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It's Time to See if Your 401(k) Measures Up

Retirement: If your firm's program hasn't kept pace with those at other companies, you may be getting shortchanged. A look at five Southland plans.

October 29, 2000|JOSH FRIEDMAN | TIMES STAFF WRITER

Though Allergan's matching-contribution rate is lower than some other companies', Walton considers Allergan's overall retirement program generous, since the company also provides a defined-benefit pension and an employee stock ownership plan. Both programs are fully funded by the company.

Walton's only quibble is a common one among 401(k) participants: The company match is all in the firm's own stock.

"All the long-term employees I know are over-weighted in Allergan," he said.

Two analysts who looked at the plan menu said it could be better diversified.

Despite its name, Franklin Small Cap Growth has become a de facto mid-cap stock fund, said Mark Wilson, a financial planner with Tarbox Equity in Newport Beach. That sort of shift can happen to a small-cap fund whose success brings in a lot of new cash.

Lawrence D. Solomon, statistician for the newsletter No-Load Fund Investor, agreed that Allergan's plan could use a bona fide small-cap option.

For the Record
Los Angeles Times Sunday November 5, 2000 Home Edition Business Part C Page 3 Financial Desk 1 inches; 35 words Type of Material: Correction
401(k) eligibility--Walt Disney Co. employees are eligible to participate in the company's 401(k) savings plan after one year on the job, with a minimum of 1,000 hours of service. The waiting period was misstated in a table in last Sunday's edition.

He said the plan also could use a "plain vanilla" index choice, noting that the J.P. Morgan SmartIndex fund, as an "enhanced" index fund, can stray a bit from the Standard & Poor's 500 as the managers try to beat that benchmark.

Conexant Systems

Conexant Systems, a semiconductor component maker, has kept its plan investment menu the same since its spinoff from Rockwell International two years ago.

But the Newport Beach-based company recently added a variable match, which could pay workers at the end of each year as much as 100% on the first 4% contributed--in other words, doubling the regular match.

The variable match is based on company performance, however, and therefore isn't guaranteed.

With its immediate enrollment and vesting, Conexant's plan has plenty to offer even if an employee doesn't intend to stay more than two or three years, Tarbox's Wilson said.

Solomon said the plan has a strong menu of choices except in the small-cap area, where Franklin Small Cap Growth, again, is the only option.

QLogic

Aliso Viejo-based electronics maker QLogic Corp. broadened its 401(k) plan's investment lineup late last year, adding a large-cap value stock fund, a small-cap value fund and a bond fund.

In two years, QLogic has doubled its investment choices to 10.

Wilson said the plan offers a good mix of fund choices, though the four-year full-vesting schedule is a negative.

One investment option QLogic will never add is company stock, vowed Tim Ashcroft, vice president of human resources.

"I've gotten requests, but it will happen over my dead body," he said. "I passionately believe that 401(k) is retirement money, and you never put your retirement money in a single stock. QLogic stock has done very well [over the years], but what happens if it drops?"

Indeed, the stock, which soared more than 20-fold from the end of 1997 through the end of last year, has been taken down to less than half its 52-week high as the tech sector has floundered.

Walt Disney

Burbank-based entertainment giant Walt Disney Co. recently made several 401(k) changes, adding Fidelity Asset Manager, U.S. Equity Index Commingled Pool (which tracks the S&P 500 index) and MAS Small Cap Value Portfolio, and replacing one of its bond funds with a money market fund.

The fund choices are reasonable, but the enrollment wait--after 1,000 hour of service, or about six months--is a bit long, and the company match--50% on the first 4% invested, all in company stock--is "pretty limited," Wilson said.

Disney, for its part, said it believes it has a competitive overall retirement package that includes a defined-benefit pension.

Solomon likes the diverse investment lineup in general but said Disney also is missing a "true small-cap" option. MAS Small Cap Value, whose recent stock holdings had a median market capitalization of about $1.8 billion, could be considered a closet mid-cap fund, he said.

WellPoint Health Networks

Managed-care provider WellPoint Health Networks Inc., based in Thousand Oaks, has kept its 401(k) plan essentially the same in the last year.

Wilson views the one-year enrollment wait as too long, but he said the fund choices and company-match policy are strong. WellPoint's match of 75% on the first 6% invested works out to a maximum of 4.5% of the employee's contributions, well above the typical 3%.

Solomon said the Vanguard fund lineup makes for an ideal mix of growth and value investment styles as well as low costs, but he said he would prefer an actively managed international fund to the choice of Vanguard Total International Portfolio, an index fund.

Historically, actively managed international funds have had success beating international index funds, he said.

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Times staff writer Josh Friedman can be reached at josh.friedman@latimes.com.

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401(k) Plans: A Southern California Sampling

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