Bechtel Global Corp.

50.5% of plan participants are terminated or retired.

Seventy-five percent of participants in the 401(k) of Bechtel Global Corp., in Glendale, Arizona, get professional help in managing their investments. Of those, 68% invest in the plan’s managed account qualified default investment alternative (QDIA), and another 7% use Empower Retirement’s online advice tool.

In 2010, the 401(k) plan moved to managed accounts as its QDIA, using the Empower Retirement Professional Management program. After the Pension Protection Act of 2006 (PPA) became law, Bechtel had reviewed its QDIA, says Retirement Plans Manager Lavina Mehta.

“At that point, we had a money market fund as our default,” Mehta explains. “So we started evaluating appropriate QDIAs for our participant base.” The plan committee initially leaned toward moving to custom target-date funds (TDFs). “But as we did a ‘deep dive’ of our employee demographics, we found that we had an older workforce and a lot of midcareer hires,” she says. “We felt, ‘Who would we be building this target-date fund glide path for?’ Our committee didn’t feel comfortable building a target-date fund glide path for one particular demographic.”

Bechtel’s engineering, construction and project-management work lends itself to both long-tenured employees and experienced new hires, Mehta says. “Many of our participants also stay in the plan when they leave Bechtel: 51% of the plan’s participants are terminated or retired,” she adds. She attributes that to both the $5.6 billion plan’s low fees and participants’ high level of trust in the company.

As Bechtel’s plan committee looked closer at potential default investments, the members liked the idea of a managed account QDIA and its customized allocations, Mehta says. “Each participant gets a portfolio that is fully customized to that participant, taking into account various factors including age and salary,” she says. Participants can provide additional information—such as their risk tolerance, expected retirement age and investments outside the plan—that will be incorporated into their personalized strategy.” Bechtel encourages them to provide this additional information so their investment allocation can be even more customized, she adds. Participants can provide the extra information when they’re enrolled into a managed account, or at a later time.

Investment in the plan’s managed accounts rose after Bechtel did re-enrollments, in 2010 and again in 2018. “We periodically do an [allocation] analysis of plan participants with our consultant, Rocaton Investment Advisors,” Mehta says. “What we started to see in 2016 and 2017 was quite a lot of younger participants who were in the money market fund or older participants with large amounts of equity. Asset allocation was really the driver of the second re-enrollment.”

Although it has done two investment re-enrollments of current employees, Bechtel has not opted to do automatic enrollment of new hires. The plan’s participation rate was 88% even before it did the re-enrollments, Retirement Administration Manager Tracy Gutterud says. “Really, our main driver behind that is that we have such a high participation rate already,” she says. “We feel that we have a very successful participation rate, without having automatic enrollment.” Auto-enrollment might even drive average deferral rates down, Mehta adds.

Late last year, Bechtel also did an education campaign for pre-retirees. “We targeted the 50-plus age group, and we offered a ‘retirement-readiness checkup’ call with Empower,” Mehta says. “Participants could talk to someone at Empower about things like adding personalized information to their managed account profile on their outside assets, their investment-risk preference or their planned retirement date. Sixty-six percent of our participants who participated in the retirement-readiness checkup took positive action during or after the call, including adjusting their investment preference, adjusting their retirement age or increasing their deferral.” Bechtel’s 2019 employer contribution was 100% of 6%, plus profit sharing.

—Judy Ward