For DJ Galvanizing Corp., getting employees to take responsibility for their DC pension plan means educating them one on one
The next time you see a flatbed truck with rolls of steel bounding along the highway, you might think of DJ Galvanizing Corp. “We zinc-coat the large rolls of steel and ship to manufacturing plants that eventually stamp them into vehicle body panels,” says Kristi Farmer, accounting and benefits co-ordinator with DJ Galvanizing.
But the greenfield site based in Windsor, Ont.—100% owned by ArcelorMittal, the world’s largest steel and mining company—doesn’t gloss over retirement planning. The company is ensuring that its employees (86 in all, with 53% baby boomers) will be prepared for retirement through its DC pension plan.
That’s an important point for Paul Dunmore, DJ’s president, who says retirement income is a key concern for most people. “By addressing it with a good plan, we are able to focus more clearly on business objectives. When you look at our retirement planning effort, it results in employees who are happier and more engaged overall, and more enthused. And that goes to the bottom line with respect to results,” explains Dunmore, adding that the company’s business results have been excellent and customer satisfaction high. “It’s not just the pension [plan] driving those results, but the pension is a key component.”
DJ’s DC pension plan—which has been in place since the company’s inception in 1992—was implemented so as to be sustainable and competitive, and not to have the legacy costs associated with a DB plan, says Dunmore. The DC plan is mandatory, with a 6% employee contribution. DJ Galvanizing also matches contributions at 6%.
But if plan sponsors know one thing, it’s that even a mandatory plan doesn’t mean all employees will be engaged in saving for retirement.
“We’ve got people who take on this responsibility very well. We’ve also got people who struggle with the responsibility,” says Dunmore. “That’s the challenge. All our initiatives have been designed to improve our employees’ understanding of what’s at stake for them, and to improve their personal responsibility and engagement when it comes to tackling their pension.”
Tools of the Trade
DJ Galvanizing uses a number of tools to help members understand their plan and its performance. The company reports unit value, as well as monthly and annual rates of return. It also monitors the number of employees using the call centre and the VIP room (on the website of its provider, Standard Life), where employees can calculate their savings, set savings goals and view their investments. This information is then posted on bulletin boards throughout the building and on DJ’s intranet. “We’re trying to engage employees to take some action,” Farmer adds.
The company has also tracked the pension performance of a fictional average salaried DJ employee since 1992. “We continue to grow their balance according to our plan’s average rate of return, and we project that out,” explains Farmer. “We show employees what the growth would bring them if they were to retire at age 65. And then we ask, ‘Where are you at? What are your numbers? Have you gone to the website to review your retirement projection?’”
Another strategy that has been very effective for DJ has been benchmarking individual rates of return within the company. The provider gave DJ rates of return for each individual employee (anonymously) on a one-year, three-year and five-year basis. Employees were invited to a meeting and asked to bring their own individual rates of return with them so that they could see the kinds of returns their colleagues were getting. “Everybody knows that there’s no investment geniuses working here—and yet, there are all these different rates of return,” says Dunmore. “It sparked a lot of conversation outside of the meeting. People went back to work and said, ‘Hey, I’m getting 4%—what are you getting, and why?’ It became a much more personal conversation, as opposed to an actuary-type conversation.”
At its annual pension meeting, DJ reviews the plan’s results and average rate of return with employees. “We show quite a few charts and graphs and remind everyone how important saving for retirement is,” says Farmer.
DJ’s provider conducts a once-a-year meeting, too, to ensure that employees are familiar with the provider’s website and the retirement tools available. In the past, this meeting was designed for teams of employees. However, last year, DJ introduced one-on-one meetings.
The company has focused on the over-50-year-olds (their spouses can also attend), inviting them to sit down one-on-one with a retirement specialist for an hour during the workday. “We find it’s easier to engage the employees who are nearing retirement because, obviously, they start to see that balance building up,” says Farmer. “They get the wake-up call or that ‘aha’ moment.”
However, Farmer wants that wake-up call to occur a lot earlier in an employee’s life. Last month, the company approached employees under age 50 for those one-on-one meetings. DJ also wants to create a section like the Globe and Mail’s Financial Facelift, where people report their financial situations and a chartered accountant provides advice. “The goal with the Financial Facelift is to engage the younger employees—to show that, with just a little bit of additional contribution or paying attention now, it will make it much, much easier when you get to that stage,” Farmer explains. “You don’t have to have your aha moment— you’ve had it all along.”
Down the Road
Despite the challenges of getting people involved in retirement planning, DJ conducted an employee survey two years ago and found that 77% of respondents feel they are on track or on track with minor adjustments for their retirement. More than two-thirds (69%) were somewhat or very confident that the current retirement plan will meet their retirement needs. And 86% believe their pension plan is well managed. On average, there are about 45 unique users a month accessing the VIP room, and 44% of members have set a retirement goal.
Next steps to further engage employees include providing a real-life (but fictional) story of a DJ employee in certain financial situations and his or her retirement outcomes. This would be published in a newsletter or attached to employees’ pay stubs. Farmer is also hoping to invite DJ retirees to write a blog on how much they’re enjoying retirement, which strategies worked and which didn’t.
Interestingly, employees are now so engaged that they want to join the pension committee and take a very active role. In fact, DJ had to increase the number of people on its committee as a result.
One employee who is now participating on the committee was interviewed for The Windsor Star. “When he first came here, he really wasn’t involved in planning for retirement,” says Farmer. “But he’s become very well educated with his pension investments. He is also making a very decent rate of return—and very proud to say that.”
Brooke Smith is managing editor of Benefits Canada.
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