BrightScope 2010 Top 30 401k Plans

Today BrightScope is pleased to announce the Top 30 401k Plans of 2010. BrightScope’s Top 30 list comprises large 401k plans with high overall quality, as measured by the BrightScope Rating. The BrightScope Rating measures how effective a 401k plan is at getting its participants to retirement. More details about the BrightScope Rating can be obtained in the FAQ section of the BrightScope website.

What traits define the plans that make the Top 30 Plans list ? Here is a quick analysis of the factors that drove top BrightScope Ratings:

1. Generous Company Contributions: One of the surest ways to appear on the Top 30 list is to offer a generous match. An employer matching contribution encourages employee participation and increases salary deferrals.  To be competitive on the Top 30 list companies must have a high level of company contributions per participant, which is indicative of generous matching and profit-sharing contributions. The top plan on the Top 30 list, the Saudi Arabian Oil Company, matches 100% up to 9% of employee contributions. The 5th rated  United Airlines Pilot Directed Account Plan, offers a 16% non-elective contribution for all participants. IBM vaulted up the list after changing its match structure from 50% to 6% of pay up to a generous 100% of 5% of pay with an extra 1% thrown in on top. Other companies on the list exhibit similarly generous plan design and as a result show high company contributions. On average companies on the list provided $8,700 in company contributions per active participant. Just as IBM saw its rating increase as its match improved, cutting the match caused a few plans to drop off of the Top 30 list. FreeScale Semiconductor and Motorola  suspended their match and have since fallen out of the top 30.

2. Immediate Plan Eligibility: Plan eligibility is the length of time between when an employee is hired and when they are eligible to participate in the plan. The shorter the time period the better. Twenty-five (25) of the thirty (30) plans on the list offer immediate eligibility to the plan. Last year 23 out of 30 plans offered immediate eligibility. The longest eligibility period was 12 months, for the 22nd rated American Airlines Pilot Retirement plan. This was twice as long as the next longest eligibility period of 6 months for the Federal Express pilots.

3. Immediate Match Eligibility: Five plans on this years list make employees wait an additional period of time to be eligible for employer matching contributions, which is up from just two plans last year. IBM made this change recently, requiring 11 months of service for match eligibility. For the rest of the plans employees are immediately eligible for matching contributions when they become eligible for the plan.

4. Immediate Vesting: All but one of the plans on the top 30 list offer immediate vesting to plan participants. Last year UBS had a 5 year cliff vesting schedule, which was the longest vesting schedule of a plan that made the 2009 list. UBS has since changed to immediate vesting, which played a part in the plan powering to 11th on this year’s list. Exxon is the only plan with a vesting schedule, 3 year cliff, but given the generosity of the plan and the average tenure of the plan’s participants it is unlikely too many Exxon employees are complaining.

5. Low Fees: With all of the goings-on in DC around fee disclosure and with several new regulations out of the Department of Labor over the last 12 months fees will again be an issue of prime importance for plan’s on this list. While many of the plans on this list offer competitively priced funds and services, there is an 0.80% difference between the lowest cost plan on the list and the highest cost plan according to our cost calculations. BrightScope’s Total Plan Cost (TPC) calculations include investment expense ratios, administrative costs and also fund-level trading and transaction costs. To read more about how we calculate these costs and why we include them, please read this blog post. Two of the plans with the lowest all-in fees (including fund-level trading costs) – Chevron and ExxonMobil – benefit from having over 50% of their plan’s in company stock, which is very inexpensive to manage but entails plenty of other fiduciary hazards.  Once again IBM has the lowest total costs, using its almost $32 billion in assets to muscle their fees as low as possible.  All told the average total cost of plans on the list is 0.67%, a full 10 bps higher than last year’s list and definitely something to keep your eye on for next year.  There are 4 plans on the list with total fees above 1% all of which use a healthy dose of retail mutual funds.

6. High Participation Rates: Participation is critical to ensuring retirement outcomes for participants. BrightScope calculates a plan’s BrightScope rating based on the performance of the average participant, so if a lot of employees are not taking part in the plan the plan’s rating can suffer. It should come as no surprise then that there is not a single plan on the list with a participation rate below 90%.  The average participation rate among plans on the Top 30 List is 96%, with ExxonMobil, Amgen, Southern California Permanente and American Airlines Pilots all obtaining 100% participation. This group of 30 also appears willing to adopt automatic enrollment features. In fact, three of the plans on the list –IBM, Pfizer and Amgen – not only offer automatic enrollment, they have a very high default deferral rate.  Both IBM and Amgen have default deferral rates of 5% and Pfizer has a default deferral rate of 6%. BrightScope applauds these sponsors for embracing automatic plan features.

7. High Salary Deferrals: High participation is great, but salary deferrals ultimately drive participant outcomes. The more people save in their 401k plan, the more they receive in company match, and the more their 401k savings compound over time. It is no secret that plan funding is the number one determinant of retirement success. It should come as no surprise then that only 8 plans on the list have salary deferrals below $10,000 per participant, with an average salary deferral of $12,200. The salary deferral average is up over $1,200 from last year. At the top of the list for salary deferrals is Saudi Arabian Oil Company, Southern California Permanente and Federal Express pilots each of which had over $15,000 in salary deferrals per employee . Bayer used rising participation and salary deferrals to jump to 7th on this year’s list.

The BrightScope 2010 Top 30 401k Plans List:

2010 Rank

2009 Rank

Company/Plan

BrightScope Rating

U.S. Headquarters

1 1 saudi_aramco_logo1The Savings Plan of Saudi Arabian Oil Company 93.17 Houston, TX
2 N/A

Southern California Permanente Medical Group Retirement Plan

89.96 San Diego, CA
3 4 southwest_logoSouthwest Airlines Pilots Retirement Savings Plan 89.04 Dallas, TX
4 10 amgen_logoAmgen Retirement and Savings Plan 88.40 Thousand Oaks, CA
5 2 united-airlines1United Airlines Pilot Directed Account Plan

88.30

Chicago, IL
6 9 credit_suisse_logoEmployees Savings and Retirement Plan of Credit Suisse Securities (USA), LLC 87.35 New York, NY
7 20 bayer_logoBayer Corporation Savings and Retirement Plan 87.26 Pittsburgh, PA
8 12 bp_logoBP Employee Savings Plan 86.99 Houston, TX
9 11 nucor_logoNucor Corporation Profit Sharing and Retirement Savings Plan 86.97 Charlotte, NC
10 25 avaya_logoAvaya Inc. Savings Plan for Salaried Employees 86.88 Basking Ridge, NJ
11 21 ubs_logoUBS Savings and Investment Plan 86.73 Stamford, CT
12 28 ibm_logoIBM Savings Plan 86.66 Armonk, NY
13 8 exxonmobil_logoExxonMobil Savings Plan 86.45 Houston, TX
14 N/A Sanofi-Aventis US Savings Plan 86.42 Bridgewater, NJ
15 N/A Anadarko Employee Savings Plan 86.35 The Woodlands, TX
16 N/A Novartis Pharmaceuticals Corporation Investment Savings Plan 86.26 East Hanover, NJ
17 N/A Bechtel Trust & Thrift Plan 86.17 San Francisco, CA
18 7 chevron_logoChevron Employee Savings Investment Plan 85.95 San Ramon, CA
19 N/A Genentech, Inc. Tax Reduction Investment Plan 85.59 South San Francisco, CA
20 N/A Altria Deferred Profit-Sharing Plan for Salaried Employees 85.35 San Francisco, CA
21 6 conoco_logoConocoPhillips Savings Plan 85.22 Houston, TX
22 N/A American Airlines, Inc. Pilot Retirement Benefit Program Variable Income Plan 85.11 Fort Worth, TX
23 27 fedex_logoFederal Express Corporation Pilots Retirement Savings Plan 85.10 Memphis, TN
24 N/A Shell Provident Fund 84.80 Houston, TX
25 N/A Sun Microsystems, Inc. Tax Deferred Retirement Savings plan 84.72 Santa Clara, CA
26 23 glaxo_logoGlaxoSmithKline Retirement Savings Plan

84.68

Philadelphia, PA
27 N/A Cisco Systems, Inc. 401k Plan 84.66 San Jose, CA
28 N/A Goldman Sachs 401k Plan 84.56 New York, NY
29 N/A AstraZeneca Savings and Security Plan 84.53 Wilmington, DE
30 13 pfizer_logoPfizer Savings Plan 84.52 New York, NY

Overall the list got more competitive than the previous year. To make the list a plan needed a rating above 84.5 whereas last year the 30th rated plan had a rating of 81. Many of the plans that are no longer on this list did not get worse, but simply did not keep pace with the plans that experienced large gains. Here are the plans that are no longer on the top 30 List for 2010: Paccar Inc. Savings Investment Plan, The Cargill Partnership Plan, Textron Savings Plan, Valero Energy Corporation Thrift Plan, Freescale 401k Retirement Savings Plan, the 401k Savings and PSP McGraw Hill, Schering Plough Employees Savings Plan, Motorola Inc 401k Plan, Nortel Networks Long Term Investment Plan, Lockheed Martin Corporation Salaried Savings Plan and the General Dynamics Corporation Savings and Stock Investment plan.

To learn more about the Top 30 Plans List please contact us at info@brightscope.com. This award is based on plan experience through 12/31/2009.

*DISCLAIMER: Ratings continually change as data is updated over time. Ratings should be viewed as a “snapshot in time.” To view current ratings information for a given plan click to view the companies plan page. The rating on the plan page may not match the rating at the time of the release of the rankings.

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