ATLANTA -- Georgia-Pacific Corp. is expanding the investment options in its $1.36 billion 401(k) plans, using a new tiered approach.
Investment options will be grouped into three tiers, making it easier for employees with differing investment sophistication to move through a layer of easy-to-understand lifestyle funds, to a group of basic core options, to specialty funds in more exotic asset classes.
Georgia-Pacific staff redesigned the 401(k) plans in-house. Patricia A. Barnard, vice president of compensation and benefits, said the Vanguard Group of Investment Companies, Malvern, Pa., made recommendations that were reviewed by an internal team, led by John E. Stettler, vice president-benefit investments. The resulting lineup was selected with input from employees.
On July 1, 10 new investment options will be offered to hourly and salaried employees.
The eight existing mutual funds and separate accounts -- all managed by Vanguard -- will be retained and regrouped into the new investment tiers.
All but one of the new funds will be managed by Vanguard, which has been the company's bundled provider since March 1992.
The bottom tier offerings will be four Vanguard Life Strategy asset allocation funds, which range from conservative to aggressive.
The second tier includes seven core options all managed by Vanguard: U.S. Treasury Money Market Portfolio; Short-Term U.S. Treasury Portfolio; Total Bond Market Portfolio; Vanguard Index Trust 500 Portfolio; Vanguard Balanced Account; Georgia-Pacific Group Stock Fund; and Georgia-Pacific Timber Stock Fund. One new option was added to the middle tier -- the Vanguard Index Trust-Total Stock Market Portfolio.
The top tier contains six specialty mutual fund options. One is an existing option: Vanguard International Growth Portfolio. Five are new, including four Vanguard offerings: Vanguard/PRIMECAP Fund, Windsor II, Vanguard Index Trust-Small Capitalization Stock Portfolio and the Vanguard Index Trust-Extended Market Portfolio. The other new third-tier option is the Loomis Sayles Bond Fund.
The 401(k) plan for hourly employees had about $260 million for 14,000 participants as of March 31.
The salaried plan had about $1.1 billion as of the same date for 16,000 participants. The company has about 47,000 eligible U.S. employees.
The concept of lifestyle planning isn't completely new to Georgia-Pacific's employees, said Ms. Barnard.
The company already had introduced the idea through an existing option, the Vanguard Balanced Account, a custom-mixed asset allocation fund, which provided some of the same benefits as lifestyle funds.
But employees may not have fully understood the concept of lifestyle planning, Ms. Barnard said.
Making the lifestyle funds the first group of options will help focus attention on how simple the options are to use, said Ms. Barnard. The upper tiers provide a wide selection of asset classes and investment vehicles for employees who want to control their own asset allocations.
Georgia-Pacific will make other improvements to the two 401(k) plans along with the change in plan design.
Employees will have unlimited transaction capability, up from a limit of eight times per year under the current plan. New employees will be able to enroll in the 401(k) plans after three months, rather than the current one-year wait.
There are a number of different company matching schemes for the 401(k) plans, depending on the particular job and union contracts, said Ms. Barnard. The company matching programs will not be changed.
Unlike many other corporate plan sponsors, Georgia-Pacific contributes its match in cash, rather than in company stock. Employees have complete discretion on the allocation of the company match.
The allocation of employee assets in the hourly 401(k) plan as of March 31 was 65% domestic equities, 3% international equities, 24% bonds and 8% money market. The salaried plan's allocation was 59% domestic stock, 4% international equities, 33% bonds and 4% money market. Company officials declined to say what percentage of 401(k) plans assets was invested in its two company stock funds, which are included in domestic equities.
Employees will begin to hear about the new plan features in May. The communication campaign carries a theme of trees, nature and environmental responsibility -- themes that pervade the rest of corporate life at this forest products company, said Ms. Barnard.
Face-to-face employee education meetings will be conducted primarily by Georgia-Pacific's employee benefits staff, with investment materials provided by Vanguard.
In addition to redesigning the investment options for its defined contribution plans, Georgia-Pacific also is midway through the process of outsourcing the administration of its defined benefit plans to Vanguard. The company's defined benefit plans totaled $1.9 billion as of Dec. 31. Administration of the defined benefit plans for salaried employees was moved to Vanguard last year. About half the defined benefit plans for hourly employees will be converted in June and the other half in December, said Ms. Barnard.
The first round of outsourcing was painless. "If there were a whine factor applied to measure employee satisfaction with this process, employee complaints didn't even register on the scale," she said.
Getting a calculation of expected benefits from the defined benefit plan for an individual employee used to take as long as two or three months, Ms. Barnard said. Now, salaried employees can make a single call to Vanguard's voice-response center and receive an answer on defined benefit and defined contribution plan questions almost instantly.
Next on Georgia-Pacific's agenda is the design of a program, through Vanguard's voice-response system, to assist employees with total financial planning for all aspects of their retirement.
The voice-response system now provides information about each different retirement plan; the new system will integrate the defined contribution and defined benefit plans to provide a more complete picture.
Ms. Barnard said Georgia-Pacific will not go as far as offering investment advice, but will help employees take more responsibility for their retirement by making sure they know how much they have to save and by giving them the tools to help them invest their assets.