Photo / Fred Field
Rachel Porter, manager of retirement benefits at Cianbro, with Mark Hovey, director of human resources.
May 14, 2018
Focus: Wealth Management / Retirement
Top Maine employers take initiative in helping employees prepare for retirement
File Photo / Jim Neuger
Giovani Twigge, chief human resources officer at IDEXX Laboratories Inc., says the company takes seriously the responsibility of helping employees prepare for retirement.
Median assets (not including pensions) for pre-retirement Americans age 47–61 are plummeting. “Despite generally increasing per capita incomes, there has been alarmingly little increase in assets among this group,” writes UMaine economist Philip Trostel. The recession and subsequent bear market were contributors to the downward trend. But “the downward trend persisted even after income and stock values rose.”
The retirement outlook for many is dismal. Investment in retirement savings has plummeted in recent years, with nearly half of American workers working for businesses that don't offer retirement plans and fewer than half participating in plans that are offered. In Maine, a third of Mainers age 65-plus rely solely on an average annual Social Security income of $16,000, and typical working households have only $3,000 saved for retirement.
Employees at Maine's two largest publicly traded companies may be bucking that trend.
At IDEXX Laboratories Inc. in Westbrook, there's 95% U.S. employee participation in its 401(k) program. WEX Inc. in South Portland has 401(k) participation of nearly 80%.
Automatic retirement plan enrollment, automatic contribution escalation and/or hefty employer matches are among employer strategies to improve retirement outlooks for their employees.
“This is a national issue,” says Giovani Twigge, chief human resources officer at IDEXX. “People do not save enough for retirement. We think that companies have a responsibility in helping employees prepare for that.”
Slow but steady growth
At IDEXX, a maker of diagnostic tests for pets, poultry and livestock, Twigge credits the high participation rate to automatic enrollment and automatic escalation of contributions.
WEX, which provides payment processing and information management services, takes the opt-in approach, but Melanie Tinto, chief human resources officer, attributes strong participation in part to a hefty 6% employer match, starting one year after hire, and full employee vesting after year one.
Cianbro, Maine's largest construction company, offers automatic enrollment, starting new hires at 3%.
“Very few people opt out,” says Rachel Porter, manager of retirement benefits at the Pittsfield-based company. She is seeing interest from younger workers anxious to save for retirement. “And we do auto-escalation. We bump them up 1% every year, capping that at 10%. We've seen good results with that as well. It pushes people closer to their retirement saving target,” she says.
“The nice thing about the automatic increase,” adds Cianbro Director of Human Resources Mark Hovey, “is that, generally, once they're in a plan, the team member doesn't really see that big a difference in their net take-home pay. You do a little bit at a time, but over time it gets to be a substantial amount for them.”
Worsening problem
“People who are age 50 or 55, now, have saved much less for retirement than [people in their 50s] were saving 15 or 20 years ago, which is pretty troubling,” says Philip Trostel, an economics professor at the University of Maine, Orono. In a 2017 report for AARP Maine, he wrote: “Asset accumulation for retirement has dramatically fallen, despite the fact that we're seeing increasing prosperity.”
Trostel and AARP Maine's director, Lori Parham, say research suggests retirement savings 10 to 12 times a worker's current income is for most nowhere near attainable. With savings for retirement declining, the problem is worsening.
There's a rule of thumb that says workers should put away 10% of earnings. “It's simple math,” he says. “You have, say, a 40-year work career and expect a 20-year retirement. If you're saving 10% over 40 years, with compound interest, then you're going to be able to largely keep your same standard of living. And you can keep that same standard of living particularly if you have Social Security income as well.”
Overall, the saving rate has dipped.
“You see more reliance on debt than before,” he says. “Some of it has been a cultural change: People haven't been as worried about savings as they used to be.”
Twigge says IDEXX finds that automatic enrollment works well for addressing the situation.
“If someone is entitled to a benefit, but they have to opt in, it can take them a long time to decide to opt in,” says Twigge. “That's what companies with low participation typically see. When you join us, you're automatically enrolled. Then you have to make a conscious decision to say, 'I don't want to prepare for retirement.' That's harder than saying, 'I want to prepare for retirement, but maybe next year' — and it keeps becoming something to postpone.”
Sweetening the pot
IDEXX matches up to 5% of employee contributions. (The 5% match, up from 4%, was a reinvestment of financial benefits realized from U.S. tax reform.) And the contribution is automatically escalated, by 1% per year, up to 15%. That provision is especially useful for the company's lower-wage earners, who may have tighter cash flow.
“So if it's $50 this year, maybe $55 next year is not so bad, so people get used to that savings,” he says. “We've seen these two mechanisms not only help with our high participation rate, but also help increase what people have in their individual account balances.”
WEX chose the opt-in approach, says Tinto, in order to have time to educate employees about their plan options. That's done in partnership with vendors who provide financial tools and resources to help employees plan for retirement. Online tools look at employee age and estimated time until retirement, combined with what a portfolio of diversified funds might look like in increments until retirement.
As a 100% employee-owned company, Cianbro's profit-sharing program replaces employer-matching, with profit shares — everyone receiving the same percentage of compensation — going into employees' retirement accounts. Employees may contribute any percentage of earnings; across the company, contributions average 8%. That compares to a national average, according to MoneyWatch, of 6%.
“We contribute to everyone who's eligible, regardless of whether they've contributed themselves,” says Hovey. “That comes from a culture standpoint, that not everyone can afford to save for retirement, so we want to help him or her.”
All three companies take a holistic approach to financial wellness. That includes things like Cianbro's employee stock ownership plan and stock options at IDEXX and WEX; plus other benefits like health insurance, health savings accounts and wellness/fitness programs.
“We know that, when people make that transition from work life into retirement, they also take their physical health into retirement,” Twigge says. “So our holistic approach includes well-being on campus, where we want to help employees take their healthiest selves into retirement.”
Leadership engagement
Education and communication efforts include bringing in retirement plan vendors to speak directly with employees, vendor webinars and online tools, financial well-being workshops and availability by human resources staffers.
“We make it a point to get out on a job site and in front of people and talk with them about the importance of saving for retirement,” said Cianbro's Porter. “We feel like speaking with them one-on-one gets their attention more. And I think it helps them feel more comfortable with their retirement planning.”
“We have literature that goes to their homes and is available on our website,” Hovey says. “We have a 12-month calendar, where topics are laid out. And it's ongoing: It isn't that we talk about retirement savings once and move on.”
“There's a lot of support, from our senior leadership team, our board,” he adds. “They're constantly asking, 'What can we do to make sure these folks retire comfortably?' My advice for people wondering how they can improve — it's got to be a team effort. It can't just be HR pushing it.”
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