BOCA RATON, Fla. -- The Sunbeam Corp. last month wrapped up a nearly year-long overhaul of its $140 million defined benefit pension plan by thawing out a long-frozen plan and moving to multiple managers.
Revamping the plan, which covers approximately 12,000 employees, included merging the Sunbeam and Coleman Co. plans into a single trust. Sunbeam acquired the Wichita, Kan., outdoor recreational manufacturer in 1998. The $30 million Coleman defined benefit plan was liquidated and the assets were invested in a balanced fund at Mellon Capital Management, San Francisco, until after the acquisition.
Sunbeam executives worked with actuary Hewitt Associates, Lincolnshire, Ill., and New England Pension Consultants, Cambridge, Mass., to put an asset allocation plan into place. That meant unwinding Sunbeam's own plan, frozen in 1990, and hiring seven additional asset managers to invest the combined assets.
The frozen Sunbeam plan had been invested in an immunized bond portfolio before the plans were merged.
"Working with our actuaries and consultants, we came up with a more logical array of investment managers, given the duration of the types of plans we have and our needs going forward," said Robert Schur, assistant treasurer at Sunbeam.
Mr. Schur said he and Ron Richter, Sunbeam vice president and treasurer, interviewed dozens of investment firms that fit the new investment profile developed by the consultants and the Sunbeam Benefits Investment Committee. The $150 million Sunbeam 401(k) plan was not affected by the pension plan overhaul.
Although the merged plan carries a substantial 40% allocation to fixed income, the new asset allocation includes nearly 50% in equities. The balance is market-neutral assets and cash.
New managers include New South Capital Management Inc., Memphis, and Batterymarch Financial Management Inc., Boston, each running $7.6 million in small-cap equity; Chicago Equity Partners Corp., Chicago, $20 million, large-cap equity; and Lazard Asset Management, New York, $15 million, international equity. MetLife, New York, was retained to manage a $40 million guaranteed Lehman Brothers Aggregate Bond index fund. State Street Global Advisors, Boston, and Columbine Asset Management LLC, Colorado Springs, Colo., were hired to invest $7 million each in a market-neutral strategy.
Mellon Capital was retained to oversee a $30 million balanced portfolio.
One-year process
"The managers were selected based on their proven track records of consistent earnings performance. We also reviewed the complexion of their investment profiles to ensure their adherence to their investment guidelines, as well as the quality and integrity of the firms," said Mr. Schur.
"The whole process took us nearly one year to complete, and the last piece was put in during the first quarter. It was a big effort for us in a fairly discrete period of time."
Following the acquisition of Coleman in 1998, Sunbeam officials "sat down and looked at what we had and what we needed going forward," said Mr. Schur. "There was a lot of infrastructure that needed to be put into place before we made any changes to the pension plan."
Meanwhile, the Sunbeam plan had been frozen and stashed in the immunized bond portfolio.
According to news accounts, Sunbeam and Allegheny International, its parent company, were involved in efforts to emerge from Chapter 11 bankruptcy protection in May 1989.
Want to be proactive
In making the changes, Mr. Schur said, "We wanted to be prudent and proactive in covering pension liabilities and fulfill our fiduciary responsibilities to beneficiaries and participants and ensure a good, viable pension fund going forward. Bonds were good for a period of time when interest rates were declining and bonds were doing well.
Monitoring process
"But we didn't want to have the entire fund in fixed income; we felt a certain amount of equity exposure was needed."
Now that the restructuring is complete, Mr. Schur said, "We are going into a monitoring process. We will review quarterly performance and watch things as we go forward. We will periodically relook at the array of investments with regard to our actuarial recommendations.
"If there are any structural changes, or if we find for whatever reasons any of our managers are not fulfilling what they were intended to do, then we would make changes accordingly.
"But we are happy that it's all in place."
