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The 401(k) plan at NBCUniversal Inc., which started from scratch in early 2011, has grown to $340 million by adopting some ideas from its joint-venture parents while adding investment and plan design ingredients of its own.
As a startup serving employees of the joint venture created by General Electric Co. and Comcast Corp., plan executives have had to build participation—now at 96.6%, thanks in part to automatic enrollment—among new hires as well as legacy GE and Comcast employees.
The investment lineup consists of a collective trust target-date fund series run by Vanguard Group Inc. and 16 mutual funds, 12 actively managed and four passively managed.
New employees are automatically enrolled into the target-date fund series at a 3.5% default rate. The auto enrollment takes place 30 days after hiring. The deferral rate automatically escalates 1 percentage point a year to a maximum of 6.5%.
In aggregate, NBCUniversal's annual 401(k) plan contribution for a new employee is between 5.5% and 8.5% of pay. Here's how it works:
• The employer match is 100% up to 3.5% of pay.
• NBCUniversal also provides a contribution of 1% of an employee's pay regardless of the employee's contribution.
• New hires are eligible for an annual flexible retirement account contribution that depends on the company's financial performance. It has a graded vesting schedule reaching 100% after six years. This payment—a minimum of 1% and a maximum of 4%—is made regardless of an employee's contribution to the 401(k) plan.
Meanwhile, as the asset base has grown, executives have begun exercising the plan's muscle in reducing expense ratios, moving to institutional share classes and reviewing some of the original investments.
“We're not standing pat,” said Jaime Erickson, director of retirement benefits for NBCUniversal, New York. “We're trying to make sure we're in the cheapest share class possible. To get into the institutional share classes, you need a certain level of assets.”
Among the plan's 16 core mutual funds, 10 are lower-priced institutional shares, and more are on the way. On July 1, the plan will switch to institutional shares for two funds—the large blend Spartan 500 Index Fund run by Fidelity Investments and Vanguard's Prime Money Market fund. Expense ratios will be cut to four basis points from six and to nine points from 20, respectively.
Also on July 1, the plan will offer lower-fee Admiral shares for Vanguard's FTSE All-World ex-U.S. Index Fund, reducing the expense ratio to eight basis points from 35.
These aren't the only money-saving efforts by NBCUniversal. In December 2011, the plan switched to a different class for the Vanguard target-date fund series, reducing the expense ratio to nine basis points from 17.
In February, NBCUniversal cut the expense ratios on two Fidelity Spartan funds by switching to Advantage class shares. The Spartan Extended Market Index Fund's expense ratio was reduced to seven basis points from 10 basis points, while the expense ratio for the Spartan 500 Index Fund was trimmed to six basis points from seven basis points.
July 1 also marks the introduction of a 2060 fund to the Vanguard target-date series. The series accounts for 57% of the plan's total assets.
Ms. Erickson said NBCUniversal chose Vanguard, Malvern, Pa., for the target-date series for its low cost and because Vanguard manages the target-date series for Comcast's 401(k) plan.
Boston-based Fidelity was chosen as record keeper for the NBCUniversal plan because Fidelity already is record keeper for both the $17.3 billion GE plan and the $3.21 billion Comcast plan, Ms. Erickson said. “We wanted to leverage that relationship,” she said.
The original investment lineup and plan design were created with advice from Aon Hewitt, Lincolnshire, Ill. The current investment consultant, Tower Watson & Co., was chosen in December following an RFP in which Aon Hewitt was invited to bid.
“We're looking at the lineup to see if there is a need to cover all distinct 16 asset classes,” Ms. Erickson said. “We are looking at some of the funds where there may be performance issues, or where we decide we may not need to have that specific fund in our lineup.”
Ten money managers provide the 16 mutual funds for the core lineup. The most popular have 5% of plan assets each—the BlackRock (BLK) Equity Dividend fund, a large-cap value fund; Fidelity Contrafund, large-cap growth; and PIMCO Total Return Fund. All are institutionally priced and actively managed.
Other actively managed institutional funds are the PIMCO Low Duration Fund; hybrids PIMCO All Asset and BlackRock Global Allocation funds; large domestic blend Neuberger & Berman Socially Responsive Fund; the large domestic blend Hartford Capital Appreciation Fund; the small-cap growth Royce Value Plus Fund; and the Columbia Small Cap Value Fund. The share class price for the actively managed Thornburg International Value Fund is the second lowest among this fund's several classes.
The four passively managed funds are: State Street Global Advisors Bond Index Non-Lending Series Fund; the two Fidelity Spartan funds; and the Vanguard FTSE All-World ex-U.S. Index Fund.
NBCUniversal doesn't offer a self-directed brokerage account in part because it's not offered by either the Comcast plan or the GE plan, said Ms. Erickson. She said she hasn't received requests from participants for the brokerage option.
The NBCUniversal plan now has 16,504 participants. The average participant balance is $20,579; participants invest in an average of 2.3 funds.
When the NBCUniversal plan took effect in January 2011, legacy employees of GE—including those working for NBC—could keep their balances at GE, roll them over into the NBCUniversal plan or a conduit individual retirement account, or take a lump-sum distribution. Legacy Comcast employees didn't join the NBCUniversal plan until a year later. They could leave their retirement money in the Comcast 401(k) plan or transfer it to the NBCUniversal plan.
Robert Steyer is a reporter for Pensions & Investments, a sister publication of Business Insurance.