Battered by the economic crisis that hit its business hard in 2009, Vermeer Corp. moved emphatically to repair damage to its 401(k) profit-sharing plan by encouraging greater participation, higher employee contributions and greater investment-option diversity.
The company's efforts to improve its $242.6 million plan caught the eye of the White House. In July, Vermeer was one of several companies cited by the White House Conference on Aging for establishing best practices to help participants achieve a secure retirement.
Vermeer enacted some strategies this year, and more changes are on the way — most notably the creation of a custom target-date series scheduled for mid-2016.
As a result of the economic crisis, “people worked reduced hours,” explained Cheri Klyn, director of shared services for the agricultural and industrial equipment company based in Pella, Iowa, whose 401(k) plan has about 2,900 participants. “People reduced their 401(k) contributions, or they stopped contributing altogether.”
The true scope of the crisis' impact on 401(k) plan participants wasn't realized until a 2011 review showed that the participation rate was down to 75.4% and the average annual deferral rate was down to 5.52%. At the end of 2008, the rates were 93% and 7.6%, respectively.
“What I had seen in the past was that when someone lowers their percentage in slower times, they forget to raise it back up when times are good,” Ms. Klyn said.
By the end of April 2015, however, Ms. Klyn said the participation rate had climbed to 98% and the average annual deferral was 8.43% of salary. By the end of 2014, two-thirds of participants were contributing 6% or more of pay while 18.4% were contributing 10% or more.
The 2011 review also had found that only 19% of participants were on track to achieve “retirement success,” a measurement of whether they were saving enough for adequate retirement income. By the end of last year, 43% of participants were on track for “retirement success.”
Retirement success is based on individual income replacement ratios using current age and income while factoring in salary, account balances and contribution. Success is defined as participants achieving at least a 75% chance of achieving the income replacement ratio through retirement savings and Social Security.