BENTON HARBOR, Mich. - Whirlpool Corp. hired Putnam Investments, Boston, to upgrade and modernize its $500 million 401(k) plan.
By mid-August, Whirlpool employees will have more investment options, upgraded plan support services and - for the first time - an integrated, intensive investment education program.
From the outset, Whirlpool officials wanted a quasi-bundled approach in which one company would provide record keeping and investment management but permit access to funds managed by external money managers, said David Deranek, senior treasury analyst and the project leader for Whirlpool's 401(k) plan redesign.
Whirlpool is increasing its investment options to 10 from eight.
Four options were retained. Of those, two - a company stock fund and a stable value fund - had been overseen by Whirlpool's previous record keeper, First Chicago NBD Corp., Detroit. Both funds now will be handled by Putnam.
Two popular mutual funds also were kept - the Heartland Value Fund, managed by Heartland Group, Milwaukee, and the EuroPacific Growth Fund, managed by Capital Research & Management Co., Los Angeles.
New investment options include Putnam's New Opportunities, Voyageur and Putnam Income funds. In addition, three risk- and age-weighted lifestyle funds will be available, also run by Putnam.
Among the investment options dropped was the IDS New Dimensions Fund Inc., managed by IDS Financial Corp., Minneapolis. "Although we and our participants really loved the fund and the portfolio manager, Gordon Fines, we decided the fund's investment style was a little too similar to two of the Putnam funds we selected. .*.*. We also felt we should award the investment management to Putnam, which we selected because the consistency of investment style was so good," said Mr. Deranek.
Another fund managed by IDS, the Mutual fund, also was dropped, as were two Woodward funds managed by First Chicago NBD - money market and indexed domestic equities.
DeMarche Associates Inc., Overland Park, Kan., helped Whirlpool with the plan design and search.
Mr. Deranek said Whirlpool sought to upgrade both investment management and administration, and needed to find a provider with the commitment to systems technology to allow the plan to take full advantage of more modern information retrieval systems.
Whirlpool had been using daily valued record keeping from First Chicago NBD for some time, but Mr. Deranek said Putnam's system has more advanced features. Also, he said, Putnam executives made a firm commitment to keep pace with systems technology improvements. That's important to Whirlpool, because executives there are considering giving participants account information through the Internet or an internal network. The changes also will be a springboard for Whirlpool's first big investment education program. About 60% of the company's 24,000 eligible employees participate in the 401(k) plan.
"We're especially concerned about improving the participation rate in some of our more far-flung facilities," said Mr. Deranek. "Here in Benton Harbor, it's relatively easy to get administrative staff into the plan. It's in the locations further away from headquarters - where we have a bit less influence - that we want to try to encourage more people to invest in the 401(k) plan."
In keeping with the company's relatively conservative culture, both plan communications and investment education materials will be straightforward and free of gimmicks and glitz.
"I just don't like that approach. It seems like when the plan sponsor is trying that hard to sell something using all kinds of gimmicks, that maybe the employee is being sold something they don't need or want. Our employees would resent something really flashy," Mr. Deranek said.
Putnam is custom-designing initial and ongoing investment education materials for Whirlpool, showing employees for the first time some of the concepts of dollar cost averaging, asset allocation and portfolio rebalancing. "We just didn't provide employees with a lot of education about their retirement plan investments before," Mr. Deranek said.
By demonstrating the advantages of 401(k) investment, Mr. Deranek said, he's confident the new plan will attract new participants and raise deferral rates for existing participants.