12-20...Reuters...List of top retirement plans...

[Ky.BrownBourbn]

List of top retirement plans has Southwest pilots flying high



By Mark Miller
Tue Dec 20, 2011 5:01am EST

Dec 20 (Reuters) - Southwest Airlines pilots are now free to retire about the country. That's because they have the nation's best 401(k) plan.
Brightscope, which rates and ranks 401(k)s, released its third annual yearend rating of the 30 best large plans today. The Southwest Airlines pilots' plan took top honors this year, rising two spots compared with last year's list.
Brightscope's ranking system crunches more than 200 data points to simulate a 401(k) plan's effectiveness at getting plan participants to retirement, and its annual top 30 list serves as a cautionary reminder that all 401(k) plans are not created equal.
If you doubt it, look up your own plan (for free) at the company's website, which tracks nearly 50,000 plans and spans more than 30 million workers. There you will find a simple numerical score, based on analysis of the annual audit reports all plans file with federal regulators, and data provided by plan sponsors and record-keepers. You'll find tremendous variation in key success factors, including plan cost, employer generosity and the quality of investment choices.
This year's top 30 list underscores some positive trends in workplace retirement plans as companies rebuild from the crash of 2008-2009. The average Brightscope score among the top 30 increased three-quarters of a percentage point, and plan improvements made it more difficult to keep a spot on the list, says Mike Alfred, Brightscope's CEO and co-founder.
Seven plans are new to the list, mainly reflecting the rising competitiveness among large employers. The newcomers include Wellington Management Co., Deloitte, Bristol-Myers Squibb Co., BASF , Ernst & Young, Google and Vanguard. Meanwhile, IBM's 401k Plus Plan, which Brightscope singles out as a best-practices plan, slipped ten slots to number 22 - even though its overall rating only slipped to 84.7 from 86.2 a year earlier. "Their plan didn't really get worse," Alfred says. "The field is just getting much more competitive."
Brightscope's findings come in the wake of other reports indicating movement among plan sponsors to improve 401(k) plans. A recent survey by The Plan Sponsor Council of America (PSCA) found an unprecedented shakeup of plans, with just under 64 percent reporting that they had changed their investment line up in the past year.
The pace of change likely will accelerate over the next few years as plan participants receive and digest new quarterly statements that reveal more information on plan fees and investments. The new statements are mandated under U.S. Department of Labor rules that take effect next year aimed at improving transparency for participants and plan sponsors.
Fees already are falling among the largest plans, Brightscope reports. The 2011 top 30 had average total plan cost of 0.61 percent, five basis points lower than a year ago. By contrast, average total plan cost for all Brightscope-rated plans was 1.55 percent, and 0.87 percent for all plans with assets over $100 million.
The biggest single factor that won plans a spot on this year's top 30 list was funding levels - whether savings by participants or matching contributions. "Across all these plans, you see employees saving more than average and employers who are more generous than average," Alfred says.
That said, it should come as no surprise that a full 50 percent of the companies on this year's list are in the healthy energy and pharmaceutical industries; another 17 percent were financial services companies.
More broadly, employers are restoring matching contributions that were cut at the bottom of the economic crisis. The PSCA survey found that half of plans that suspended their matching contribution in the last four years have fully restored it; among all plans, 66.7 percent have maintained their matching contribution.
For Southwest's pilots, the number-one ranking means their plan "gets average plan participants to retirement faster than any other 401(k) plan in the country," says Bryan Lorenz, Brightscope's vice president of data. "A participation rate of nearly 100 percent as well as the highest combination of company generosity and salary deferrals contributed to this outcome."
That must explain why the airline's pilots have that legendary in-flight sense of humor.
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The author is a Reuters columnist. The opinions expressed are his own.

 

[Ky.BrownBourbn]

Fire away....

KBB

 

[Smarta$$]

The main driver of the rating was the average plan balances per participant. You have a number of things working in your favor here that make it a highly rated 401k plan.

You have a plan for pilots only, not all SW employees, which means you negotiated a higher company match than the rampers and bag smashers. You have very high pay which enables you to put away a lot of your own money. You have no other retirement funding by the company, so your pilots must allocate a very high percentage of their salary to the fund, which increases its ranking with brightsource.

So your high ranking was based primarily on high savings rates and a solid company match.

Good job. The trends are improving somewhat.

 

[JumpJetter]

PS rampers....and all the other unionized folks have the same 9.3% match....I think ;-)

 

[Smarta$$]

OK, same match, different 401k plan. The fact that the plans are seperated from one another means that ONLY high paid pilots contribute to the plan. That one fact, in itself is largely responsible for the high ranking.

 

[SWA Bubba]

The main driver of the rating was the average plan balances per participant. You have a number of things working in your favor here that make it a highly rated 401k plan.

You have a plan for pilots only, not all SW employees, which means you negotiated a higher company match than the rampers and bag smashers. You have very high pay which enables you to put away a lot of your own money. You have no other retirement funding by the company, so your pilots must allocate a very high percentage of their salary to the fund, which increases its ranking with brightsource.

So your high ranking was based primarily on high savings rates and a solid company match.

Good job. The trends are improving somewhat.

Not really true, smarta$$. The most ANY person in the country can contribute to a tax-deferred 401(k) is limited by law. It generally goes up a little each year (not always) to keep up with inflation. For 2012, I believe it's gonna' be $17,000 for less-than-fifty-year-old employees. For 2011, I believe it was $16,500. Lots and lots and lots of companies' employees (certainly all the major airlines) can max out every year. Making lots of money is certainly nice, but even if I put 50% of my salary in my 401(k), I'd just max out and hit the limit earlier. I personally have always contributed 15% per month, and even maxed out as an FO before the year ended. It should be easy for any airline's captains (and FOs if they're willing to contribute 15 or more percent) to max out. So other airlines start with the exact same amount of money that we do. SWAPA's 401(k) is just a great plan on its own for lots of reasons.

While it's true that SWA's pilots have their own 401(k) plan (administered by SWAPA), every other employee uses the company-administered plan, and to the best of my knowledge, they all get the same 9.3% match that we do. As you pointed out, that IS a solid match.

Also, there ARE other retirement plans funded by the company. Every employee receives profit sharing after their first year. In the "good old days," it was as much as 20% or so, but lately, it's been 5-8%. That's another 5-8% of whatever your total years' compensation was, put into another, different, tax-deferred retirement growth vehicle (again, funded by the company). More "free money." There's only one profit-sharing plan for all employees, and it's administered by the company (no separate SWAPA version).

There's a few other plans, but the two above are important in that they're qualified plans. The others are things like Tophat, 403, etc., which basically allow you to defer part of your salary (tax-deferred as well) until retirement. These plans are unqualified however (meaning that if the company goes BK, you're just another unsecured creditor), and they generally only apply to captains who fly extra, or really hard-charging FOs. I think you need something like $245k to qualify for these.

And of course, while not a retirement plan per se, there's also an employee stock purchase plan. This allows any employee to put up to 10% of their income to buy SWA common stock at a 10% discount of the FMV at day of purchase.

Finally, they also issue you a pretty piggy bank to save your change in. Southwest really, really wants you to be ready for your retirement.

Bubba

P.S. OK, I made up the piggy bank part, but the rest of it is true.

 

[labatt]

Your part about the "piggy bank" is correct. The SWA Credit Union pays 4.0% APR on checking, up to $25,000. I can't find a better deal on checking anywhere.

When you add it all up, it's a rather impressive package. Very grateful to be onboard.

 

[dashocho]

Piggy Bank

Bubba, your piggy bank comment is part true. While they don't give on to us, my newborn son did get one a year and a half ago. Piggy SWA plane is what it was.

 

[Hpilot]

And this is why we have captains at US Airways trying desperately to get hired at SWA.

As one captain at a commuter I used to fly at put it, "if I can't get hired at Southwest I'm going back to running night clubs, they're the only airline left worth working for." He got hired in 2002 I think.

 

[Smarta$$]

Not really true, smarta$$. The most ANY person in the country can contribute to a tax-deferred 401(k) is limited by law. It generally goes up a little each year (not always) to keep up with inflation. For 2012, I believe it's gonna' be $17,000 for less-than-fifty-year-old employees. For 2011, I believe it was $16,500. Lots and lots and lots of companies' employees (certainly all the major airlines) can max out every year. Making lots of money is certainly nice, but even if I put 50% of my salary in my 401(k), I'd just max out and hit the limit earlier. I personally have always contributed 15% per month, and even maxed out as an FO before the year ended. It should be easy for any airline's captains (and FOs if they're willing to contribute 15 or more percent) to max out. So other airlines start with the exact same amount of money that we do. SWAPA's 401(k) is just a great plan on its own for lots of reasons.

While it's true that SWA's pilots have their own 401(k) plan (administered by SWAPA), every other employee uses the company-administered plan, and to the best of my knowledge, they all get the same 9.3% match that we do. As you pointed out, that IS a solid match.

Also, there ARE other retirement plans funded by the company. Every employee receives profit sharing after their first year. In the "good old days," it was as much as 20% or so, but lately, it's been 5-8%. That's another 5-8% of whatever your total years' compensation was, put into another, different, tax-deferred retirement growth vehicle (again, funded by the company). More "free money." There's only one profit-sharing plan for all employees, and it's administered by the company (no separate SWAPA version).

There's a few other plans, but the two above are important in that they're qualified plans. The others are things like Tophat, 403, etc., which basically allow you to defer part of your salary (tax-deferred as well) until retirement. These plans are unqualified however (meaning that if the company goes BK, you're just another unsecured creditor), and they generally only apply to captains who fly extra, or really hard-charging FOs. I think you need something like $245k to qualify for these.

And of course, while not a retirement plan per se, there's also an employee stock purchase plan. This allows any employee to put up to 10% of their income to buy SWA common stock at a 10% discount of the FMV at day of purchase.

Finally, they also issue you a pretty piggy bank to save your change in. Southwest really, really wants you to be ready for your retirement.

Bubba

P.S. OK, I made up the piggy bank part, but the rest of it is true.

I think you missed the point. SWA pilots can easily max out their 401k plans and still have plenty of money left over for living an upper middle class life. MOST people cannot do that. If you gave the EXACT same "pilots" 401k plan to a bunch of teachers making 45k, the SAME plan would rate much lower because of the way the plans are measured and ranked.

I am almost shocked that you think most people in America can just "max out their 401k plan".

One of the important metrics in ranking the plans by this company is plan balances. The article clearly states that employee deferrals and company matching are the reasons for some plans having higher balances, and better rankings.

Tell me, the SWA 401k plan for other employee groups rates much lower, even with the same 9.3% match, if it is not because of the pilots segregated plan, and their high salaries, why the discrepancy.

I said it was a good plan. But the data is what it is because it is a pilots only plan(high salaries) and a good company match. Yes, it is a good plan otherwise, but those two factors are very significant to why it was rated number one.