Angela Buk won the Innovator Award for outcome orientation by shepherding multiple changes in the 401(k) plan at Chrysler Group LLC, Auburn Hills, Mich., including streamlining the investment menu, adding custom target-date funds and re-enrolling 55,000 participants.
“We decided to go with the Big Bang Theory,” said Ms. Buk, head of risk management and investment operations, describing why Chrysler made the changes all at once in its $4.5 billion plan.
Re-enrollments are slowly gaining in popularity, but ones on the scale of Chrysler's are rare. Ms. Buk decided to market the change as a “re-investment,” rather than re-enrollment.
Ms. Buk and her team devoted considerable time to explaining the new policy to workers by attending many of the 90 employee meetings to answer questions. “We didn't experience a negative response,” said Ms. Buk.
Her advice to executives at other plans: Beware of “unfounded fears” that participants won't accept re-enrollment. Comprehensive communication is the best way to address participants' concerns, she said.
The participant education effort focused not only on diversification, but also on participants taking action rather than relying on being defaulted into an investment.
“Approximately 35% of the dollars transferred were participant-directed, greatly exceeding our initial estimates,” said Robert Watson, Chrysler's assistant treasurer and chief investment officer in his nomination of Ms. Buk for an Innovator Award. Approximately 60% of plan assets are now invested in a target-date fund or managed account.
Innovator Award judges noted that although some 401(k) plans re-enroll employees, and some offer custom target-date funds and some revise their investment menus, Chrysler's all-in approach was an innovation of comprehensiveness and communication.
“While other plan sponsors have overhauled their investment lineups, what I like about this is Angie Buk understood that to be effective, she needed to be able to re-enroll,” one judge wrote.
“Being done by such a large DC plan and implemented so quickly shows it is possible, which could help overcome resistance in other large plans,” another judge wrote.
The total time from concept to implementation, on March 1, 2013, took 19 months. Once Ms. Buk and her team got the go-ahead to proceed, participants received an initial communication in December 2012 and a more detailed description of the changes in January 2013.
Ms. Buk said Chrysler took action because officials found, for example, that participants lacked diversified portfolios; that money market allocations were playing too big a role in balances; and that participants were confused by too many investment choices. One example: some participants were investing in each of 15 domestic equity funds.
After the changes, the money market fund allocation dropped to 10% from 26%; investments in inflation-hedging assets rose to 10% from 5%; and investments in fixed income rose to 15% from 8%.
Ms. Buk, who started at Chrysler 1999, has a family history in the auto industry — her father, a retired United Auto Workers member, was a millwright at a Ford Motor Co. plan in Dearborn, Mich. She has an additional understanding of the role financial wellness plays for industry employees, but she added that what Chrysler has achieved can be accomplished elsewhere, too. “I want to share our experience with others,” Ms. Buk said. “My passion extends beyond Chrysler.”
See Ms. Buk in the video at www.pionline.com/chrysler13.