By Mark Miller
Dec 20 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
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 86.28 from 86.66 a year earlier. "Their plan didn't
really get worse," Alfred says. "The field is just getting much
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
That must explain why the airline's pilots have that
legendary in-flight sense of humor.
The author is a Reuters columnist. The opinions expressed
are his own.