PITTSBURGH - Mellon Financial Corp. has expanded the investment lineup in its $1.25 billion 401(k) plan, eliminated the year eligibility requirements and implemented a new vesting schedule.
Mellon executives communicated the changes through the company's benefits newsletter and a special publication "EC News Flash" that was written in a way that employees who are not finance professionals could understand, explained Pamela Mrozek, Mellon's human resources head. The changes were not fully implemented until the end of January.
"The finance professionals asked for more variety of choices within the 401(k) lineup of investments," Ms. Mrozek explained. Moreover, the menu of options had not been re-evaluated since 1996, she said.
It was all part of a companywide initiative to become "an employer of choice," Ms. Mrozek said.
Only 11 options
Before the redesign, the plan had 10 mutual funds plus company stock. (The company match is in Mellon stock; company stock became an investment option in April 1999.)
Mellon took a three-tiered approach to its expanded menu of investments. The first tier, called "basic funds," has a U.S. bond index fund, a Standard & Poor's 500 stock index fund, an international stock index fund, a money market fund and an asset allocation fund, all managed by Mellon Capital Management. This level also includes Mellon company stock. Mellon pays all fees and operating expenses for basic funds.
The next tier is made up of 11 actively managed mutual funds and a stable value collective fund, all offered by Mellon or its subsidiaries. Participants using this level pay all management fees and operating expenses, which are deducted from assets in the fund. The active investments are the Dreyfus-Certus Stable Value, Dreyfus Disciplined Stock Fund, Dreyfus Premier Third Century Fund, Dreyfus Premier Core Value Fund, Dreyfus Founders Growth Fund, Dreyfus Founders Discovery Fund, Dreyfus Founders Worldwide Growth Fund, Dreyfus International Value Fund, Dreyfus Premier Technology Growth Fund and three Dreyfus LifeTime Portfolios, a set of lifestyle investment options.
The last tier is a self-directed account run by Dreyfus Investment Services Corp., a Mellon Financial subsidiary. The minimum initial transfer is $5,000, with subsequent minimum transfers of $1,000. Mellon pays the annual maintenance fee, transaction fees and other fees.
Mellon executives also replaced some existing funds in the plan with comparable funds. "The new funds had perhaps better performance or fee structure," Ms. Mrozek said.
The Dreyfus Institutional Prime Money Market Fund was replaced with Mellon's Daily Liquidity Money Market Fund; Dreyfus' Bond Market Index Fund mapped to Mellon's Daily Liquidity Aggregate Bond Index Fund; Dreyfus BASIC S&P 500 Stock Index Fund was switched for Mellon's Daily Liquidity Stock Index Fund; Dreyfus Premier Small Company Stock Fund was replaced with Dreyfus Founders Discovery Fund; and Dreyfus Founders Worldwide Growth Funds, class F shares, was mapped to the class R shares of the same fund. The new share class has reduced management fees and operating expenses.
Mellon executives also eliminated the requirement of working for a full year before employees could be eligible to participate in the 401(k) plan.
New vesting schedule
And, the company changed its vesting schedule. Employees hired before 2001 are 100% vested in the company match and earnings on those contributions. Those hired after Jan. 1 are 100% vested in their own contributions and any rollover contributions, but will not become fully vested in Mellon's matching contributions until they complete three years of service, she said.
The communications challenge was to present material that would be useful for finance professionals but also accessible to employees who do processing or support functions, Ms. Mrozek said.
The campaign push started with teasers in the company's benefits newsletter, and iformation packets were then distributed to all 26,000 active employees through interoffice mail, she explained. Then in December, the bulk of the technical information concerning the plan changes was distributed.