Boeing’s retirement plan soars to new heights thanks to asset size, plan design
When it comes to assets in company retirement plans based on company plan size, some familiar names lead the list. New data from business intelligence data analytics firm miEdge found that the top 401(k) plans by asset size for companies with more than 1,000 actively enrolled employees hail from IBM Corp., Boeing and Wells Fargo. For companies with up to 1,000 actively enrolled employees, the 401(k) plans with the most in assets under management are Jones Day, United Space Alliance and CommunityAmerica Credit Union.
The miEdge data comes from Form 5500 filings with the U.S. Department of Labor as of July 30. Government entities such as cities, towns and fire and police departments are not required to file and therefore are not reflected in this data. The same applies to church plans, as defined by ERISA.
Recent research from Vanguard confirms that defined contribution retirement plans have become the centerpiece of the private-sector retirement system in the United States. More than 90 million Americans are covered by DC plan accounts, with assets now in excess of $6.7 trillion.
One such firm is Boeing. With about $47 billion in assets, The Boeing Company Voluntary Investment Plan was not only No. 2 on the list of large plans, it also scored second in Bloomberg’s 401(k) qualitative rankings for 2015. This was based on the level of matching contributions, additional company contributions, vesting, automatic enrollment and investments.
Boeing has about 165,000 employees worldwide. All U.S. employees are eligible to participate in the company 401(k) plan, and there are currently about 138,000 active members. There is just one DC plan for all employees, but certain unions still also have defined benefit plans. The DB plan for non-union employees has been closed and replaced with additional contributions to the 401(k) plan. “We are hovering at about 93% or 94% 401(k) plan participation, up from 87% in 2010, so we’ve made progress,” says Dimitra Hannon, the global aerospace company’s director of well-being and retirement strategy. “We do have a faction of our employees who have chosen not to participate, most of whom were never auto-enrolled because that feature is a little newer.”
Employees are permitted to contribute between 1-30% of their annual base pay. Boeing matches 75% on the first 8% of base pay contributed by employees, or a maximum yearly match of 6%.
Hannon notes that the average annual Boeing employee’s 401(k) savings rate is 11%. In addition to matching contributions, Boeing employees get a further automatic contribution based on age of 3%, 4% or 5% of base plus bonus pay.
Willis Towers Watson’s Defined Contribution Leader Robyn Credico believes the employer match is very important if the company’s goal for establishing a 401(k) plan is to help people save enough for retirement. “It actually helps people to accumulate retirement savings effectively, and it drives how much the person is going to save,” she says.
That’s why she advises clients that a plan like Boeing’s, which only partially matches employee contributions up to the company maximum, is a preferable design than a straight dollar-for-dollar match. “It does a better job because if my plan provides a 75% match up to 8%, it is more likely that I will save 8% in order to get the full match than if my company simply matches my annual contributions up to 6% annually,” she says.
Nevertheless, 75% of Fortune 100 employers offering a match used a single-tier match formula, most commonly dollar-to-dollar up to 6% of pay. Only 25% offered a multi-tier match, typically dollar-for-dollar up to 3% of pay and 50 cents on the dollar for the next 2% of pay.
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There is no waiting period for the Boeing VIP, and new employees are auto-enrolled (with an opt-out provision) at an annual employee contribution rate of 4% of payroll with all contributions immediately vested. Employee contribution levels escalate by 1% every April until they are contributing 8% a year. Credico says immediate 401(k) plan eligibility is important because new hires miss the payroll deductions less if they begin right away rather than six months after they start with the company.
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What’s more, Credico sees auto-enrollment and auto-escalation as two sides of the same coin. “People are pretty passive and retirement plans can be overwhelming, so you want to auto-enroll them at a lower contribution rate at first,” she says. EBA