401(k) excellence

By Bill Murphy

Thursday, August 04, 2016

Sandia’s plan recognized among the best of the best

Portable blood clotting monitor wins UC Davis/Sandia Engineering Design Award

ONE OF THE KEYS to the recent recognition of Sandia’s 401(k) program by PlanSponsor magazine is that unlike most corporate 401(k) plans, Sandia has two dedicated teams — from  both the HR and Finance organizations — focused on making the plan the best it can be. Pictured here, representing the two teams, are Connie Lee, CFA, an investment manager in Sandia’s Retirement Investment Management Department and assistant secretary to the Investment Committee; and Bob Martinson, CPA, benefits, finance and programs analyst for the 401(k) plan in Sandia’s Total Rewards Department.   (Photo by Lloyd Wilson)

Sandia has long offered employees an option to enroll in the Sandia Corporation Savings and Income Plan, also known as a 401(k) plan, which includes a company match of 2/3 of the first 6 percent of pay the employee contributes to the plan. That benefit was provided as a supplement to Sandia’s defined benefit pension plan.

When Sandia, following industry trends nationwide, closed its defined pension benefit to new employees and rehires, the Labs’ Board of Directors knew it was important to offer individuals hired after the closure an alternative path to retirement security.

For employees not eligible for the pension, the Labs added an enhanced 401(k) benefit of an automatic up-front company contribution of 6 percent of the employee’s salary into their 401(k) account. These employees are also eligible to receive the company match.

Sandia’s 401(k) plan, held in trust through Fidelity Management Trust Company, is popular with employees; participation rate is 90 percent and plan assets total more than $3 billion.

Sandia’s efforts to ensure a smooth transition from the pension benefit to the enhanced 401(k) benefit did not go unnoticed — PlanSponsor magazine named the Labs a 2016 Plan Sponsor of the Year finalist in the category Corporate 401(k) Plans with Assets of Greater than $1 billion.

‘An obligation to our workforce’

In an interview with PlanSponsor, Mary Romero Hart (3510), senior manager of HR’s Total Rewards organization, said, “Sandia feels very strongly that we have an obligation to our workforce to provide them with a well-defined path to save. Bringing contributions to a higher level is definitely one of those goals. As we let go of our defined benefit plan, we wanted to build a strong campaign around our 401(k) to help employees understand how they can use this vehicle for their savings.”

Leah Mitchell, senior manager in Sandia’s Retirement Investment Management Group 10520 in Sandia’s Finance Division, says the PlanSponsor recognition is not about the transition itself, but about Sandia’s best practices and how those best practices facilitated the transition and ensure a positive experience for plan participants.

“One of the unique things about Sandia’s plan is that we really have two groups dedicated to making sure our plan is both well-administered and closely monitored,” Leah says.

Working with the Investment Committee

Administration of the plan is handled in Sandia’s Total Rewards organization in HR, with key individuals including Mary and Bob Martinson, a CPA and benefits, finance, and program analyst for the 401(k) plan. 

That administrative aspect of the 401(k) plan management is essential, says Leah. “What’s more uncommon is my team — the Retirement Investment Management Group. We work with Sandia’s Investment Committee to make sure we have the appropriate investment information available to our participants and that we are maintaining the highest quality of investment choices at very low fees. Having a team like ours that works with the Investment Committee — that’s much more unusual.”

Bob Martinson, a CPA and Sandia’s 401(k) program analyst, does the math to show that employees who take full advantage of the Labs’ 401(k) plan can look forward to a good retirement income.

“Assuming that somebody that’s newly hired contributes 6 percent to get the full company match – which would be 4 percent – the employee would be, with the help of Sandia, contributing 16 percent of their compensation to their 401(k),” Bob says. “Current industry rules of thumb say anything near 15 percent, including company contributions, is a good benchmark. So we’re doing that.

“Then there’s another measure: Based on preliminary analysis of data gathered by Fidelity of employees who are not pension-eligible, they are collectively on target to replace 55 percent of their pre-retirement income. If you add as a back-of-the-envelope estimate of 20 to 25 percent for Social Security that gets them near the 80 percent range, which a lot of experts say is a good goal for retirement — and that would not include any outside investment. The message here is that collectively, our enhanced 401(k) benefit is designed well to help people reach the goal, and the people at Sandia are doing all the right things to get to a successful retirement.”

The Investment Committee, made up of four Sandia executives and two Lockheed Martin executives, is appointed by the Labs’ Board of Directors to have fiduciary responsibility for the savings plan and the pension plan. Leah’s group does much of the heavy lifting of the Investment Committee. “We do the day-to-day monitoring of the investments and the investment policies that have been set and we advise and consult with the Investment Committee, which has the express responsibility for acting independently in the best interest of the plan participants.”

A team effort

Bob says administration of Sandia’s 401(k) plan is a team effort. “There are a lot of talented people with a lot of deep experience involved,” Bob says, “not only within Sandia but among our service providers, as well. We work together to help with the plan design, the administration of the plan, and compliance with federal regulations.”

When the transition from the pension benefit to the enhanced 401(k) benefit occurred, Bob says, “There was a lot of communication to explain the changes and processes put in place to make sure new employees are thoroughly informed about the enhanced contribution and their other savings and investment options.”

Connie Lee (10520), a Chartered Financial Analyst and an investment manager in Leah’s group, says Sandia’s enhanced 401(k) benefit — the 6 percent up-front company contribution plus the 4 percent match on the next 6 percent — “are considered a very good contribution level compared with other plan sponsors . . . Most new hires come in recognizing that; when they compare our benefits to the benefits — including the retirement benefits — offered by other employers, ours is excellent.”

‘Put in the effort up front’

Says Leah, “All of our efforts are aimed at making this the best 401(k) plan we can. That’s the goal, that people who come is as new hires will be able to have a stable retirement income when they get to that stage . . .”

Adds Connie, “. . . as long as they put in the effort up front. It does take a little bit of work on the part of each individual employee. As long as our new hires put in that effort up front and ongoing throughout their careers, they can establish a good nest egg. Our challenge is to make sure we’re educating them about saving and investing.”

Regarding specific investment advice, Sandia has partnered with independent, registered investment advisor Financial Engines to work with individual employees on asset allocations using the 401(k) investment option line-up.  Employees, depending on their need for professional investment management or desired level of involvement in managing their investments, have the option to use either the Online Advice (paid for by Sandia) or Professional Management (fee based on account assets) service offered through Financial Engines.

Connie, who attended the PlanSponsor awards ceremony earlier this year, says, “One of the things they highlighted is that these awards are given to plan sponsors who really aren’t just checking the box, you know, just providing the options and meeting the regulatory requirements of the 401(k) plan. The awards are presented to plan sponsors who are going above and beyond what’s required by regulation, providing options and educating and really putting forth the effort to ensure that participants have good retirement outcomes.”