Dan Holupchinski, along with his boss Mark Kelliher, felt so strongly about changing the design of Deluxe Corp.'s $1.2 billion 401(k) plan so participants would have an adequate income at retirement that they were willing to sacrifice a government safe harbor to do so.
Their goal was to ensure that if employees spent a full career of 30 years at Shoreview, Minn.-based Deluxe, they would have 90% of their income at retirement — 70% from the Deluxe plan and 20% from Social Security, said Mr. Holupchinski, manager of retirement plans.
Those changes earned Mr. Holupchinski one of the inaugural Innovator Awards, sponsored by Pensions & Investments and the Defined Contribution Institutional Investment Association.
He and Mr. Kelliher, senior manager of retirement plans, spent about two years on the project.
“We talked about what we could do within the safe harbor (which covers a maximum deferral of 10% of a participant's compensation) to meet employees' needs,” Mr. Holupchinski said. “We decided it (the 10% deferral) would not get our employees to an adequate level of retirement. We wanted what was right for our employees.”
What turned out to be "right' is an ultimate deferral of 15%, including automatic increases of 2% a year. All new employees were enrolled at a 4% default rate. Existing employees who had been deferring 0% to 3% of pay per year were automatically re-enrolled at 4%.
Mr. Holupchinski's approach won plaudits from the Innovator judges.———“This took guts,” said one judge. “That to me is a big part of innovation.”
The 90% income replacement goal and the comprehensive education effort - including meetings on company time and letters of encouragement from top executives - “make this a winner,” said another judge.
“I have not seen a plan that takes auto-escalation up to a 15% contribution (rate),” said a third judge. “This is important and will help participants save more for retirement. It creates an awareness of what participants need for retirement and gives them a way to get it.”
The Deluxe team wanted to achieve a sufficiently high savings goal without discouraging employees. “We didn't want to design a plan that would fail,” Mr. Holupchinksi said. “We didn't want to drive negative behavior.”
Mr. Holupchinski credits record keeper J.P. Morgan Retirement Plan Services and investment consultant Callan Associates with helping him and Mr. Kelliher achieve their goals by overcoming technical barriers, gathering data to build an optimal plan design and presenting the changes to participants.
