Midland, Mich. -- Dow Chemical Co. is expanding the selection of investment options in its $2.9 billion 401(k) plan and replacing its current record keeper and administrator with one that ultimately will administer Dow's $7 billion pension equity plan as well.
"We want to provide unified statements and a one-stop-shop for employees," said Geof Kusch, a physician who now is director of global benefits.
Dow Chemical executives also will merge two smaller plans - those of Angus Chemical Co. and Flexible Products Co. - into its 401(k)plan when the changes are implemented in February.
Investment options will expand to 16 from 10, and now will include a mutual fund window and series of lifestyle funds.
Dow's plan will retain a growth and equity fund co-managed by Capital Guardian Trust Co., Los Angeles, and Provident Investment Counsel, Pasadena, Calif.; an interest income fund run by PRIMCO Capital Management, Louisville, Ky.; a U.S. Treasury money market fund by T. Rowe Price Retirement Plan Services, Baltimore; an international bond fund managed by Fischer Francis, Trees & Watts Inc., New York; and Dow's company stock. Company executives are adding Fidelity's Broad Market Duration Collective Trust, Equity-Income fund, Low-Priced Stock fund and International Growth Collective Trust and the Capital Guardian Global Balanced Fund, Dr. Kusch said.
Dropped are two balanced portfolios, managed by Wellington Management Co. and Capital Guardian. An international stock fund managed by T. Rowe Price is being moved from the core lineup to the mutual fund window.
`Fair amount of interest'
Dow Chemical executives switched to Fidelity for its wide range of investment options and technological capabilities, Dr. Kusch said. "We have been getting a fair amount of interest (from participants) in having expanded investment options," he said.
Dow Chemical executives decided to expand the lineup of core investments and add the mutual fund window to accommodate participants' requests.
The mutual fund window also gives executives more flexibility in merging defined contribution plans of acquired companies. For example, Angus Chemical's 401(k) plan has three Janus funds that are not in the Dow Chemical plan. Those funds - Enterprise, Mercury and Worldwide - will be included in Dow's plan through the mutual fund window, he said.
Because Dow executives were leery of providing plan participants too many investment options, Dr. Kusch said, they decided not to provide a brokerage account.
"One aspect is the fiduciary responsibility," he said. "To what degree can we provide any kind of fiduciary oversight in a window that gives people investments in a wide, wide range of investment options?"
The issue is whether Dow Chemical executives could do good due diligence with the number of investment options provided in a brokerage window, Dr. Kusch said.
Following a trend
Dow is among a growing number of plan sponsors opting to have their defined benefit and defined contribution plans administered by a single service provider, said Joseph LoRusso, president of Fidelity Institutional Retirement Services Co. Some 60% of Fortune 500 companies approached by Fidelity have been speaking about hiring it for both plans, he said.
"I think there are a couple of reasons," Mr. LoRusso said. "Predominantly, the participant experience can be significantly improved by providing one place for participants to go and think about retirement planning."
Fidelity will provide Internet capabilities for Dow Chemical participants including planning and modeling tools, Mr. LoRusso said.