ot long ago, Annette Grabow, manager of retirement benefits at M.A. Mortenson Co., had a simple but ambitious goal. She wanted to get all of the Minneapolis-based construction company's 1,300 employees participating in the 401(k) plan, and she wanted do it the old-fashioned way: by educating workers, teaching them why it's important to save and how they can do it properly, and persuading them to voluntarily contribute to the company's retirement plan. No need for bells or whistles like automatic enrollment. Just let the power of information prevail.
Now, however, things are changing a bit at Mortenson.
Like scores of other companies have done recently, Mortenson finally decided that it will begin automatically enrolling new hires in its 401(k) next year. It's a move Ms. Grabow initially opposed, but she says it's the most efficient way to get Mortenson's non-office workers—the portion of the company's work force that experiences the most frequent turnover—to save for retirement.
Automatic enrollment will surely go a long way toward improving Mortenson's already impressive 85% participation rate. But Ms. Grabow still won't rest easy. "Once you start making decisions on behalf of your workers," she said, "it becomes your responsibility to educate them even more."
Workers who are automatically placed into the Mortenson 401(k) will have their contributions default to a customized fund that consists of stocks and bonds, a fund that Ms. Grabow says has a fairly moderate investment approach. After all, when you're investing someone's money for them, you can't be too aggressive and you can't be too conservative, she said. "We don't want someone coming back to us in 20 years if they're unhappy with the way things worked out."
So that's why Ms. Grabow has a new mission: Over the next year, she plans to reach out to every employee who is automatically enrolled in the 401(k) and get them to make a choice about how their retirement money is being invested. "We don't want to be leading the blind here," she said. "There's too much at stake."
These freshly enrolled workers can elect to stay in the customized fund, of course, "but we want it to be on their terms," she added. Otherwise, she'll do whatever she can to teach these employees about the benefits of having a diversified set of investments, and how they should go about selecting the right mix of funds for their 401(k) portfolio.
All of this will take place as part of a broader financial education initiative that Ms. Grabow has been spearheading at Mortenson for years. This involves road shows and workshops to meet with—and answer questions from—all of the company's employees about their retirement plans, sessions that Ms. Grabow says are more important than ever given the incredible volatility in the markets in recent months.
"It's understandable if people are fearful of investing these days," she said. "But it's my job to ease some of their concerns by teaching people that these are long-term investments and that they shouldn't be paralyzed by shortsighted fears."
—Crain's Benefits Outlook Online, December 2008
Mark Bruno is a reporter for Financial Week. To comment, e-mail editors@workforce.com.
