ISELIN, N.J. - Just as the 401(k) plan of Hanson Industries was putting the finishing touches on its switch to a bundled service provider and enhanced investment options, company officials learned they'd have to restructure the plan again.
The reason: Hanson PLC announced it would create a new company, U.S. Industries Inc., composed of 34 non-core Hanson Industries businesses.
Effective July 10, the $288 million Hanson Industries Retirement Savings & Investment Trust was split in two, leaving USI with $102 million covering 4,686 participants and Hanson Industries with $186 million covering 7,629 participants.
"While we were doing this, suddenly there was this great de-merger. We had to in actuality do it twice - once for Hanson companies and then for U.S. Industries Inc. companies," said Helen H. Myers, manager of capital accumulation plans at Hanson Industries.
In the next year, $16 million in assets and 1,576 participants will be added to the new USI master trust.
Additional plans also will be merged into the Hanson master trust by year end, which will significantly increase the size of the trust and provide cost savings through economies of scale.
The two newly separated defined contribution plans will retain the same options chosen for the plan before it was split.
(On the defined benefit side, the $2.2 billion Hanson Industries master pension trust is being divided as well. When the process is complete, USI will have $300 million and Hanson the remainder. No investment policy changes were made.)
In the restructuring of the 401(k) plans, the number of investment options was increased to seven from four. In addition, the plans switched to monthly transfers and enrollment from quarterly (valuation already was monthly); added a service center manned by live representatives from new bundled service provider Bankers Trust Co. with a voice-response system; and embarked on an extensive communication and education program.
Money market and indexed equity funds offered through Bankers Trust were eliminated. But Hanson continues to offer a stable value fund through the firm as well as company stock, with a 25 to 50 cents matched contribution, which varies depending on the subsidiary. Hanson also eliminated two Fidelity mutual funds - Balanced and Growth and Income - that had been added to the Hanson trust when it took on the assets of the Beazer USA plan in January.
The seven core investment funds offered by the U.S. Industries and Hanson 401(k) plans are: company stock; stable value; BT Investment International Equity fund; BT Investment Equity Appreciation fund, a midcap stock fund; and three BT Investment lifecycle mutual funds, for short, mid- and long-range investment horizons.
"I would hope within a year gradually participants will get more diversified in their approach," Ms. Myers said, noting the plan had been heavily weighted in the stable value fund.
Hanson decided to go with a bundled approach because the 401(k) plan is in a constant state of flux because of frequent buying and selling of divisions.
"I clearly see a bundled approach working better for us with the way our business is conducted. Bankers Trust has a good handle on who we are and how we operate. It understands our corporate culture. We're a demanding client - no two ways about it. They have to be able to respond to that change. They have to be able to turn on a dime," Ms. Myers said.
"Cost was certainly a consideration and the ability to provide a total product to participants in a cost-efficient manner. We looked at other firms. We've dealt with other institutions, but with all our acquisitions it seems we always come back to Bankers."
Another attraction was the firm's approach to educating Hanson employees.
"This has been a team effort," Ms. Myers said.
Joseph Polidoro, vice president in the retirement communications and education group of Bankers Trust, New York, said: "We did 'train the trainers' sessions for location (plan) administrators. That was integral to the whole process. We've never really done that with a client."
Seventy-three plan administrators from Hanson and USI locations around the country convened in Bankers Trust's Nashville, Tenn., service center for a massive training session. They were then entrusted with the responsibility of leading - and getting employees to attend - retirement investing workshops.
This was no easy feat at a company with seven diverse core businesses. One subsidiary, Spectrum Construction, set up a table under a tree along a highway for men and women at work. Another, Benchmark Materials, conducted workshops at quarries and plants in Georgia and Tennessee. Florida-based SCM Glidco Organics, which makes aromas and fragrances, prepared a Southern-style meal of fried chicken and biscuits to entice employees to attend its workshop.
To appeal to the more sophisticated investors in its employee base, the Hanson and USI funds will add in the first half of 1996 a self-directed brokerage window option through Bankers Trust's alliance with Charles Schwab & Co. Inc. Individuals would be able to invest in mutual funds as well as individual securities for a small annual fee.
Ms. Myers also is considering offering financial planning to participants at a modest cost. In choosing a provider, "we'll look at what Schwab has to offer and what Bankers has to offer," Ms. Myers said.
Hanson decided against offering daily valuation and transactions under the plans because of the higher costs and because "we did not see a real need. This is not a place to be market timing..... Right now our feeling is it's just not necessary," she said.
Hanson does expect to reap a cost saving as a result of its changes, although it's difficult to quantify. Ms. Myers expects to save $250,000 a year just from the merging of trusts that now use an unbundled approach.