Ceridian constantly strives to grow, increase productivity and improve profitability. As part of Ceridian's effort to improve profitability, we periodically review all employee programs to determine if they are still meeting company and employee needs. Ceridian made a careful, measured analysis of its 401(k) plan using the DMAIC process. The results of that analysis led Ceridian to implement three changes that achieved its overall goals AND reduced 401(k) plan costs by an estimated $3.265 million in year-over-year expenses.  

401(k) plans: Reduce expenses, retain the benefit

Ceridian constantly strives to grow, increase productivity and improve profitability. As part of Ceridian's effort to improve profitability, we periodically review all employee programs to determine if they are still meeting company and employee needs. Ceridian made a careful, measured analysis of its 401(k) plan using the DMAIC process. The results of that analysis led Ceridian to implement three changes that achieved its overall goals AND reduced 401(k) plan costs by an estimated $3.265 million in year-over-year expenses. 

 

The Bottom Line
  • Ceridian reduced its 401(k) plan expenses by $3.265 million per year.
  • Changes to Ceridian's 401(k) plan did not affect participation rates.
  • Ceridian's current 401(k) plan continues to be comparable to similar plans offered by other companies.
  • Changes to Ceridian's 401(k) plan employer contribution match formula had a positive affect on average employee 401(k) savings rates.

Ceridian's offers a 401(k) plan to help employees save money to reach their retirement goals. Retirement savings plans like 401(k) plans will be a prevalent source of retirement wealth for many Americans. Ceridian also uses their 401(k) plan to differentiate themselves from other employers in the marketplace by offering an attractive retirement savings benefit to their employees. 

Ceridian took a comprehensive look at many aspects of the company's 401(k) plan, including total plan assets, participation rates, average savings rate and average account balance of active participants, along with other key plan characteristics. Once we had a broad picture of our own plan, we benchmarked it against comparably sized companies in comparable industries. To benchmark we used Ceridian's powerful Insight database to instantly surface benchmarking statistics on a variety of employee programs including 401(k) plans, as well as industry 401(k) plan statistics compiled by T. Rowe Price and Vanguard, two top plan administrators. 

The benchmarking analysis of Ceridian's 401(k) plan yielded four important results: 

  1. Ceridian's participation rate, average savings rate and average account balances were more or less in-line with industry averages.
  2. Employers who contributed 4 percent or more in matching contributions were in a decided minority (and the number is going down each year). Many more employers are offering matching contributions in the 3.0-3.99 percent range rather than the 4.0-4.99 percent range.
  3. The majority of 401(k) plans require matching contributions of at least 6-6.99 percent before employer contributions are matched.
  4. A large percentage of employers use some form of vesting before plan participants are eligible to receive matching contributions.
Improving Ceridian's 401(k) plan

Based on the analysis, Ceridian's 401(k) plan experts, in concert with Ceridian's global HR leader, brainstormed possible changes to the plan and their potential impact. Three basic scenarios were proposed, each of which would result in significant savings in the plan, while maintaining the plan's attractiveness to employees. Ultimately, the scenario Ceridian chose to implement changed the match formula to 50 percent up to 6 percent for all domestic employees, reducing the employer contribution from 4 percent to 3 percent. Additionally, the new plan changed eligibility to receive the match to one year and semi-annual entry dates and added a three year cliff and five year graded vesting schedule. 

The overall cost savings of this new plan have resulted in approximate annual savings of $3.265 million in the first year of implementation. Additionally, the increased amount required for plan participants to reach the maximum employer contribution had the positive effect of increasing participant savings rates. The most popular savings rate under the old plan was 5 percent. Under the new plan the most popular savings rate rose to 6 percent. And finally, while the majority of plan savings derived from reducing the employer contribution by 1 percent, the reduction had no negative effect on employee perspectives, as measured by Ceridian's 2009 Employee Engagement survey. 

The changes made to Ceridian's 401(k) plan triggered several additional requirements, some regulatory, some involving the communication of the changes to employees. The reduction in Ceridian's employer contribution from 4 percent to 3 percent meant Ceridian lost its Safe Harbor status, requiring additional testing and different audits at the end of each fiscal year. Ceridian and our plan administrator, T. Rowe Price, also had to update all 401(k) plan documents to properly describe new plan details and train representatives to handle questions. Ceridian had to test and implement changes to plan eligibility and employer contributions in our HRIS system. Ceridian used a detailed change leadership plan to introduce and mange this change to employees. 

As an HR services company with broad, deep expertise in all areas of human resource management, Ceridian periodically uses its knowledge of best practices to focus on its own employee programs. The review, changes contemplated and ultimately made to Ceridian's 401(k) plan were just some of several efforts that have, over the last three years, driven $170 million in year-over-year expenses out of Ceridian's business.