ConocoPhillips’ weekend plan merger avoids blackout period

HOUSTON — The merger of ConocoPhillips Inc.'s two defined contribution plans serves as a road map for other companies seeking to avoid blackout periods.

Weekend conversions are a relatively new phenomenon among defined contribution plan sponsors wanting to avoid the debacle that befell Enron Corp., whose 401(k) participants lost millions of dollars during a blackout that kept them from selling their Enron stock when its value was plummeting.

ConocoPhillips took great care in planning for the 401(k) merger, which was accomplished the weekend of Oct. 3-5. Preparations included two mock weekend conversions to test all of the systems. Assisting were Vanguard Group, Malvern, Pa., bundledprovider of the Phillips Petroleum Co. plan, and New York-based J.P. Morgan Retirement Plan Services Inc., Conoco's bundled 401(k) provider.

Vanguard, Malvern, Pa., was selected as bundled provider of the combined plan, which has $5.8 billion in assets.

"We looked at the whole array of services and the ability to fill our needs for the future and felt that Vanguard was the best provider," said Betsy Barnes, ConocoPhillips manager of retirement and savings plans.

(ConocoPhillips completed the merger of the two $1.3 billion defined benefit plans on Dec. 31 and is conducting an asset-liability study to determine whether to change the asset allocation and any of the investment managers of the plans.)

A total of 80 people from Vanguard and about 20 people from ConocoPhillips worked on the 401(k) plan merger at various points.

"We performed the mock conversions to test all the systems on all sides; we wanted to make sure there were no surprises when we did the actual conversion," said Gerard Mullane, a principal at Vanguard who led his company's conversion team.

The teams had weekly conference calls to discuss the conversion and created a ConocoPhillips hub and web-based sharepoint system that served as a central point for all information.

"Between all that information on the web and the weekly focus calls, that's how we kept up to date on the conversion," said Mr. Mullane.

Ms. Barnes described the steps that took place over the weekend from Friday, Oct. 3, to Sunday Oct. 5.

"The first step was that the data needed to be reconciled at J.P. Morgan for transmission to Vanguard," she said. "The balances were reconciled and the transfer of data began very early Saturday morning. That took a lot of time to do.

"The verification and reconciliation of the data was completed Saturday evening on the Vanguard system," said Ms. Barnes. "On Sunday, everything had to be verified again and checked on Vanguard's system."

"We were updating 2 million transactions over the weekend that had to be transferred from the old provider to us," said Mr. Mullane.

"You must understand the needs of the plan and the data must be accurate for a conversion to work well," said Ms. Barnes. "We were working with very clean data from J.P. Morgan."

ConocoPhillips and Vanguard also held conversion meetings with plan participants to keep them informed of what was taking place. The combined plan has 30,000 participants and a 94% participation rate among active eligible employees.

The merged plan offers 31 investment choices across all the major asset classes, including active and passive large-cap value, large-cap growth, core bonds and international equities.

Ms. Barnes said some of the most popular funds from the old Conoco 401(k) plan were included in the new plan so employees wouldn't have to switch their investments. The merged defined contribution plan includes mutual funds from Fidelity Investments Inc., Boston, and PIMCO, Pacific Investment Management Co., Newport Beach, Calif. as well as Vanguard mutual funds.

Ms. Barnes said participant reaction has been positive.

"They were very happy there was no interruption in their access to the plan and that things went very smoothly."