age using
target-date funds for employees
- Nearly 95 percent of Schwab's Retirement Plan Services clients
offer employees the chance to set up annual automatic savings
increases, enabling them to automatically increase the amount they
contribute to a plan up to a pre-determined amount
- Nearly 25 percent of plans that moved to Schwab in 2007 have
automatically mapped all plan participants into target-date funds
- In 2007, 93 percent of automatically enrolled participants have
remained in retirement plans administered by Schwab Retirement Plan
Services
Employers Get Creative with Automatic Tools
Plan sponsors working with Schwab choose from an "a la carte" menu of
automatic features, called Schwab Retirement Smart Steps(TM). More recently,
Schwab has helped employers to create a more customized automatic features
solution that addresses the specific needs and unique characteristics of their
organization and workforce.
Bergquist added, "Many companies are catching on to the benefits of
automatic features, but a number of them are asking us to help them be more
creative as they design plans that uniquely suit their workforce. There
really is no cookie cutter approach to using automatic features in retirement
plans."
McKee Foods
McKee Foods, the Collegedale, Tennessee, producer of Little Debbie brand
snack cakes, recently worked with Schwab to implement two progressive
automatic retirement plan features. First, McKee Foods incorporated a
component into their plan through which participants saving between zero and
four percent of their salary received an automatic "boost" to a five percent
savings rate. Second, the company set up automatic savings increases of two
percentage points each year for existing participants saving five to 14
percent of their salary. These automatic increases will continue on an annual
basis until the participant reaches a 15 percent savings rate.
"It's one thing to get our employees into our retirement plan, but
deferring only a small percentage of their salary isn't going to get them
where they need to be," said Brian Mitchell, compensation and benefits manager
at McKee Foods. "By using automatic savings boosts and annual savings
increases, we are using inertia as a positive force to drive higher levels of
savings."
Evraz Oregon Steel Mills
Evraz Oregon Steel Mills ("EOSM"), located in Portland, Oregon, is using a
combination of the Schwab Retirement Smart Steps tools to progressively
increase employee participation and savings. Prior to incorporating automatic
features into its plans, the company found it difficult to get its staff
engaged in saving for retirement. EOSM's two separate plans -- one for non-
union workers and one for union workers -- had participation rates of 50
percent and 47 percent respectively. Since adding automatic enrollment to its
non-union plan, participation has jumped to 97 percent. Participation in its
union plan as a result of automatic enrollment has increased to 71 percent.
EOSM also implemented an automatic deferral boost for its non-union
employees of up to five percent for employees deferring between zero and four
percent of their salary. EOSM provides a company match up to five percent and
it wanted to do all it could to ensure that as many staff members as possible
could receive that benefit. Eighty-four percent of employees have agreed to
the increase and 97 percent are now deferring five percent or more.
Both union and non-union employees are automatically enrolled into
Schwab's target-date funds, and about 75% of the employees keep their accounts
in these funds.
"While it is nice to see such a significant increase in plan
participation, it is even more gratifying to know that we are helping our
employees plan for a more secure future by using all the resources at our
disposal," said John Worcester, compensation and benefits manager at Evraz
Oregon Steel Mills. Worcester added that employees appreciate the convenience
of automatic enrollment and the target-date funds.
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About Charles Schwab
The Charles Schwab Corporation (Nasdaq: SCHW) is a leading provider of
financial services, with more than 300 offices and 6.9 million client
brokerage accounts, 1,169,000 corporate retirement plan participants, 187,000
banking accounts, and $1.4 trillion in client assets. Through its operating
subsidiaries, the company provides a full range of securities brokerage,
banking, money management and financial advisory services to individual
investors and independent investment advisors. Its broker-dealer subsidiary,
Charles Schwab & Co., Inc. (member SIPC, http://www.sipc.org), and affiliates
offer a complete range of investment services and products including an
extensive selection of mutual funds; financial planning and investment advice;
retirement plan and equity compensation plan services; referrals to
independent fee-based investment advisors; and custodial, operational and
trading support for independent, fee-based investment advisors through its
Schwab Institutional division. The Charles Schwab Bank, N.A. (member FDIC)
provides banking and mortgage services and products. CyberTrader(R), Inc.
(member SIPC, http://www.sipc.org) is an electronic trading technology and
brokerage firm providing services to highly active, online traders. More
information is available at www.schwab.com.
The Charles Schwab Corporation (Charles Schwab) provides services with
respect to retirement plans and participants through its subsidiaries, Schwab
Retirement Plan Services, Inc., The 401(k) Companies, Inc. and its
subsidiaries, The Charles Schwab Trust Company, and Charles Schwab & Co., Inc.
(Member SIPC, http://www.sipc.org ). Charles Schwab also provides equity
compensation plan services and other financial and retirement services to
corporations and executives through Charles Schwab & Co., Inc. (0907-3630)
SOURCE Charles Schwab -
09/05/2007
CONTACT:
Michael Cianfrocca of Charles Schwab,
+1-415-667-3252,
michael.cianfrocca@schwab.com; or
Clayton McGratty of Intermarket
Communications,
+1-212-754-5425, cmcgratty@intermarket.com, for Charles
Schwab
Web site: http://www.schwab.com