TRW's 401(k) grows up.

• Author: Steigerwald, Will
• Position: Information Management

When TRW decided to revise its stock savings plan, it aimed to cut costs and improve service. Find out how the right information technology helped it do both.

In a way, 401(k) plans are like infants. Everyone adores them and remarks about how they've grown. But few people consider that you have to continually watch them, as well as change them. In the last 15 years, we converted or changed our stock savings plan 12 times. Our biggest challenge arrived in the winter of 1992, when we had to revamp the plan to comply with the Department of Labor (DOL) requirements to implement 404(c) regulations. Along the way, we discovered another good reason for improving the plan: new information management technology that could address the needs of both the company and the plan participants.

TRW's concerns ranged over several different areas. For example, because of employee attrition, human resources spent a great deal of time communicating with both current and former employees about the plan, and it needed to streamline those efforts. Human resources also wanted to consolidate responsibilities under a central group so that it could free its field representatives from 401(k) duties.

And both finance and human resources were concerned about the large amount of paper we were using. Processing and storage were becoming big problems. The job of printing computer reports seemed endless, and the run time on many jobs was considerable, even with a powerful computer mainframe. Programming requests prompted by frequent regulatory changes added to the cumbersome processing workload. On top of all that, our investment department believed that we needed more diversity in dispensing assets. Our legal department agreed, although it focused more on the issue of investment advice. Therefore, to meet our requirements, the new plan would have to eliminate paper, cut staff in the stock savings plan office and in the field and reduce computer processing costs.

The 36,000 participants in our plan had a separate wish list. In order to make informed decisions and implement them quickly, they wanted better access to information, including more timely quarterly reports and historical data. They were also concerned about fund transfers, disbursements and loans. These were particularly important considerations for participants with larger dollar amounts, because as fund balances grow, they begin to doubt their own ability to manage their portfolios and start looking for guidance in making investment and diversification decisions.

After we settled on our needs, we began searching for vendors, a process that took about eight months. We spent much of this time listening to proposals and eventually on making on-site visits. As we visited vendors we continually asked them about their ability to automate various elements of the plan. Our only real problem was agreeing on the final choices. This required hiring a third party to help us focus on our evaluation process. For us, the most important consideration, aside from quality, was the ability to work effectively with the vendor we selected. We wanted our staff members to feel comfortable with the style, performance and work ethic of...