A routine review of record keeping led Symantec Corp. to overhaul its $800 million 401(k) plan's options and makeup, adding automatic enrollment for new employees, separate accounts and collective trusts, as well as an emphasis on blending equity options.
The new structure, which takes effect Jan. 3, will reduce total plan expenses by 15%, said Joshua Newmister, global retirement program manager for the Mountain View, Calif.-based company.
There were no complaints with the previous structure, he said. But the plan “had reached a plateau of participation rates, deferral rates and retirement readiness,” he said. Symantec officials wanted to make changes because the plan's design and options “weren't moving the needle,” Mr. Newmister said.
The new plan will try to improve on the 78% participation rate and the 6.3% deferral rate, although Mr. Newmister said his company didn't set a goal for either.
He said the investment committee conducts a marketplace review every three years, and it issues a request for proposals for a record keeper every five years. The RFP coincided with discussions by the committee about changing the investment lineup, a debate that had been going on since the beginning of 2010.
“We used the RFP process to change the dynamics of our plan. The RFP was the emphasis,” he said.
The RFP was issued early this year. Symantec chose Putnam Investments, Boston, to replace Charles Schwab & Co., San Francisco, as record keeper.
One change is automatic enrollment, which Symantec will offer to new employees, with a 4% default rate. The new plan won't offer automatic escalation, the practice in which 401(k) plans annually raise a participant's deferral rate by a set percentage.
The investment committee had been considering auto-enrollment for several years, but the additional cost had been too much for Symantec's budget, Mr. Newmister said. For 2012, the auto-enrollment strategy finally fit within budget parameters.
Another change is a shift in active equity options from a choice among growth and value to an approach in which the two are blended into one. The existing plan offers growth and value options in small-cap, midcap, large-cap and international equities. The new plan retains the four strategies, but blends growth and value.
The existing plan already offers blended passive mutual funds, which will be retained.
Using blended options will allow participants “to focus more on the broader asset classes, rather than on deciding how to allocate among growth and value, in addition to the broad asset class,” Mr. Newmister said.
The four new blended options are a combination of separate accounts, collective trusts and mutual funds. Symantec hadn't offered collective trusts and separate accounts in the past.
“We did not close the door on any type of vehicle,” said Mr. Newmister, referring to the combination. “We implemented whichever vehicle provided the best access to the investment strategy at the most competitive price.”
Plan officials also are altering the fixed-income/cash lineup. They are eliminating a money market fund and a low-duration bond fund, replacing them with a stable value fund. An existing total return bond mutual fund will remain an option, he said.
Mr. Newmister said a target-date fund series also will remain in the plan, but will be collective investment trusts rather than mutual funds. He said the switch will cut costs, but did not elaborate.
All of the adjustments led to terminating six money managers and adding four; Mr. Newmister declined to name them.
The new plan will have an administrative fee that replaces revenue sharing, the practice in which most or all of a record keeper's costs for providing services are offset by a plan's investments.
The administrative fee is structured as a percentage of a participant's account balance up to a “hard-dollar cap,” said Mr. Newmister, declining to discuss the percentage or the cap.
Symantec officials rejected a flat, per-person administrative fee, believing this might discourage newcomers or lower-income employees from participating, he said. If the administrative fee were based solely on assets, participants with higher balances would have been unfairly burdened, he added.