ISSAQUAH, Wash. -- Costco Wholesale Corp. boosted participation and employee contributions in its more than $900 million 401(k) plan by involving employees as advocates to rally for the plan.
A smaller plan sponsor, Findlay Industries Inc., Findlay, Ohio, is taking the concept one step further, said Maria Washburn, the corporate accountant who is now in charge of the plan. Plan executives formed an oversight committee of advocates who helped shape the recent enhancements and will assist in running the plan once the conversion to its new record keeper -- Strong Retirement Plan Services, Milwaukee -- is complete on April 1.
These days more and more companies are taking the promotion of their defined contribution plans to the streets.
"It takes a grassroot effort," said Clare M. Bergquist, director of 401(k) communications at Strong.
With human resources staffs shrinking, it helps to have someone on site who will champion the plan and who will continue to be the contact, Ms. Bergquist said.
"And it works well with know-it-alls and gets them in the loop," she added. "We see more and more clients doing it."
It's too hard to have one person touting the message, said Betty Meredith, president of Discover Learning Inc., Ann Arbor, Mich.
The idea is to identify one person at each location, Ms. Meredith said, "not so much to teach but to wave the flag and talk about the benefits."
At Costco, whose plan is bundled with T. Rowe Price Associates, Baltimore, the advocacy program was put in place by company executives searching for a way to reach employees in about 320 U.S. locations, each of which has between 220 and 250 people, said Katherine Miller, manager of Costco's employee benefits and retirement plans.
The challenge was to find a way for Costco's small benefits staff to communicate with so many employees, most of whom work in warehouse stores, plants and shipping depots, she said.
Initially, location managers were asked to select employees who were interested in the 401(k) program, Ms. Miller said. Those who were chosen were trained by Costco and T. Rowe Price executives so they could answer questions about the plan. They were sent back to their sites to encourage fellow employees to enroll.
And it worked, she said.
Participation shot up to 73% from 59%. Employee contributions also rose. At year-end 1999, Costco employees contributed $59.7 million pre-tax to the 401(k) plan, up from $46 million the year before, she said.
"A lot of people are putting a lot of money in there," Ms. Miller said. "We can see it's (the advocacy program) working."
Employees design tools
Although Costco and T. Rowe Price executives have provided advocates with tools, many advocates have taken the initiative to design their own promotions, Ms. Miller said.
One woman put together individual packets for everyone in the building that included T. Rowe Price-supplied materials for projecting account balances and calculating take-home pay for different amounts of deferred pay, and relevant articles she found, Ms. Miller said.
A payroll manager who is an advocate set up a table with cookies and juice in the employee break room.
Employees who asked a question about the 401(k) plan could help themselves to the treats, Ms. Miller said.
Costco executives also made up black and yellow buttons that had 401(k) in the center surrounded by the words: "Think about your future today."
To further encourage advocates, Costco circulates a quarterly newsletter to them that highlights the various locations' participation rates.
"It has become quite competitive," Ms. Miller said.
Advocates at locations that achieve participation rates of 90% or better become members of the "rod and reel club" and receive a token reward such as a water bottle, she said.
Costco's 401(k) plan has nine investment options. The company matches 50% of the first $1,000 contributed by the employee. There is also a discretionary contribution at the end of the plan year, determined by the employee's years of service and his/her earnings.
Findlay Industries is still in the midst of converting its $15 million semibundled plan, said Findlay's Ms. Washburn.
A privately held manufacturer of auto parts, Findlay has 5,600 employees in 17 divisions nationwide, Ms. Washburn said.
Advocates began their duties as part of a focus group that communicated what employees at their sites wanted in their 401(k) plan which does not have a company match. And Findlay listened.
For example, a paperless loan feature was added at the advocates' suggestion.
"We do not encourage loans, but I feel that people who take loans are those who really need them. So why not get them their money as early as possible?" said Ms. Washburn.
The 401(k) plan now has 12 investment choices, up from seven. Only one option -- a Gabelli midcap growth fund -- was kept.
Being added are three lifestyle portfolios: conservative, moderate and aggressive managed by Strong using a mix of the core options, Ms. Washburn said.
The core options include Strong's money market, government securities, corporate bond, growth and income funds; Neuberger Berman's Genesis and Europacific growth funds; and Janus 20 and Overseas, she said.
Once the plan enhancements were finalized, advocates became the advance people for the 401(k) plan -- heralding the changes and stirring up excitement. Strong followed with on-site education meetings, Ms. Washburn said.
Sometime in the fourth quarter, Ms. Washburn said, she will fade out of the picture and a committee of four advocates will take over running the plan.
But there are limitations to what advocates should talk about, said Ms. Meredith.
"Internal advocates should talk more about getting into the plan and saving as much as you can," she said.