Putting Employees First Through Innovative Education, Plan Design and Investment Solutions

Karsten Manufacturing Corporation dedicated to providing employees a rewarding retirement program

Results from a recent employee survey at Karsten Manufacturing indicate that employees are smiling about their 401(k). “When asked to rate how satisfied they were with their 401(k) plan, 90% indicated that they were either satisfied or very satisfied. This is a 16 percentage point increase from a survey taken in 2000,” said Stacey Pauwels, vice president of human resources at Karsten. When Pauwels was asked about the other 10% that were neutral or dissatisfied, she indicated that it was largely in part to the absence of loans or hardship withdrawals. “We are a paternalistic company and the 401(k) plan is a savings vehicle for employees’ retirement. We try to communicate the purpose and the need for employees to plan ahead. Let’s face it; it’s hard to save for retirement when funds can be tapped into for current needs.” 

Making it easy for employees to build a meaningful retirement benefit is a central goal at Karsten Manufacturing, maker of renowned PING golf clubs. Karsten is headquartered in Phoenix, Arizona and is a family-owned engineering and manufacturing company with 1,200 employees dedicated to the innovation and the design of custom-fitted golf clubs. The firm’s engineers design clubs based on a simple precept: properly fitted clubs will lead to better play and maximize enjoyment of the game. 

Karsten employees are passionate about producing quality products that are world famous in the game of golf. Likewise, its senior management team is committed to rewarding employees for their work with a retirement plan that offers the investment choices and flexibility to help them reach their retirement goals. 

“We produce millions of golf clubs each year, and every one is handcrafted. Our success and our reputation for quality are literally in the hands of our employees, every day. Our retirement plan is an integral part of how we reward their commitment,” Pauwels said. “We’ve always understood that we have to be able to provide varying 401(k) solutions for our more sophisticated participants, and that we will still have employees who either don’t participate or are hesitant to make their own investment decisions. We have to find ways to help them, too. Otherwise, there’ll just be too many employees who have nothing saved after 30 years of work.” 

This long-held perspective has led the firm to implement a number of improvements to its 401(k) plan in recent years, starting back in 2002, when Karsten launched automatic enrollment. Of course, adding auto enrollment meant adding to plan costs as well, particularly the increased cost of the company match — $1 for $1 up to 5% of pay. 

However, the firm understood there would be rewards as well — namely employee satisfaction. “When we started automatic enrollment, we had some concerns about how it would be received, but we have found the overall reception has been immensely positive. There’s a growing awareness of what a very real benefit the 401(k) plan represents as our employees see their balances grow. So, we believe the benefits outweigh the costs,” explained Mike Trueblood, chief financial officer of Karsten Manufacturing. 

“The beauty of auto enrollment is that it’s easy for new employees to start saving, and once they accept that first bite out of their paycheck, they get used to it. They enjoy seeing their balances grow without having to put forth the effort to initiate the savings into the plan and can take full advantage of the company match. This makes the plan a powerful retention tool, and retention of our highly skilled workforce is critical for our business,” said Pauwels.

Default Investment Education
In 2000, when Karsten moved from a trustee-directed to a participant-directed plan, it established a balanced fund as its default investment. “We were concerned that the money would just stay in the default fund, where 100% of the assets were at the transition,” Trueblood explained. “After several years, and a very concerted education effort last year, we’ve driven that percentage down to around 45%. Also, we’re now having some success with participants moving into the target date retirement funds we added in 2004. We’re now evaluating whether these age-appropriate target funds would be better choices as our default funds as well.” 

Karsten plans to make a final decision on target funds as defaults once the Department of Labor issues final guidelines on Qualified Default Investment Alternatives that were part of the Pension Protection Act of 2006.

The Next Level
In 2004, Karsten wanted to take its plan to the next level and do a better job of reaching out to its increasingly diverse workforce. Also, even with auto enrollment in place, increasing participation remained a goal. The firm decided to switch plan providers, and instituted an aggressive education campaign in partnership with its new provider. In connection with a switch in plan providers, Karsten targeted non-participating employees to enroll in the plan. 

“It was important that the new plan provider thoroughly understand our employees and our paternalistic culture. We took the representatives on a detailed tour of our production processes so that the look and feel of the educational material compliments our business. Our employees take great pride in PING products, whether or not they play the game of golf. It was important that the educational materials feature the products they craft. In addition, we wished to share the importance of this benefit offering within our organization and our management’s willingness to involve key executives’ time and attention to its administration. This level of detail and organizational support permitted us to blend well with our provider to create a great team with excellent results,” said Pauwels. 

“Karsten presented some unique challenges from an education standpoint. Our consultative approach and the teamwork between our organizations led to some very successful and innovative campaigns that helped them achieve their goals,” said June Mitchell, Schwab education consultant on Karsten’s plan. 

The team put together a plan to re-introduce the 401(k) plan with a combination of posters, postcards, newsletters, education guides, CDs and on-site, in-person conversion presentations in four different languages, English, Spanish, Vietnamese, and English with a Cambodian interpreter. The on-site conversion presentations were held over a two-week period, with mandatory meetings held for all employees just prior to the conversion. Due to general problems with procrastination and a significant portion of the employees’ lack of comfort with computer technology, a paper based enrollment form from the previous provider was negotiated and used. This enabled Karsten to target employees who were not participating in the plan to sign up just prior to the conversion so that when the plan went “live” with the new provider, all employees interested would be enrolled. In addition, a custom conversion web portal was made available to keep employees informed through the transition. 

PSCA Signature Awards  Karsten has earned six PSCA Signature Awards for its retirement plan communication materials during the past two years, including Best in Show, increasing participation, language diversity, plan conversion, overall campaign and asset allocation.  "We're very pleased with our results and thrilled to be recognized by the PSCA for our efforts in helping our participants plan and save for retirement," said Pauwels. "We knew we were doing the right thing for our employees by making changes to the plan and promoting those changes in several languages. Winning awards for our efforts is really icing on the cake."

Adequate spacing between each meeting proved valuable by establishing individual connections with employees and the Karsten and provider representatives in attendance. Many employees were not comfortable asking their questions in a group setting and took advantage of the time after the meetings to verbalize their inquiries. 

Because Karsten has such a diverse employee base, the education guides were translated from English to Spanish, Vietnamese and Cambodian. In the past, Karsten had interpreters and a bilingual Spanish presenter, so translated materials were a significant improvement. 

Overall, the effort clearly paid off, with an 83% participation rate, a 12% increase. Karsten’s successful conversion and innovative approach to education also earned a Best-in-Show Signature Award at the 2005 PSCA National Conference.

Advice — The Next Step
The team developed a new education campaign focused on investment choices. But employees also often struggle with a larger issue — the need to take definitive control of their financial future and take decisive action. And engaging employees who communicated in five different languages — from five different cultures — was a tall order. 

“We worked together to brainstorm a marketing theme that would create excitement around the latest addition to our plan — advice and managed accounts at no additional cost. We knew these services could help our employees towards the goal of a more comfortable retirement,” Pauwels said. 

Many Karsten employees are enthusiastic baseball fans, especially after the Arizona Diamondbacks won the World Series in 2001. The season tickets the company owns are a hot commodity with employees, and Karsten leveraged them to build interest in the campaign. 

Karsten chose the theme, “Get into the Game,” which conveyed passion, excitement, and need for definitive action — elements which really spoke to their employees. In this campaign they introduced advice and managed accounts, and reviewed all fund choices, again stressing ease of use. Karsten’s main message was that they did not want any of their participants to be a benchwarmer, when each participant has the opportunity to “Get into the Game” and choose their retirement line-up. 

Once again, materials were presented in English, Spanish, Vietnamese, Cambodian, with the addition of Chinese. An all-out push with posters, banners and postcards promoted the meetings, and attendees received Get in the Game ball caps plus the chance to win Diamondback tickets at each meeting. The meetings were voluntary, and close to 500 participants attended. Employees were totally engaged in sessions in their languages because these presenters had strong financial backgrounds and the ability to communicate the complexities of investment options in very simple ways.

Outcomes
As a result of the campaign, assets shifted from the default investment choice to other investment choices available in the plan. 

Karsten’s participation rate is up from 83% to 86%, well above the national average of 70%, with an average deferral rate at 6.43%. This is particularly remarkable considering that the Karsten plan does not allow loans or hardship withdrawals. 

At the meetings, Karsten kicked off its Advice offering, allowing participants to sign up for an one-on-one meeting via phone appointment or in person as well as being available anytime on the internet. Since the “Get in the Game” campaign, 143 participants accepted advice through an advice consultation. Some of the advice consultations were in Spanish, Chinese, and Vietnamese. At least 272 participants have explored the Advice option since its addition in 2005. The demand for in-person Advice remains high among the employee base and is scheduled out into the future. For those that have accepted the Advice, the result have shown greater diversification and increased savings with an average deferral percent increase of 1.96%.

Conclusion
Making meaningful changes that move participants forward on the path to a comfortable retirement is a challenge every plan sponsor faces. Karsten understands that a variety of components — plan design, investment options and education — all play a role in constructing a successful plan. “We’ve worked very hard to construct a plan that helps our employees reach their retirement goals. It is important that employees are at peace with their plans for the future. The assistance we can provide as an employer is one of most gratifying parts of my job. That said, we’ll never stop trying to make it better,” added Pauwels.

What’s Next for Karsten? Innovation is a competitive advantage for Karsten both in its products and its benefit plans. The firm is currently considering these enhancements for its 401(k) plan Workshops for employees nearing retirement to discuss in-retirement needs and broader financial planning topics Ongoing promotion of diversification through target date retirement funds and the advice offering Changing default fund from a balanced fund to an age-based retirement fund (pending final DOL guidance) Automatically enrolling all eligible but not participating employees in 2007