An exemplary benefits program
Almost a decade ago, Dallas's Parkland Health and Hospital System looked ahead to its employees' future retirement and saw the need for a change in its retirement benefits administration. Parkland's challenges included a roster of more than 8,000 employees who frequently shifted job titles and full-time vs. part-time status. Legacy sources of employee data included paper records, as well as databases that had undergone a series of conversions as technology evolved.
Parkland knew it needed a complete overhaul in order to offer employees a new generation of benefits, whose centerpiece would be reliable online access to benefits information. By providing a "self-service" benefits portal, Parkland hoped to increase awareness of the value and extent of its benefits package and demonstrate how competitive it was in the Dallas market.
Envisioning what the future should look like
"From the outset, we worked with Parkland to understand its total benefit picture, both defined benefit (DB) and defined contribution (DC) administration—as well as the need for communicating the importance and value of these plans to employees," says Milliman consultant Greg Boland. "Our practice leader, Mark Trieb, was heavily involved from the start in plan design. Parkland managers Jim Johnson and Candy Knowles knew they wanted all aspects of the DC and DB programs to work together, consolidated into a single clear picture that would be easy for employees to understand."
Greg's focus has been on transforming the DB side of Parkland's retirement program. He and his team worked to create a "hierarchy of trust" for diverse information systems to accurately record employees' compensation history, contributions, and employment status for specific time periods. Developing this confirmation and consolidation process took close to three years, but the end result was well worth the work: "Parkland and its plan participants now have confidence in the information it gets from the system. It gets it quickly and directly from the plan website, and it trusts the numbers it's getting." An invaluable benefit is the selfservice environment that's been created. "The employees are happier because they're a lot more self-sufficient. And Parkland's HR staff has the tools to administer these plans effectively."
Three-fold benefits for DC participants
Milliman DC specialist Pat Hargrove began working on the Parkland outsourcing project in 2002. DC plan design enhancements have always been a significant focus and, along the way, three separate DC plans have been integrated into one.
"What we’ve done," says Pat" is to combine a 403(b), a 401(a), and a 457(b) in a way that’s seamless to participants." How can they do that? "Parkland is unique in that it's a governmental entity and it's also a teaching hospital. Because Parkland is a governmental entity, employees are eligible for 457(b) benefits and therefore they have the ability to double up on deferrals." For example, for 2009, once Parkland’s employees contribute the basic salary deferral up to the $16,500 maximum allowed into a 403(b), they can contribute an additional $16,500 into the 457(b) plan. "Then, to enable participants to put in as much as possible, we place the Parkland match and after-tax contributions in the 401(a). In some cases, this means that employees can triple their contributions."
Participants don't have to worry about the rules for contributing to the separate plans; their contributions automatically get distributed to the right plan in the right sequence. Diversification is now also "automatic," thanks to a more diversified default portfolio that draws from a wider range of investment offerings.
Metrics show the changes are working
Best-of-class investment vehicles still need participants who know that funding them adequately is in their best interests. Both Pat and Greg emphasize how essential effective communications have been to the success of the Parkland relationship.
"Nancy Kariel, Parkland's lead Milliman communications consultant, is involved on a daily basis in ensuring that everything done from a communications standpoint is in line with Parkland's overall plan," says Pat. "Parkland's communications are unique to its retirement program, and include advanced tools that consolidate benefits information and show the value of these for employees."
Employees are getting the message. Participation in the Parkland DC plan is up 21%, with an average DC deferral rate of 8%. "We're helping employees become better investors, and maximizing their engagement with the entire retirement benefits process," says Pat.