Re-enrollment Case Study: Utility Company in the West | Capital Group

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Defined Contribution Investment Perspectives

Re-enrollment Case Study: Utility Company in the West

A utility company with $1.2 billion and 7,500 participants in its retirement plan wanted to improve the investment selections of its participants. It introduced a new set of custom TDFs in order to help participants achieve a more “defined-benefit-like” experience within the defined contribution plan, according to the consultant for the large global consulting firm that guided the company through its re-enrollment.

Challenges

The plan implemented the re-enrollment to coincide with a change in recordkeepers. “Doing a re-enrollment in conjunction with other plan changes made it more seamless for the participants, although it required additional effort from the plan sponsor and recordkeeper,” explains the consultant.

Overall, participants were satisfied with the changes and moved about 60% of available assets into the new QDIA.

“The biggest challenge was just making sure all the ‘i’s were dotted and ‘t’s were crossed from an administrative perspective,” says the consultant. “For plan sponsors who are considering a re-enrollment, I would recommend having someone on the transition team who has done one before.”

Another challenge encountered by this plan was that a significant portion of the work force didn’t have online access at work. “We took a multipronged communications approach to try to reach as many people as possible using mail, online and in-person workshops,” the consultant says.

What Did Participants Gain?

Participants realized a number of benefits:

  • They are in age-appropriate investments.
  • They don’t have to worry about reallocating investments as they approach retirement.  

“I believe very strongly that re-enrollment is the right thing for participants, and I would encourage plans that are considering it … In the end, you’ll have participants who are better prepared to retire,” advises the consultant.

— Consultant for the utility company

Re-enrollment “Absolutely Worth It”

“It’s important to have the right resources in place in advance, but the investment is absolutely worth it. I believe very strongly that re-enrollment is the right thing for participants, and I would encourage plans that are considering it. From a plan sponsor’s perspective, it’s a good work force management practice. In the end, you’ll have participants who are better prepared to retire,” advises the consultant.

Conclusion

Re-enrollment into the QDIA benefited the plan and created a better alignment between participants’ asset allocations and their retirement goals. This may improve the likelihood that participants will achieve greater financial security in retirement. The experience of other plans may differ.

Note that re-enrollment is not available in all plans.


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Statements attributed to an individual represent the opinions of that individual as of the date published and do not necessarily reflect the opinions of Capital Group or its affiliates. This information is intended to highlight issues and not to be comprehensive or to provide advice.