Beverly Hills, Calif. - Hilton Hotels Corp. has tidied up the investment lineup in its $400 million 401(k) plan and hired Wachovia/First Union's Benefit Services Group, Charlotte, N.C., as trustee and record keeper.
Hilton executives ran the yearlong search internally, said Ken W. Billett, senior manager of retirement plans. "We sent out an RFP through most of 2001," he said. "We had the same provider for six years and decided to do some due diligence and see what the market looked like."
State Street Bank and Trust Co., Boston, had been the plan's trustee, and CitiStreet LLC, Quincy, Mass., was the plan's semibundled provider, Mr. Billett said.
At the same time, Hilton evaluated its menu of investment options, cutting back to 10 options from 16, he said. Departing from industry practice, Wachovia/First Union, at least initially, is taking the Hilton plan on a record-keeping-only basis, with cost incentives if Hilton adds some proprietary funds later.
The plan had inherited a crazy quilt of investment options from its 2000 purchase of Promus Hotels, which owns the Double Tree and Embassy Hotel chains, Mr. Billett explained. Last year Hilton merged the 401(k) plans, which had $242.5 million in combined assets, and kept all of the options offered. The governing board thought it was high time for some spring-cleaning.
Investment consultant Curcio-Webb, Chicago, helped Hilton evaluate the combined plan's offerings, he added.
It retained the following funds: Fidelity Growth Company; PIMCO Total Return; GE U.S. Equity, Series 1; Capital Resources American Balanced Fund; and a Hilton company stock option that was offered starting Jan. 1, 2001. Thrown out were: the State Street Bank and Trust Co. S&P 500 Index; GE Asset Management Money Market and Conservative Strategy, Moderate Strategy and Aggressive Strategy; State Street Bank and Trust Co. Guaranteed Investment Contracts; T. Rowe Price International Stock; AIM Constellation; MFS Investors Growth Stock; and Vanguard Corporate Bond funds. Hilton also replaced a self-directed brokerage account that had been run by CitiStreet with one from Wachovia/First Union.
Hilton added the SEI Stable Asset, GE Institutional S&P 500, T. Rowe Price Foreign Advisor and Neuberger Berman Genesis funds.
Change of pace
Last year, the landscape of the 401(k) industry changed, making plan sponsors like Hilton reluctant to make a number of plan changes at the same time, explained Joe Ready, senior vice president and director of the benefit services group. Wachovia/First Union will work with plan sponsors who want to make plan changes gradually under a minimum asset fee arrangement, he said. Sponsors that later add proprietary investment options would then get a break on fees as an incentive.
Before it upgraded its record-keeping system late last year, Wachovia/First Union Benefit Services Group could not have taken on a plan as large as this, said Mr. Ready. Hilton is the firm's first win in the larger plan market, he said.
Before its merger with First Union in April 2001, Wachovia, the smaller of the two companies, had outsourced its record-keeping business to INVESCO Retirement Inc., Atlanta, Mr. Ready said.
"Traditionally, we focused on plans from $5 million on up, but our core was between $30 (million) and $200 million," he explained. "The upgrade gave us the flexibility and scalability to move up-market. Before we did not cultivate it because we could not handle it."
And even though much of the larger plan business is driven by consultant referrals, Wachovia/ First Union got its entree through Hilton's traditional banking relationship with First Union, he added.