In recent years, American workers have been forced to work later than planned to support themselves in retirement. Educating employees about opportunities through an employer-sponsored retirement plan still proves a difficult task. Given the physically demanding nature of many jobs at PepsiCo, such as positions in plants, trucking, packing, warehouse and delivery, working additional years past intended retirement dates isn't realistic for many employees. Moreover, delayed retirements can cost companies significantly because of dampened productivity and output.
Chad Ryan, director of retirement plans for PepsiCo, is this year's winner of the Benny Award for Benefits Leadership in Retirement Planning. He's has taken a committed and data-driven approach to helping PepsiCo's 100,000 U.S. employees retire securely. Ryan oversees PepsiCo's defined contribution 401(k) plan, defined benefit pension plan, retiree medical plan, and nonqualified deferred compensation plans. "We feel [Chad] is a model for what we want to do with our other clients," says Cornell Staeger, director in the human resource solutions practice at PricewaterhouseCoopers. "We use him as an example of how [clients] can get vendors to work together, how to use the data and work to achieve results."
PepsiCo closed its traditional DB plan for salaried new-hire employees in January 2011. The traditional pension plan is still an actively accruing plan for those who entered it prior to 2011, but new hires now participate in a DC plan. In addition, the beverage and snacks company has some hourly employees in a traditional DB plan, while others are in a cash balance plan.
"Hourly employees generally need greater retirement protection and security," says Ryan. "We believe it's important to maintain a defined benefit plan for those employees." Further, salaried and hourly employees also have the opportunity to save for retirement within the company's 401(k) plan.
According to PepsiCo's Form 10-K, the company had approximately $11 billion in U.S. pension plan assets at the end of its 2012 fiscal year. It also shows that the company contributed $109 million to the company's 401(k) savings plan in 2012. PepsiCo is able to leverage the scale of its retirement plans with its partners to ensure low-cost offerings that meet the needs of employees.
To engage employees in the 401(k) plan, PepsiCo offers an employer match and employer contribution based on employees' age and years of service. It also uses auto-enrollment and auto-escalation to increase participation and encourage sustainable savings behaviors.
Ryan works hard to reward PepsiCo's loyal employees, many of whom have worked there for 20 to 30 years, with a strong financial future once they leave the company.
Many work on the front lines as hourly workers who make, sell and distribute PepsiCo products. "These men and women are the heart and soul of our business. Enabling them to retire comfortably from PepsiCo is very important to us," explains Ryan.
Further, employees are much more productive when they don't have financial stress in their lives. Productivity is important in every business. So offering a competitive set of retirement planning benefits is a win-win - good for employees and good for business.
Ryan worked with Towers Watson to set up retirement-readiness scores to inform employees when they could feasibly retire based on their retirement savings. This process was eye opening for many workers who immediately took action and asked for advice on how to reach their retirement age goal.
He also introduced the Healthy Money program, a financial planning program that educates employees through a website and onsite workshops delivered by PwC. PwC provides financial education to employees on any matter related to financial planning, such as estate planning, how to diversify a 401(k) portfolio and ways to increase retirement savings. Educators also plan meetings every three months with employees to set longer-term goals and "engage in long-term coaching relationships with participants," says Staeger.
This program affords them the opportunity to talk to a financial planner through PwC with zero cost to them or their spouse. The most common questions or issues from participants include how to get out of credit card debt, whether to borrow from their 401(k), and which investments are best for their 401(k) portfolio. Many participants also ask for advice about how to fund their children's education or buy a home. Many others are concerned with day-to-day financial worries.
PepsiCo has approximately 100,000 employees in the U.S., with 80,000 participating in the 401(k). Of those participants, 50% have a 401(k) loan. However, thanks in part to the Healthy Money program, employees have reduced the number of outstanding loans by 5,000 since January 1, 2013. And in certain locations, the company has seen an increase in 401(k) plan participation of more than 10%. Many employees have built more diverse portfolios to better manage their retirement risk after participating in the program.
Bang for your buck
Ryan emphasizes how culling and analyzing data gives employers the biggest bang for their buck by enabling the company to hone in on the things employees are looking for. He has detailed data about participation rates and diversification rates for all 2,500 PepsiCo locations in the U.S.
"We target the locations that could benefit from the education the most," such as areas where the company has the highest 401(k) loan utilization or the lowest participation rate, explains Ryan. "That helps us understand where our communications efforts would be most effective. As a result, employees get more of what they're looking for, and we're able to be much more efficient in delivering those benefits."
While "communicating to 100,000 employees is challenge for any organization," as Staeger explains, Ryan and PepsiCo leaders educate employees during meetings between shifts and send out targeted information to smaller audiences. They use simple, clear communication to educate employees broadly and target smaller demographics with more detailed or personalized information. For example, the company sent out a diversification mailer to employees who had too high a concentration in company stock, showing an example of a conservative portfolio that directly compared to the participant's current diversification, and also showing them how they could take action.
The Healthy Money workshops are held at all times of day to ensure all shifts are covered. It can be especially challenging to reach smaller locations and remote employees, such as those working in sales, says Ryan. For this challenge, the company is looking into social media and webinars to engage workers.
Power of marketing
Ryan takes a page from Pepsi's successful product marketing. "We need to educate our employees about retirement just as we're educating consumers about our products," he says.
Retirement benefits are complex, so employers need to keep it simple. "You can put all the tools and modelers out there for employees, but utilization tends to be low. It's a complicated area, and the best way to educate is face to face," advises Ryan. "A lot of companies simply try to put more bells and whistles into a program, but employees can easily get confused. At the end of the day, they just want a program that provides retirement security and is simple and easy for them to use. We have to balance the features in retirement plans with something that employees easily understand."
In general, Ryan believes that corporate America struggles with educating employees sufficiently about retirement. Employees assume their company program and Social Security will be enough when they retire, which is why many workers aren't saving enough.
But Ryan has faith that employers can bridge the retirement-readiness gap by educating employees with clear and targeted communication about relevant retirement issues.
"I really enjoy seeing people change behavior for the better after we have educated them on all the facts about retirement," Ryan says. He believes that by spending time on education and using population data to improve employees' readiness for retirement, other employers can have the same success he has achieved at PepsiCo.
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