printable versionUniversity’s contributory retirement plan has broad participation
BY JON ANN LINDSEY
Lori Branley
Les Schlaegel
More than 80 percent of eligible Stanford employees invest a percentage of their earnings using the Stanford Contributory Retirement Plan, an encouraging statistic in light of estimates that 30 percent of employees nationwide do not take advantage of their companies' opportunities for retirement savings.
"I tell employees in orientation that if they don't participate after a year of service, they're missing out on free money," said Lori Branley, manager of retirement programs in the university's Human Resources department.
As employers continue moving away from offering traditional "defined benefit" pension plans, more are emphasizing "defined contribution" plans—401(k)'s or, for educational institutions and nonprofit organizations, the similar 403(b)'s. In a 2005 survey, global human resources firm Hewitt Associates found that defined contribution plans were the primary retirement vehicle for 64 percent of large companies, up from 55 percent in 2003.
That percentage is likely to increase since President Bush signed the Pension Protection Act of 2006 in August. "In addition to reforming the laws governing traditional private pensions, the bill I signed today also contains provisions to help workers who save for retirement through defined contribution plans," Bush said at the time. "These savings plans are helping Americans build a society of ownership and financial independence."
One of the goals of the Pension Protection Act was to encourage organizations to automatically enroll their employees in their 401(k) or 403(b) plans—something Stanford already did. For the Stanford Contributory Retirement Plan (SCRP), a 403(b) plan, the university makes a basic contribution for all eligible employees of 1 to 5 percent of their pay, depending on years of service.
"That comes into their account automatically—they don't have to enroll," Branley said.
Beyond that, those who contribute a percentage of their earnings receive matching funds from the university. A 4 percent employee contribution, for example, qualifies for the maximum 5 percent match.
Employees are eligible for SCRP after working at Stanford for a year. During their first year of employment, they can enroll in a Tax Deferred Annuity plan that consists of employee contributions only but offers the same investment options as SCRP. In both plans, employees choose their own investments among funds offered by Fidelity, TIAA-CREF and Vanguard.
"The TDA is a bridge to SCRP," Branley said. "We didn't want people to have to wait a whole year without any type of retirement savings."
Les Schlaegel, director of benefits, said a university survey this year found that SCRP, like many Stanford benefits, compares very favorably to programs offered by other major employers.
"We looked at a comparative group of 20 major employers in the Bay Area, and there was only one company that has a richer benefit than us—and only barely," Schlaegel said. "For defined contribution plans, we rank No. 2." The survey looked at the benefits of Apple Computer, Bank of America, eBay, Genentech, Intel and Oracle, among others.
Even employers with generous contributory retirement plans find that some workers don't bother participating because they aren't very knowledgeable about investing. Stanford addresses that issue on several levels. Employees can choose professionally managed "lifestyle" or "life cycle" funds, in which their money is invested based on their age and year they want to retire. Six times a year, the Benefits Department offers free investing workshops by an independent educational firm called Financial Knowledge. And benefits-eligible employees also can schedule one-on-one sessions with advisers from Fidelity, TIAA-CREF and Vanguard. The goal, Branley said, is to keep employees from leaving that free money on the table. "We don't want people not to participate because they don't know how to invest," she said.
Jon Ann Lindsey is a writer for the Office of University Communications.