© Copyright 2006 Rogers Publishing Ltd. The following article first appeared in the July 2006 edition of BENEFITS CANADA magazine.
Retirement on-ramp
Two years ago, 63% of JB Hunt’s drivers were in neutral when it came to saving for retirement. It took creative thinking and investment advice to get them in gear.
By Leigh Doyle

After many hours on the road, a driver for JB Hunt Transport Services Inc. can cruise into one of the company’s 15 service centre truck stops for some preventative maintenance and a truck wash. Inside the break room, fellow drivers sit drinking warm coffee from the vending machines and watching the two TVs mounted on the wall. One stays on the weather channel at all times.

This truck stop is like any other except for one distinguishing feature: a number of computer kiosks give drivers the ability to log on to JB Hunt’s Internet portal, called Connections. The portal lets employees manage a variety of work-related matters like discounts, pay schedules, health benefits and, of course, pension planning.

“In the financial section, [a trucker] can link his 401(k)account online,” says Eric Airola, director of Benefits at JB Hunt in Lowell, AR. He can change his contribution rate or switch into a different fund or even enroll in the company’s recently added investment tool, Advice Access. “Eventually, he’ll be able to click on a link to take him to a computer tutorial to learn about investing, 401(k), Advice Access and how to make the most out of those tools.”

JB Hunt and its investment provider, Merrill Lynch, continually work on innovative ways to engage the employee base that is always en route. Their current project is a 10- to 12-minute, flash-technology-based tutorial that will be available at JB Hunt truck stops around the country. “We’re going to…make it more of a class where drivers can learn about retirement and making choices for their 401(k),” says Airola.

JB Hunt is one of the largest transportation logistics companies in North America and employs about 16,000 people. As of Dec. 31, 2005, its 401(k)plan had assets totaling US$308 million with an average account balance of $31,500 and an average contribution rate of 7.4%. Plan participation and diversification problems have plagued the company’s 401(k)plan. The reason: 12,000 of its employees spend long hours driving and most are not comfortable with investment and retirement planning.

“We found that a lot of employees that were in the plan were putting all their eggs in one basket and in the most conservative fund,” says Airola. “Or, they were going in the opposite direction and putting it in company stock.” JB Hunt’s employees needed something more than educational materials to get the most out of the 401(k). That’s when Merrill Lynch made a suggestion.

At the trucking company’s quarterly retirement meeting two and a half years ago, Merrill Lynch made a presentation to the benefits and pension committee about a product called Advice Access, which is provided by the investment research firm Ibbotson Associates.Using complicated calculations based on personal information provided by a user, Advice Access determines what funds the user should be invested in and how much money should be invested. Simply put, it is a Web-enabled tool that provides investment advice.

“Advice(Access)seemed like a very good way to get people to spread the money around and also to make their money work harder for them,” says Airola, adding the system can be customized to each individual. When joining Advice Access, an employee can take 10 minutes to do a quick sign-up, a process in which the tool considers the person’s age, their anticipated retirement date, their contribution rate and a determination of which funds they should select. Or an employee can take a little longer to enter outside investments, such as stock holdings, before the tool recommends an investment plan.

After funds are determined, Advice Access reallocates and rebalances member investments every 90 days to ensure an optimal mix. “Once you get into it, you don’t have to worry about it,” says Airola, “and for our employees, that is the key.”

Before Airola can get more members into Advice Access, he has to get them participating in the 401(k)plan. As always, the solution is communication. “It has to be frequent,” says Airola. “You can’t let up or your numbers start sliding.”

That’s where the truck stop computer tutorials come in. To raise awareness about Advice Access, JB Hunt and Merrill Lynch created a cassette tape for the drivers to listen to on the road. It includes a scenario between a driver and an investment advisor as well as a general overview of the 401(k)plan and the benefits of participating.

The companies try to send out recruitment materials once a month to communicate with and engage employees. Both firms mail personalized projected statements to employees not enrolled in the plan, showing what being in the 401(k)would mean to their retirement. Others promote higher contribution rates and greater diversification and include information about Advice Access.

Airola has seen participation in the plan rise in two years to 46% from 37%. His long-term goal is to have 90% of employees participating. Since the rollout of Advice Access, 18% of the 7,300 members in the 401(k)have enrolled for the service, but Airola wants 60% of those in the plan to utilize the online tool.

In the months ahead, Airola has his eye on new legislation in the U.S. that will make it easier for companies to institute automatic enrollment in 401(k)plans. “One of our concerns is that we would like that money to be put into something that will truly benefit the employee,” he says. “What we would like to see, if we’re going to pursue it, is to invest that money into Advice Access where it can give a customized solution for each individual.”

WEIGHING IN The age-old debate: whether or not to provide advice.

“Information is not education. It is not enough to hand [plan members] a booklet with 20 or so mutual funds and expect them to build the optimum portfolio for their needs,” says Neil Murray, investment advisor, group plan specialist, Neil Murray Investment Group, BMO Nesbitt Burns in Toronto.

Is providing investment advice a solution? No Canadian company currently provides advice to
defined contribution plan members. The most popular reason is because offering advice opens a company up to litigation. But Hugh Kerr, assistant vice-president and senior counsel at Sun Life Financial in Toronto, thinks differently. “Plan sponsors and advisors are not promising retirement income,” he says, so no promise is broken if the advice doesn’t yield adequate savings and there are no grounds for a suit. “That’s why we haven’t seen the litigation.”

Plus, he adds, “The advice would have to be negligent.” Even if the advice isn’t meeting the industry standard, liability wouldn’t necessarily fall on the sponsor.

In the United States, where ERISA does provide safe harbour rules, providing investment advice is more prevalent. “For all 401(k)plans, 55.6% of them offer investment advice,” says Michael Weddell, a consultant with Watson Wyatt Worldwide in Detroit, and 27.6% of participants access the advice.

“Even if you offer investment advice, the percentage of employees who use it and who implement it is low,” he says.

In the U.S., advice hasn’t yielded the expected results. “[Providing advice] has not been a successful solution,” says Weddell. “Plan sponsors have been frustrated that offering advice has pleased a very small minority and it hasn’t really changed asset allocation for the better in a very noticeable way.”

Leigh Doyle is assistant editor of BENEFITS CANADA. leigh.doyle@rci.rogers.com.