Pensions: automatic enrollment in 401(k)s pushed.A program that many plan sponsors may be considering in the coming months is the notion of automatic enrollment in 401(K) plans--putting employees into managed accounts where they don't have to make investment choices and get the benefit of having someone else make portfolio decisions. One company that recently went that route is Australia-based global mining giant BHP Billiton BHP Billiton is the world's largest mining company.[1] Its origin is in the 2001 merger of Australia's Broken Hill Proprietary Company (BHP) and the UK's Billiton, which has a South African background. The result is a dual-listed company. . Daniel Helman, team leader for retirement services, described the company's program in a recent Conference Board seminar in New York New York, state, United States New York, Middle Atlantic state of the United States. It is bordered by Vermont, Massachusetts, Connecticut, and the Atlantic Ocean (E), New Jersey and Pennsylvania (S), Lakes Erie and Ontario and the Canadian province of . Billiton had closed a number of mines in the 1990s and the early years of this decade and was saddled with "a lot of legacy costs Legacy costs is a term formed by analogy with the computer industry's legacy systems. Legacy costs are those incured by an organization in prior years under different leadership or when the entity's priorities and resources were different. ," Helman said. It elected to close out its defined-benefit pension plan defined-benefit pension plan A pension plan in which retirement benefits rather than contributions into the plan are specified. Thus, a retired employee who has reached a certain age with a given number of years of service and has earned a certain income is , which it did in 2004, and roll out a new defined-contribution plan Defined-Contribution Plan A retirement plan wherein a certain amount or percentage of money is set aside each year for the benefit of the employee. There are restrictions as to when and how you can withdraw these funds without penalties. ; that started with new employees, then 60-90 days later with the rest of the employee base. Helman noted that employees range from Inuits and other native peoples who may not even read to Ph.D. scientists, so a plan had to work for everyone. Employees are now automatically enrolled at 6 percent of their salary to take advantage of a company match, and that rises by 1 percent a year until a 15 percent cap, he said. More than a third of employees choose to get additional investment information, which they get from The Vanguard Group, Billiton's fund provider, and investment counselor Financial Engines Inc. Helman says Billiton is paying fees of only 35 basis points on assets in the managed accounts for new employees, which he said works out to $2 or $3 a month per employee, and is working to reduce that to 25 basis points. Jeff Maggioncalda, president and CEO (1) (Chief Executive Officer) The highest individual in command of an organization. Typically the president of the company, the CEO reports to the Chairman of the Board. of Financial Engines, argued that too many 401(k) plans are aimed at the 10 to 20 percent of employees who are "do it yourselfers" actively engaged in their own investments. Yet 30 to 40 percent of workers fall into a passive "do it for me" category. "We need to focus more on help," he said. Automatic enrollment into managed accounts "represents a fundamental mindset mind·set or mind-set n. 1. A fixed mental attitude or disposition that predetermines a person's responses to and interpretations of situations. 2. An inclination or a habit. shift," he said, to one where "those who do nothing can succeed." |
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