Sandia Corporation

HEADQUARTERS: Albuquerque, New Mexico

TOTAL PLAN ASSETS/PARTICIPANTS: $3.05 billion/13,300

PARTICIPATION RATE: 90%

AVG. DEFERRAL RATE: 8.2%

MATCH: 6% contribution plus two-thirds
of employee’s 6% own contribution

ADDITIONAL PLAN: DB, closed to new participants

Before closing its defined benefit (DB) plan to new employees, members of the investment committee and the retirement investment management and human resources (HR) departments of Sandia Corporation knew they had a significant task ahead of them.

Although the company, headquartered in Albuquerque, New Mexico, had made the financial decision to close its DB plan to new employees as of December 31, 2008, it remained as committed as ever to helping employees become retirement ready, says Leah Mitchell, the company’s senior manager, retirement investment management. That led to substantial, munificent, changes to its 401(k) plan.

“Sandia feels very strongly that we have an obligation to our work force to provide them with a well-defined path to save,” says Mary Romero Hart, Sandia senior manager of human resources total rewards. “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.”

In 2009, Sandia enhanced its 401(k) plan contributions. For employees ineligible for the pension plan, Sandia began contributing 6% of compensation. This increase to 7% when someone has  15 or more years of service, Mitchell says. The enhancement is in addition to the two-thirds company match Sandia furnishes for the first 6% of a participant’s own contribution. Therefore, if an employee contributes 6%, he will receive 10% from Sandia, for total contributions of 16%—17% for those with 15 or more years of service. At the same time the enhanced contributions were added, the waiting period to receive the match was reduced from a year to immediately, Mitchell says.

To make these generous contributions was a deliberate decision by Sandia, which, while aiming to be “fiscally responsible about its pension liabilities, also wanted to create a secure retirement for new hires and be a responsible steward by enhancing the 401(k),” says Lisa Hitt, vice president and managing director at the plan’s recordkeeper and trustee, Fidelity Investments, in Prescott, Arizona.

Without automatic enrollment, Sandia realized that generous contributions would sit unclaimed and that it needed to create a true “culture of saving,” Mitchell says. That led to the decision to hire Financial Engines to provide independent investment advice to all of the plan’s participants—not just active employees but also retirees and terminated employees who maintained a balance in the plan. “Annually, Financial Engines lets participants know if they are on track with their investment allocation, retirement savings and retirement income outlook, and it highlights any risks that could impact their goals,” Mitchell says.

Last July, Sandia held its first Financial Wellness Month initiative. Four courses were offered, discussing: estate planning, 401(k) plan investment options, use of Fidelity and Financial Engines investment tools, and Sandia’s new pension calculator tool. This April, Fidelity will launch a new financial wellness initiative that it hopes will become integral to the 2016 Financial Wellness Month, Hitt says.

Sandia’s 401(k) plan is also unusual in that it is governed by an internal retirement investment management department that also runs the pension plan, notes Mitchell, who is supported by three Chartered Financial Analysts (CFAs) and two certified public accountants (CPAs). “We feel this provides a better basis for our participants because we are managing the retirement plans on a full-time basis,” she says. “We also handle financial reporting and compliance.”

Looking back at what it has achieved—the generous contributions, financial wellness initiatives, advice, professional management of the 401(k) plan, and high participation and deferral rates—Sandia plans to “continue to build on this momentum to make sure our employees achieve retirement readiness,” Romero Hart says. —Lee Barney