Ed Pictroski calls compensation and benefits the "sweet spot" of his 35-year career. "I love the objective nature of compensation and benefits. There are rules and strategies," says the senior vice president of compensation and benefits for Avis Budget Group. "I like the strategic aspect of building programs that are competitive and help the employer achieve business results, and I like the challenge of integrating benefits design with business objectives."
Over the past several years, Pictroski has used his strategic moves to help Avis Budget's U.S. employees get more out of their retirement plans. The car rental company - which boasts 10,000 rental locations in 175 countries - has three 401(k) plans covering both union and nonunion employees with approximately $519 million in assets and more than 17,000 participants.
Avis Budget's challenges are three fold, Pictroski explains. Like many employers in the service industry, the company is highly fragmented - employees are spread in small numbers across many locations. Think about every airport in America - there could be up to five or six Avis Budget locations at each of those airports. Employees are "not necessarily sitting at a computer where it's going to be easy for us to get them those [retirement planning] messages," says Pictroski. In addition, "our people are consumed with delivering our product, so they're with our customers, they're handling our vehicles. It's tough to get people off the lot and into a meeting," he says.
Second, Avis Budget has a highly diverse workforce. In addition to English, the company communicates with employees in up to seven different languages. And, third, "we have a lot of second-wage-earners and young people who aren't necessarily that interested in retirement investing and savings," says Pictroski. "So, it's difficult sometimes to get those folks to pay attention to the fact that retirement is going to creep up on them."
Feeding the hunger
About five years ago, Avis Budget's employee benefits committee became concerned that the lifestyle funds in the company's plans were no longer meeting employees' needs - employees would enroll in the plan, invest in a lifestyle fund and never revisit their initial choice. Moreover, the committee was concerned about knee-jerk reactions it was seeing from some participants to big shifts in the investment markets. "They were concerned about people getting out of the market or getting into it without forethought to what was going on," says Pictroski.
As well, HR staff were getting requests like, 'What should I do?' and 'Help me make a decision' from employees.
"There was just tremendous hunger for advice by the participant population," says Pictroski. "Although we had a desire, historically, to provide some opportunity for planning through those lifestyle funds, that was not really meeting what we saw as the needs of the participants."
Ultimately, says Pictroski, the company believes that good employee financial health supports better business results.
Avis Budget, in 2009, implemented the Advice Access service offered by its provider Bank of America Merrill Lynch. Delivered in person, on the phone or online, Advice Access recommends an appropriate contribution rate, asset allocation and investment options based on the investment funds in the Avis Budget 401(k) plans.
The service "tells a participant where they're at relative to a goal, and the goal we use is 90% of their after-tax income adjusted to inflation to their retirement age," explains Bruce Gsell, a Merrill Lynch financial adviser in Edison, N.J., who has worked with Avis Budget for several years. "We are absolutely giving them a number and telling them whether they need to save more, change their asset allocation or do both."
Participants can choose a one-time asset allocation, quarterly rebalancing or a managed account option, which rebalances an individual's portfolio every 90 days based on updates to personal financial information, account balances and other data.
"The committee really liked the fact that within the model there were levels of advice the participants could choose from - from an initial modeling and election to a periodic rebalancing, all the way up to active management," Pictroski says.
To reach its decentralized workforce, Avis Budget implemented a comprehensive communication and outreach campaign that included direct mail, posters, postcards, webinars, in-person employee seminars and one-on-one meetings. In addition, the company launched personalized retirement projection statements in 2010 and added auto-enrollment for new hires in 2011.
While the company's efforts are paying off - plan participation in all three of Avis Budget's plans has increased - Pictroski admits it's got a long way to go.
"We've made a lot of progress, and we're seeing the health of savings and investments by our participants improve but, again, it's a challenge for us to get to our employees and, like every other organization, we have turnover. This campaign with advice access is a never-ending campaign," he says.
One on one
What has really helped Avis Budget employees, Pictroski believes, is the opportunity for face-to-face meetings. "When you point them toward the website and invite them to a meeting, your hope and expectation is that they're going to go home that night and sit down with their spouse and look at all the educational material there, but that's often not the case. Our lives are busy, and we're tired when we get home," he acknowledges.
Presenting the material in seminars and one-on-one meetings continues to be well-received by Avis Budget's HR community, which sees the competitive advantage of the benefit; by general management, which is always looking for opportunities to engage employees in benefits; and by the participants themselves, who "never cease to ask tons of questions in those meetings, which gives us an opportunity to think about content for future meetings," says Pictroski.
Indeed, Gsell maintains that "if you want to get the numbers up - over and above what you can do through phone and Internet campaigns - it really comes down to getting in front of people in seminars and one-on-one meetings. I'm a firm believer in one-on-one meetings and walking people through something as simple as setting up a password and an ID."
During the Advice Access rollout at Avis Budget, laptops were made available at all locations where onsite meetings were held, and employees were encouraged to set up their user IDs before the meetings.
More recently, the company has expanded the scope of its health and wellness program, HealthWorks@ABG, to include financial wellness.
"While most of that program is focused on things like fitness and nutrition and disease management and healthy lifestyles, we've included financial health under that umbrella," Pictroski says. "So, when people look at their HealthWorks@ABG bulletin board, they're likely to see some materials associated with the Avis Budget Savings Plan and they're likely to see some information about diversification, investment advice and so forth."
4 tips for building 401(k) engagement
Ed Pictroski offers the following advice for employers facing retirement communication and education challenges similar to the ones at Avis Budget Group:
1. Employees are looking for help. "That's a given, especially during times of economic uncertainty as we've had over the past few years. So right from the beginning, the assumption should be that there's a strong desire for this [retirement planning] information."
2. Auto-enrollment is critical. "Have employees develop an account balance and they'll become increasingly interested in the benefits provided by the company."
3. Offer access to advice. "The messages of savings and diversifying and the comfort in informing these participants they're getting objective advice through the Ibbotson model is a great advantage."
4. Partner with HR. "Make sure you have a strong partnership with your local HR group and that they're well-informed about the plan design."
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