Semiconductor maker Intersil Corp. has put a charge into its 401(k) plan through a restructuring that will save participants $600,000 a year in fees and offer what plan officials say is more flexibility in meeting employees' retirement needs.
“Our primary concern was employee savings,” said Helene Sanford, director of human resources and compensation, in describing the revamping of the Milpitas, Calif., company's $330 million plan. Like many DC plans, Intersil — whose new lineup took effect in January — reduced fees to participants by negotiating lower-fee share classes.
The share-class switch was only part of the plan's overhaul. Intersil changed record keepers, moving to Putnam Investments, Boston, from T. Rowe Price, Baltimore. It dropped T. Rowe Price as the manager of its target-date portfolio, stable value fund and self-directed brokerage account, replacing it with, respectively, BlackRock Inc., Putnam and TD Ameritrade. Intersil also replaced five core funds.
Intersil officials began thinking about a plan revision nearly two years ago following questions from employees about lifetime income options and discussions with the plan's investment adviser about helping employees guard against outliving their retirement assets.
“A lot of employees began asking about in-plan annuities,” said Ms. Sanford, whose company doesn't have a defined benefit plan. “As we talked to more and more employees, we learned that people weren't sure how it was going to work out in retirement. They weren't sure what amount they should withdraw each year” after they retired.
The average employee age is 48 and the average tenure is 14 years, Ms. Sanford said. The plan has 950 active participants and 829 participants who are retirees or ex-employees. The participation rate is 92%, and Intersil auto enrolls all new employees. The average annual deferral rate is 9.9% of salary, and the average balance is $184,764, she said. Intersil matches 100% up to 6% of an employee's salary, and the match is available for employees after one year of service.
“If you look at the plan for assets and accumulation and participation, the plan did well,” said investment adviser Jason Chepenik, managing partner of Chepenik Financial Services, Winter Park, Fla. “Are people on track to succeed for income replacement? We didn't think so.”