SAN FRANCISCO - The $7 million defined contribution program of Rochester Big and Tall Clothing Co. Inc. made extra-large changes.
The retail clothing chain moved from trustee-directed money purchase and profit-sharing plans to a single profit-sharing plan with a 401(k) feature that is allowing participants to direct the investments and contribute money from their paychecks.
Executives for Rochester, which had used in-house plan administration and record keeping, outsourced plan administration and money management to Columbia Management Co., Portland, Ore., and record keeping to third-party administrator Carlson Quinn & Associates, Emeryville, Calif.
To make sure they don't overstep the bounds of fiduciary liability in their new roles, executives are testing Plan Tools, a service developed by the Normandie Group Inc., Berkeley, Calif., and offered by Columbia. It follows up an investment policy statement with quarterly monitoring reports that flag investment options that no longer meet the goals set forth in the investment policy statement.
"It's to provide us with an alarm clock that (a particular) fund is not up to our standards," said John Soares, Rochester's chief financial officer and treasurer.
Began in 2001
The process of switching plans began in July 2001, when Rochester closed its $4 million money purchase plan and distributed the assets to the participants. Rochester added a 401(k) feature to its profit-sharing plan, offering a 10-fund investment lineup and instituting salary deferral to supplement the profit-sharing contribution, Mr. Soares said.
The old system "got too expensive. We were funding both plans," he said. Company contributions were about 5% of salary for each plan, he noted.
"When things got rough, we terminated the money purchase plan, kept the profit-sharing and added a 401(k) feature," Mr. Soares said.
"Before that, both were pooled investments managed in-house by a couple of trustees," he said.
Between 2001 and 2003, when the new plan was launched, trustees continued to invest plan assets, which remained in a pooled environment until the 401(k) feature was added Jan. 1. Now the plan has three managed allocation portfolios and a stable value fund managed by Columbia; Liberty U.S. Treasury, Acorn and large-cap index funds; Dodge & Cox Stock Fund; Growth Fund of America; and Artisan international fund.
So far, 60% of Rochester's employees opted to contribute to the plan, said Mr. Soares, who visited the company's more than 20 stores nationwide to explain the new plan to employees. "That's 20 to 25 percentage points above what I thought," he said.
Plan executives elected a safe harbor design with a guaranteed 3% match, but executives hope to continue contributing 5% of pay each year, he said.
Plan executives also chose Plan Tools to help them satisfy their fiduciary responsibilities, he said.
"It's kind of an insurance policy," Mr. Soares said. "When you have a fiduciary responsibility, you are looking for ways to document the process."
The investment policy statement, quarterly monitoring statements and a written response specifying what action was taken are stored by the providers, said John Katovich, chief executive officer of Normandie Group, maker of Plan Tools.