Skip to main content
MENU
Subscribe
  • Subscribe
  • Account
  • LOGIN
  • Topics
    • Alternatives
    • Consultants
    • Coronavirus
    • Courts
    • Defined Contribution
    • ESG
    • ETFs
    • Hedge Funds
    • Industry Voices
    • Investing
    • Money Management
    • Opinion
    • Partner Content
    • Pension Funds
    • Private Equity
    • Real Estate
    • Russia-Ukraine War
    • SECURE Act 2.0
    • Special Reports
    • White Papers
  • Rankings & Awards
    • 1,000 Largest Retirement Plans
    • Top-Performing Managers
    • Largest Money Managers
    • DC Money Managers
    • DC Record Keepers
    • Largest Hedge Fund Managers
    • World's Largest Retirement Funds
    • Best Places to Work in Money Management
    • Excellence & Innovation Awards
    • WPS Innovation Awards
    • Eddy Awards
  • ETFs
    • Latest ETF News
    • Fund Screener
    • Education Center
    • Equities
    • Fixed Income
    • Commodities
    • Actively Managed
    • Alternatives
    • ESG Rated
  • ESG
    • Latest ESG News
    • The Institutional Investor’s Guide to ESG Investing
    • ESG Sustainability - Gaining Momentum
    • Climate Change: The Inescapable Opportunity
    • Impact Investing
    • 2022 ESG Investing Conference
    • ESG Rated ETFs
  • Defined Contribution
    • Latest DC News
    • DC Money Manager Rankings
    • DC Record Keeper Rankings
    • Innovations in DC
    • Trends in DC: Focus on Retirement Income
    • 2022 Defined Contribution East Conference
    • 2022 DC Investment Lineup Conference
  • Searches & Hires
    • Latest Searches & Hires News
    • Searches & Hires Database
    • RFPs
  • Performance Data
    • P&I Research Center
    • Earnings Tracker
    • Endowment Returns Tracker
    • Corporate Pension Contribution Tracker
    • Pension Fund Returns Tracker
    • Pension Risk Transfer Database
    • Future of Investments Research Series
    • Charts & Infographics
    • Polls
  • Careers
  • Events
    • View All Conferences
    • View All Webinars
    • 2022 Retirement Income Conference
    • 2022 Managing Pension Risk & Liabilities
    • 2022 WorldPensionSummit
Breadcrumb
  1. Home
  2. DEFINED CONTRIBUTION
September 29, 2014 01:00 AM

Exelon powers up major 401(k) plan changes

Merger creates chance to start over with a "more user-friendly' DC plan

Robert Steyer
  • Tweet
  • Share
  • Share
  • Email
  • More
    Reprints Print
    Douglas Brown said executives saw an opportunity to diversify the plan and cut costs.

    Exelon Corp. has overhauled the design and investments of its $6.2 billion 401(k) plan, seeking to provide greater diversification and simplicity while reducing costs.

    Among the changes, officials at the Chicago-based electric utility created three actively managed multimanager funds and a series of custom target-date funds that use Exelon's defined benefit plan managers. They also sharply reduced the total number of investment options.

    The changes were made in conjunction with merging the Chicago-based Exelon's plan with the plan of Constellation Energy, acquired by Exelon in March 2012. The overhauled plan was launched in July. Assets from the old Exelon plan account for about 80% of assets in the merged plan.

    The Constellation Energy acquisition “was a great opportunity to combine the plans and get greater leverage and scale and really to start over,” said Douglas Brown, senior vice president and chief investment officer of Exelon. “Both were good plans.”

    Behind the broad restructuring was the desire to be “more user-friendly” as well as to increase diversification and cut costs, Mr. Brown said. All of this was done without the help of investment consultants because, he added, Exelon felt confident about handling the changes internally.

    Mr. Brown said his team began working on the investment menu and plan design changes in late 2012, completing the work at the end of 2013.

    Re-enrollment

    Exelon eschewed mapping, deciding instead to re-enroll Constellation and Exelon employees. They were asked to make an investment re-election a month ahead of the new plan's launch.

    If they didn't choose, their assets — other than investments in employer stock — were transferred to the most appropriate target-date fund.

    “There was very extensive education” prior to asking employees to make a choice, said Cindy Cattin, Exelon's director of investment options and risk management. The education campaign, which started in April, featured videos, e-mails and intranet communications with a theme of “Power Your Future.” The biggest education effort was conducting approximately 150 group meetings.

    Mr. Brown said the most common questions were why Exelon was making the changes and why some funds were being dropped. “People appreciated the question-and-answer sessions.”

    The merged 401(k) plan gives participants a choice of investment approaches - “Do It For Me” or “Do It Yourself.”

    The first uses the 12 custom target-date funds that blend strategies of 27 of the money managers running money for Exelon's defined benefit plan and/or voluntary employees' beneficiary association.

    (Exelon's DB plan and a DB plan for former Constellation employees have combined assets of $14.7 billion, and are managed in a master trust.)

    Target-date funds

    The target-date funds are “actively managed with some passively managed components,” Mr. Brown said. They include “core real estate, real estate investment trusts, emerging market equity, emerging markets debt (and) high-yield (bonds) in addition to more traditional allocations” such as domestic equity, international equity, core fixed income and Treasury inflation-protected securities.”

    J.P. Morgan Asset Management is in charge of the target-date funds' asset allocation and manages the core real estate component of the target-date funds.

    The custom target-date portfolio accounts for 65% to 70% of assets in the merged plan. “In general, we think target-date funds are the way to go for diversification,” he said.

    The legacy Exelon 401(k) plan had passively managed target-date funds from Vanguard Group Inc.; the legacy Constellation plan used active target-date funds from T. Rowe Price Group Inc.

    The custom target-date funds count as one option. The other seven — the “Do-It-Yourself” menu — include the three multimanager funds: U.S. equities, containing large-cap, midcap and small-cap strategies using eight money managers; international equities, with six investment managers covering developed and emerging markets; and fixed income, in which four managers invest primarily in Treasuries, agencies and U.S. corporate investment-grade securities.

    Other choices

    The other choices in the “Do-It-Yourself” menu are:



    • Two passive options — one pegged to the S&P 500 index and one tracking the Barclays Capital U.S. Aggregate Bond index. Both are managed by BlackRock Inc. and both are collective investment trusts.

    • An Exelon Corp. stock fund, a holdover from the old Exelon 401(k) plan; and

    • The Northern Trust Government Short-Term Investment Fund, also a holdover from the old Exelon plan and also a collective investment trust.

    Mr. Brown said the new 401(k) will reduce costs compared to the legacy plans.

    “Participants will see their investment management fees on the actively managed core menu offerings reduced by approximately 45% on average from the comparable investments in the legacy menus,” he said. “This reduction is driven by the move away from institutional class mutual funds to separate accounts and the ability to leverage the scale of the combined assets of the legacy Exelon and Constellation plans.”

    The new 401(k) plan also provides online investment advice and managed accounts offered by Aon Hewitt and Financial Engines Inc. Although the Constellation 401(k) plan offered investment advice and managed accounts, the former Exelon plan did not.

    Aon Hewitt, the record keeper for the legacy Exelon plan, is the record keeper for the merged plan. T. Rowe Price Group Inc. had been record keeper for the Constellation plan.

    Mr. Brown said Exelon will assess the performance of the new plan by measuring participation rates and participant contribution rates as well as measuring investment performance. “We can add or remove funds,” he said. “Nothing is etched in granite.”

    Related Articles
    Exelon wipes slate clean with new investment approach
    Exelon-Pepco union could create $32 billion investment treasure chest
    Oregon utility fires up record-keeper search for 2 DC plans
    Auto re-enrollment adoption gains slowly
    Exelon goes with Northwest Plan Services as new 401(k) record keeper
    American Airlines 401(k)s flying high
    Recommended for You
    EPF buildingEPF building
    Malaysia's EPF reports $32 billion in COVID-19-related early withdrawals
    Rubio2022_i.jpg
    Sen. Rubio questions Thrift Savings Plan's exposure to Chinese companies
    Boeing_Workers_i.jpg
    Boeing machinists OK contract that keeps 401(k) match same, includes $8,000 payment
    Private Markets
    Sponsored Content: Private Markets

    Reader Poll

    August 10, 2022
    SEE MORE POLLS >
    Sponsored
    White Papers
    Gaining Momentum: Where Next for Trend-Following?
    The market opportunity in U.S. residential mortgage-backed securities
    Credit Indices Evolve with Enhanced Data Inputs
    Hedge Funds 2.0: Back to the future
    How Has 2022's Carnage Reshaped Global Stock and Bond Markets?
    Crossroads: Politics, Inflation, & Bonds
    View More
    Sponsored Content
    Partner Content
    The Industrialization of ESG Investment
    For institutional investors, ETFs can make meeting liquidity needs easier
    Gold: the most effective commodity investment
    2021 Investment Outlook | Investing Beyond the Pandemic: A Reset for Portfolios
    Ten ways retirement plan professionals add value to plan sponsors
    Gold: an efficient hedge
    View More
    E-MAIL NEWSLETTERS

    Sign up and get the best of News delivered straight to your email inbox, free of charge. Choose your news – we will deliver.

    Subscribe Today
    August 1, 2022 page one

    Get access to the news, research and analysis of events affecting the retirement and institutional money management businesses from a worldwide network of reporters and editors.

    Subscribe
    Connect With Us
    • RSS
    • Twitter
    • Facebook
    • LinkedIn

    Our Mission

    To consistently deliver news, research and analysis to the executives who manage the flow of funds in the institutional investment market.

    About Us

    Main Office
    685 Third Avenue
    Tenth Floor
    New York, NY 10017-4036

    Chicago Office
    130 E. Randolph St.
    Suite 3200
    Chicago, IL 60601

    Contact Us

    Careers at Crain

    About Pensions & Investments

     

    Advertising
    • Media Kit
    • P&I Content Solutions
    • P&I Careers | Post a Job
    • Reprints & Permissions
    Resources
    • Subscribe
    • Newsletters
    • FAQ
    • P&I Research Center
    • Site map
    • Staff Directory
    Legal
    • Privacy Policy
    • Terms and Conditions
    • Privacy Request
    Pensions & Investments
    Copyright © 1996-2022. Crain Communications, Inc. All Rights Reserved.
    • Topics
      • Alternatives
      • Consultants
      • Coronavirus
      • Courts
      • Defined Contribution
      • ESG
      • ETFs
      • Hedge Funds
      • Industry Voices
      • Investing
      • Money Management
      • Opinion
      • Partner Content
      • Pension Funds
      • Private Equity
      • Real Estate
      • Russia-Ukraine War
      • SECURE Act 2.0
      • Special Reports
      • White Papers
    • Rankings & Awards
      • 1,000 Largest Retirement Plans
      • Top-Performing Managers
      • Largest Money Managers
      • DC Money Managers
      • DC Record Keepers
      • Largest Hedge Fund Managers
      • World's Largest Retirement Funds
      • Best Places to Work in Money Management
      • Excellence & Innovation Awards
      • WPS Innovation Awards
      • Eddy Awards
    • ETFs
      • Latest ETF News
      • Fund Screener
      • Education Center
      • Equities
      • Fixed Income
      • Commodities
      • Actively Managed
      • Alternatives
      • ESG Rated
    • ESG
      • Latest ESG News
      • The Institutional Investor’s Guide to ESG Investing
      • ESG Sustainability - Gaining Momentum
      • Climate Change: The Inescapable Opportunity
      • Impact Investing
      • 2022 ESG Investing Conference
      • ESG Rated ETFs
    • Defined Contribution
      • Latest DC News
      • DC Money Manager Rankings
      • DC Record Keeper Rankings
      • Innovations in DC
      • Trends in DC: Focus on Retirement Income
      • 2022 Defined Contribution East Conference
      • 2022 DC Investment Lineup Conference
    • Searches & Hires
      • Latest Searches & Hires News
      • Searches & Hires Database
      • RFPs
    • Performance Data
      • P&I Research Center
      • Earnings Tracker
      • Endowment Returns Tracker
      • Corporate Pension Contribution Tracker
      • Pension Fund Returns Tracker
      • Pension Risk Transfer Database
      • Future of Investments Research Series
      • Charts & Infographics
      • Polls
    • Careers
    • Events
      • View All Conferences
      • View All Webinars
      • 2022 Retirement Income Conference
      • 2022 Managing Pension Risk & Liabilities
      • 2022 WorldPensionSummit