Three companies are shaking up their 401(k) plans, affecting about $3.5 billion in assets.
Among the changes:
* PG&E Corp., San Francisco, is consolidating the 401(k) plans of its five subsidiaries into a single $1.6 billion plan covering the entire diversified North American holding company.
* Brunswick Corp., Lake Forest Ill., is freezing its $750 million defined benefit plan, replacing it with a 401(k) plan with a profit-sharing feature. The boat division's $200 million profit-sharing and $250 million 401(k) plans will be merged into the new plan.
* Jeans maker VF Corp., Greensboro, N.C., is revamping the investment options in its $675 million 401(k) plan, adding a mutual fund window, changing some investment managers, outsourcing some plan services and moving to daily valuation.
At PG&E, Fidelity Institutional Retirement Services Co., Marlborough, Mass., will provide some investment management, record keeping and other services, said Peter Corippo, manager of investments and benefit finance.
Fidelity replaces State Street Bank & Trust Co., Boston, as trustee/custodian of the utility plan. But State Street will continue as trustee of PG&E's $7.3 billion defined benefit plan.
State Street Global Advisors, Boston, which had managed some of the options in the plan of the company's utility, Pacific Gas & Electric, will continue to manage the same options in the new com-bined plan, Mr. Corippo said. State Street Bank also had been the utility's record keeper.
The new plan took its structure and investment options from subsidiaries' plans, principally from Pacific Gas and Electric, Mr. Corippo said.
Tiered match, options
Company officials created a two-level company match. One is for employees who are in the defined benefit plan; the other is for employees not covered by a DB plan.
The investment options are divided into three tiers: an asset allocation fund series managed by Fidelity; a set of core funds; and a mutual fund window from Fidelity.
Company stock is in the core tier. A stable value fund managed by PRIMCO Capital Management and four SSgA index funds also are included in the core fund tier, and were used in the utility's plan as well.
Additionally, these four index funds are used to build the first-tier asset allocation portfolios.
The utility had a two-tier structure that didn't include a mutual fund window. Also, the utility's matching contribution had been in cash and now will be in company stock.
Watson Wyatt Worldwide was the consultant on the restructuring.
1 plan for Brunswick
At Brunswick, the changes were partly motivated by the desire to create one plan for all companies Brunswick had acquired.
None had a defined benefit plan, said Michael Dolsen, director of retirement plans.
The Vanguard Group Inc., Malvern, Pa., will handle investment management, record keeping and other services for both the new and existing 401(k) plans. Hewitt Associates LLC, Lincolnshire, Ill., was the previous record keeper; Mellon Bank Corp., Pittsburgh, was trustee and custodian; and Dreyfus Retirement Services, Uniondale, N.Y., provided mutual funds and separate accounts.
Vested employees will remain in the defined benefit plan and the old 401(k) plan, he said. The old plan "has a lower company match than the new 401(k) plan, but taking it together with the defined benefit plan, it is at least as good," he said.
The new 401(k) "Rewards Plan will be the sole retirement plan for new and non-vested employees.
The investment options will be changed in the old plan to mirror those of the new plan: a fixed-income portfolio to be known as the Brunswick Fixed Income Fund to be derived from an aggregate of three Vanguard funds; a Vanguard asset allocation fund; a Vanguard Standard & Poor's 500 index fund; Vanguard's Morgan Growth Fund; the Managers Special Equity Fund; the Janus Overseas Fund; and the Brunswick stock fund.
The company match in the new 401(k) plan will be in cash; however, the matching contribution in the old plan will continue to be in Brunswick stock, Mr. Dolsen said.
Every eligible Brunswick employee automatically will be enrolled in the new plan. That's because Brunswick guarantees a 3% company contribution, regardless of whether the employee contributes anything, Mr. Dolsen said.
Unless the employee chooses otherwise, these assets will be invested in the Brunswick fixed-income fund.
An increasing number of plan sponsors are structuring their 401(k) plans with 3% guaranteed contributions because of new rules effective Jan. 1, said Tom Foster, an attorney and vice president of John Hancock Funds, Boston.
Under the rules -- part of the Small Business Job Protection Act of 1996 -- employers that make 3% contributions for all employees will not be required to meet non-discrimination testing requirements, Mr. Foster said.
Meanwhile, VF's moves, which will be finished by Sept. 1, were spurred by VF's record keeper, Watson Wyatt Worldwide, announcing it was getting out of the record-keeping business, said Louis J. Fecile, vice president of employee benefits.
VF put out a bid and chose Fidelity to provide most of the services and some of the investment options.
The trustee and custodian had been United Missouri Bank of Kansas City; Vanguard had managed some of the funds; and the plan had been administered in-house, he said.
"We're going to outsource as much as possible," Mr. Fecile said.
Of the nine investment options in the plan, two Fidelity funds will be retained -- Growth and Income and Puritan, he said. Also retained will be the company stock option; a small-capitalization value equity fund, the Long Leaf fund, managed by Southeastern Advisory Services, Atlanta; and a small-cap growth fund managed by Baron Capital Management Inc., New York, Mr. Fecile said.
Plan executives will be swapping Vanguard's S&P 500 and money market fund for ones offered by Fidelity.
The plan now has a stable value fund managed by United Missouri Bank, Kansas City, which may be retained, but company executives are conducting a search to investigate alternatives.
New to the plan will be Fidelity's mutual fund window to give participants a wide variety of funds, he said.
"We have people who have accumulated fairly significant amounts of money," Mr. Fecile said. "It is an opportunity to have more diversification."
Also, the fund is going to add a large-cap growth fund, which has not yet been selected, Mr. Fecile said.
The company match will continue to be in preferred stock through an employee stock option feature the company added in 1990, he added.
Until recently, Mr. Fecile did not think daily valuation was a good fit for the blue jeans and apparel manufacturer.
"Quite frankly, I had been on a one-man, no daily valuation campaign," he said.
His fear was employees would be tempted to chase hot funds and move quickly in and out of investment options.
This view changed a year or so ago as participants gained investment savvy through the company's ongoing education program.
"I honestly now believe people look at the long time horizon," Mr. Fecile said.