Unum Group and First Tennessee Bank are among fewer than two dozen companies nationwide to meet a long list of criteria developed by the Financial Services Roundtable showing they help prepare employees for retirement, chiefly by enabling them to sock away about 10 percent or more of their income for latter years.
Unum contributes up to 9.5 percent of employee income to retirement plans for its 2,700 Chattanooga workers, and it auto-enrolls employees in its 401(k). For employees who have been with Unum for one year, the insurer contributes 4.5 percent of the employee's base pay, plus any bonus to the defined contribution plan, and matches $1 per $1 of an employee's contributions to his or her 401(k) for up to 5 percent of that employee's salary.
Pension versus 401(k)
Beginning in the 1980s, a dramatic shift occurred in employer-sponsored retirement plans, away from traditional defined benefit plans, such as pensions, and towards portable defined contribution plans, such as the popular 401(k), according to the national Bureau of Labor Statistics. Employer contributions required for defined benefit pension plans can often fluctuate based on plan investment returns. By comparison, employer costs for defined contribution plans are often based on a fixed formula that matches employee contributions.
The First Tennessee Bank building is located between Market and Broad Streets in downtown Chattanooga.First Horizon National Corp., the parent company of First Tennessee Bank, matches dollar-for-dollar the first 6 percent of what an employee contributes to his or her 401(k) plan.
Both companies previously offered defined benefit retirement programs to employees. In recent years, First Tennessee replaced its pension with the 401(k) match. Unum had a defined benefit program until 2013, when it switched to a defined contribution plan that's integrated with its 401(k).
Unum employees' average deferral savings rate is almost 8 percent.
"We're trying to get employees over time to save at least 10 percent of their salary," said Linda Levesque, Unum's vice president of corporate benefits. "We've got a ways to go."
At First Tennessee, City President Keith Sanford said a growing number of employees are fully participating in the company match, setting aside 12 percent of their pay for retirement benefits each year. First Tennessee has been recognized two years in a row by American Banker magazine as the best major bank to work for in the United States.
"We've found that happy employees tend to have much longer tenure and provide better customer service," Sanford said.
Research has shown that employees typically defer up to their company's matching rate. A 2013 report from consulting firm Aon Hewitt showed that the most common match is $1 per $1 on the first 6 percent of employee deferrals, the Society for Human Resource Management noted. Previously, the most popular match was 50 cents per $1, on the first 6 percent. Aon Hewitt surveyed 400 plan sponsors representing more than 10 million employees, in plans totaling $500 billion in retirement assets.
At Unum, the company's retirement assistance extends beyond matching contributions to employee savings plans. The insurer also offers one-on-one consulting with a financial advisor, as well as targeted workshops for older employees and their spouses, along with on-site and electronic financial-education workshops for all workers. Unum tries to prepare employees psychologically and socially for late-life work-free years.
"Retiring is more than 'Do I have enough money?' " Levesque said. "The key for us is ... understanding that things need to be viewed holistically."
The Financial Services Roundtable, which lobbies for the financial services industry, says its "Save 10" campaign is "a business-to-business, peer-to-peer effort to encourage responsible employers to help their employees save for a secure financial future."
About 95 percent of Unum employees stay in the 401(k) after auto-enrollment, Levesque said. That's high compared with national trends. According to the annual National Compensation Survey from the Bureau of Labor Statistics, released in March, 75 percent of employees in private industry with access to defined contribution plans, like a 401(k), or defined benefit pension plans, actually participate in them.
Unum and First Tennessee were among 18 companies that got the "Save 10" label on Monday. The other companies that made the list are: IBM, Franklin Templeton Investments, MasterCard, Allstate, Milliman, Cargill, United Technologies, AXA, LPL Financial, Nationwide, Popular Community Bank, Principal, Putnam Investments, Quicken Loans, SunTrust and TransAmerica.
To be considered for recognition as a Save 10 employer, companies had to certify that, among other things, they offer a retirement plan, contribute to employee retirement accounts and ensure employees can keep that 10 percent savings by providing access to disability and life insurance plans.
Staff writer Dave Flessner contributed to this story.
Contact staff writer Mitra Malek at mmalek@timesfreepress.com or 423-757-6406. Follow her on Twitter @MitraMalek.