DEARBORN, Mich. - Ford Motor Co restructured its $14 billion 401(k) plan, cutting 25 investment options in the process.
In the shift to 36 options - down from 61 - Ford terminated Scudder Retirement Services, Boston, which had managed seven funds. A number of new firms were hired to offer one or two funds, including Pacific Investment Management Co., Newport Beach, Calif.; World Asset Management, Birmingham, Mich.; Janus Capital Corp., Denver; INVESCO, Atlanta; Neuberger Berman Inc., New York; and Templeton Worldwide Inc., Fort Lauderdale, Fla.
"We made a number of changes with the express intent of making it easier for participants," said David Reuter, Ford's financial news manager. "Some of the decisions (about which funds to scrap) were based on how much employees participated in the funds."
The new funds were selected by an in-house team that reviewed the plan's investments, along with Fidelity Investments, Ford's semibundled provider.
One new twist: a menu of "ready mix" and "mix your own" options.
Before the change, the plan's investments were primarily through alliances with Fidelity.
Ford officials told participants they would freeze the options to be eliminated, giving them until next March to decide how to redirect their money in those funds.
Consultants say Ford's move to pare its investment menu is part of a developing trend. Education is not working, so some plan sponsors are looking to "tweak" their investment options, said Linda P. Holleman, senior vice president and defined contribution consultant,AON Investment Consulting Inc., Tampa, Fla.
Ford's options are being divided into "ready mix" and "mix your own."
The so-called "ready-mix" tier consists of Fidelity's Freedom funds, which are five lifestage funds tied to a participant's expected retirement date.
The "mix-your-own" tier has six passively managed stock funds, 12 actively managed domestic equity funds, six actively managed international equity funds and five fixed-income funds.
Ford added a Barclays Global Investors EAFE index fund and Fidelity's U.S. Extended Market fund, the only new passive funds.
New active equity options are: INVESCO Dynamics Fund; Janus Aspen Growth Fund; Neuberger Berman Genesis Fund; Oakmark Select I Fund; Royce Low-Priced Stock Fund; and Vanguard Explorer Fund. The remainder are existing options from Fidelity, including a real estate fund.
The new actively managed international equity funds are Janus Aspen International, Morgan Stanley Institutional Global Value Equity and Templeton Foreign A. The plan also retained three existing international equity options.
New to the fixed-income category are two PIMCO funds. The plan retained three other bond options: The Bond Index Fund managed by Barclays Global Investors, the Interest Income portfolio by Fidelity and T. Rowe Price's High-Yield Bond fund.
Asset allocation help
To help participants wade through the maze of investment options, Ford is offering them Fidelity's asset allocation tool, PortfolioPlanner.
All of the investment changes were made under the basic premise that Ford executives "didn't want to overwhelm employees," said Mr. Reuter. Ford plan participants, like investors in general, had had a tough year in 2001.
Each of the three investment options with the largest proportions of plan assets - a interest income fund managed by Fidelity; the Common Stock index fund, managed by Comerica; and the Ford Stock Fund - lost value in the year ended Dec. 31.
The company stock option lost the most - $1.9 billion - dropping to $4.3 billion, according to documents filed with the Securities and Exchange Commission, Washington. And more than a third of the plan's assets remain in company stock, Mr. Reuter said, even though on Jan. 1 Ford stopped making its matching contribution, which had been in company stock.
Ford stock has been on a steady decline since the beginning of the year, dropping to $9.34 on Sept. 24 from $16.22 on Jan. 2. The 401(k) plan has more than 742 million shares, and by the end of 2001, the 401(k) plan had depreciated by $2.5 billion.
Ford plan participants are locked into company stock matching contributions for at least five years, until the contributions are vested.