Barbara Kontje
When American Express Co. saw an opportunity to help its 401(k) plan participants improve their savings rates, it didn't miss a beat.
The company implemented a non-discretionary company contribution, rewarding its lower-paid workers more than its higher-paid employees.
Lower-paid workers now receive a 3% automatic contribution to their 401(k) retirement accounts, while higher-paid workers receive 2%.
The new contribution replaces an annual discretionary profit-sharing contribution that varied from year to year.
"Higher contribution rates for lower-paid employees can really support financial well-being for those most in need," Barbara Kontje, the company's New York-based director of retirement and smart saving, said in an application nominating the American Express Retirement Team for an Excellence & Innovation Award, which it won.
Ms. Kontje declined to be interviewed.
American Express also boosted employee default savings rates to 6% of total pay from 3%, a change that positioned employees to maximize the company's 6% dollar-for-dollar match from the beginning.
The twin moves would over time improve retirement income replacement rates for all participants, Ms. Kontje said in the application.
American Express also implemented other plan design changes, including allowing former employees to stay in the plan after reaching the age at which they must start taking required minimum distributions and permitting them to make multiple withdrawals from their 401(k) accounts.
It also added what is referred to as a "super Roth" feature giving participants the option to automatically convert after-tax contributions to Roth contributions each payroll period.
Participants were especially appreciative of the new "super Roth" capability because the Roth conversions could be done online without the need to phone the call center for assistance, saving time, American Express said.
Judges applauded the plan design changes, saying American Express implemented several best practices and focused on what one described as "equity for employees across the pay scale."
"I love the focus on lower-paid employees," one judge said.
