CLEVELAND - Parker Hannifin Corp. is taking more control of its $550 million 401(k) plan.
The company is rewriting the investment policy statement for the plan and is instituting some performance benchmarks for new and existing managers.
Quarterly meetings with both investment managers and other service providers will give plan officials a better review of the total plan and the quality and timeliness of services.
The move to improve plan oversight coincides with changes in plan design, investment options and the valuation system.
The changes, effective March 1, include:
Three new options added to the existing five;
Unlimited transfers, a change from being allowed only quarterly transfers and in amounts of 25% of assets;
Daily valuation from monthly; and
Expansion of the automated voice response system.
Two mutual funds - the Constellation Fund, managed by AIM Advisors Inc., Houston, and a Standard & Poor's 500 Stock Index fund from State Street Bank & Trust Co., Boston - are being added. The third new option is an international equity collective trust fund, managed by Capital Guardian Trust Co., Los Angeles, said Sandy Sheldon, manager of benefits administration.
The plan will retain three collective trust funds managed by KeyCorp, Cleveland - fixed income, balanced and equity. KeyCorp will continue to administer a Parker Hannifin leveraged employee stock ownership plan into which company contributions are made. Also retained will be a contract income fund managed by Certus Financial Corp., San Francisco.
The new options will open for contributions in December. By March, employees will be able to transfer assets from existing account balances to the new choices. Employees will be permitted unlimited transfers; the old design restricted participants to quarterly changes and let employees allocate assets to the five investment options only in 25% increments.
Company matches will continue to be made in Parker Hannifin stock; employees will not be permitted to diversify those assets into other investment options until age 55.
An in-house team is tightening the investment policy statement. Guidelines will be more precise, and performance monitoring more exacting.
"We are going to be watching all of our funds and those that fail to comply with the new investment guidelines may be replaced," Ms. Sheldon said.
The 401(k) plan will move to daily valuation with a new record keeper, SunGard, Birmingham, Ala.
Many functions now performed by Parker Hannifin's human resources staff from 142 locations nationwide will be outsourced to SunGard, including plan enrollment, loan processing and account transactions for the company's 18,000 eligible employees.
"The removal of the more mundane tasks will leave our HR staff with much more time for in-depth education and training about the retirement plan," Ms. Sheldon said.
Except for loan signature documents and hardship withdrawals, the new system will be virtually paperless and much faster.
Employees will have access to a greatly expanded automated voice-response system to perform many basic account management tasks. Under the old, monthly valued record-keeping system provided by the Washington office of Watson Wyatt Worldwide, only loan processing was conducted on a voice-response system.
Other plan design changes include an increase in the permitted employee pre-tax contribution to the 401(k) plan to 15% from 10%. The company match will remain the same - dollar for dollar up to 3% of pre-tax salary deferral by a participant and 25% on employee contributions between 4% and 5%. The formula for employer matches on employee after-tax contributions will be somewhat reduced to encourage employees to save more on a pre-tax basis within the plan. The number of permitted outstanding loans will be increased to two from one.
In the past, all employee communication and education was handled internally, a big job for the human resources staff, Ms. Sheldon said. An employee focus group said communications were too technical and concepts weren't repeated after an initial splashy message.
Parker Hannifin got the message and decided to increase the frequency of communications. Consultant Coopers & Lybrand's Chicago office provided critical help with both plan design and communication of the new features, Ms. Sheldon said.
A poster campaign in all manufacturing and corporate locations and a mailing to all off-site sales people created a high awareness about the forthcoming plan changes. A new enrollment kit and a "fun facts" sheet provide employees with the basics about plan changes. A quarterly payroll stuffer will repeat basic investment concepts.
But the highlight of the plan roll-out is a customized video, performed by the Chicago-based improvisation theater troupe Second City.
"We found that fun and games really worked in our own internal HR training. And we thought it would be a great idea to carry that concept over to the employee benefits training we needed to do for the new 401(k) plan. But humor is unheard of at Parker Hannifin. We're a manufacturing company and don't really have a tradition of humor, especially when we're communicating important benefits," Ms. Sheldon said.
The internal task force in charge of redesigning the plan and its communications persevered and had the video made for them. Ms. Sheldon said the video script introduces an investment or retirement concept, builds the viewer up and then lets him or her down with humor. The next concept is introduced in a similar way, creating a series of peaks and valleys. The video ends with a personal message from Parker Hannifin's president and chief executive officer, Duane Collins.
"The video is funny, motivational and we found that preview audiences walked away with many of the concepts we were trying to convey firmly and accurately held in their minds. And, thank goodness, people actually laughed at the funny parts," Ms. Sheldon said.
