Wellington’s 401(k) plan ranks among best in area
Like many Boston investment firms, Wellington Management Co. has a reputation for paying well.
But the company that manages retirement savings for thousands of Americans also does a stellar job of providing retirement benefits to its own employees. Wellington’s 401(k) plan offers a variety of quality investment funds and charges low fees. The company contribution averages a whopping $19,500 per participant (including profit sharing worth up to 15 percent of an employee’s salary). No wonder the plan boasts an impressive 98 percent participation rate.
“For a plan that size, that’s very high’’ participation, said Eddie Alfred, a vice president of BrightScope, a San Diego company that rates 401(k) plans. “Wellington has done a superb job.’’
Indeed, Wellington Management topped a list that BrightScope developed of the companies based in the Boston area that have the best 401(k) plans, based on a minimum of $100 million in assets. Other local companies that made the list, which BrightScope plans to release today, include Boston Consulting Group in Boston; Waters Corp., the laboratory equipment maker based in Milford; and investment company Loomis, Sayles & Co. of Boston.
BrightScope’s ratings are a reminder that benefits such as 401(k) plans are a critical piece of compensation, even though they are often overshadowed by salary and other considerations.
“It could be a difference of 20 to 30 years of additional work’’ before someone is able to retire “between two employers in the same industry,’’ said Mike Alfred, BrightScope’s chief executive and cofounder.
A Wellington spokeswoman declined to comment.
BrightScope said it based the calculations on simulations of how long it would take a typical worker to retire using money socked away in the 401(k) plan. The firm has rated more than 45,000 401(k) plans from employers from across the country, using public filings with the Department of Labor.
To make the numbers comparable from one company to the next, BrightScope used a standard hypothetical employee in its simulations — a 44-year-old earning $44,000 a year and starting with $40,000 in retirement savings. It then figured out how much savings the person would need to retire and how long it would take to reach that goal with each reviewed company’s 401(k) plan, based on its contributions, fees, investment menu quality, vesting schedules, participation rates, and other factors.
There are some caveats. Some companies also offer traditional pensions in addition to 401(k) plans, which BrightScope did not consider in its calculations. That means some companies that have mediocre 401(k) plans but also offer pensions may ultimately provide more retirement benefits than a firm with a highly rated 401(k) and no pension plan. And the data are based on government filings, which typically lag by as much as several years. So it is possible some companies have since modified their 401(k) plans, for better or worse.
In addition, BrightScope acknowledged the ratings could be skewed by turnover and salary levels. At companies with lower salaries, workers are less likely to participate or save as much, which can drag down a company’s ratings for its 401(k) plan. In addition, BrightScope rated companies based on the dollar amounts they contribute, not the percentage of salary that they match, so the ratings methods rewards companies that pay better.
Not surprisingly, law firms, consulting firms, and tech companies, which tend to have many high-paying jobs, also tend to rank higher in BrightScope’s rankings than, say, retailers.
But Mike Alfred says there are notable exceptions, where companies have improved their 401(k)s and persuaded employees to participate. For instance, he said Costco and McDonald’s both ranked above average.
Still, Alfred said a bigger surprise was how widely fees range from one company’s plan to the next. He said he’s seen fees average from as little as 0.2 percent per year to as much as 9 percent.
“It is woeful,’’ Alfred said. “There is no way that participants can save’’ much with fees approaching 9 percent.
The announcement comes as many companies are stepping up their contributions to employee retirement plans as the economy improves.
Boston-based Fidelity Investments recently said that nearly half of companies that had suspended their 401(k) match in July 2009 because of the recession have either reinstated the match or planned to do so within the next year. Fidelity also found that many employees who stopped contributing to their retirement accounts between late 2008 and 2009 had resumed contributions by early 2010.
It also comes as Congress is considering additional rules to force investment companies to disclose more information about the fees they charge 401(k) participants. But the Investment Company Institute, an industry association, claims the rules are unnecessary and could actually be counterproductive, because the Department of Labor is already on the verge of issuing its own rules about new disclosures.
Todd Wallack can be reached at firstname.lastname@example.org.