PLANSPONSOR - September 2017 - 56

PLAN PROFILE
Fiduciary Management Model
A plan sponsor is able to address its overall investment objectives
U
ntil November 2015, the fiduciary
committee for Teradyne, a high tech
global product company, managed
its 401(k) plan investment lineup for the
3,566-participant plan. Steve Fagerquist,
vice president of human resources (HR)
for Teradyne, says, " We were managing
the plan via our fiduciary committee. We
were tasked with managing a complex
fund lineup and making investment decisions
in and out of the lineup on a macro
level while doing our full-time jobs. There
is a certain bandwidth that goes with that. "
Headquartered in the Boston area,
the 57-year-old firm has $2 billion in
revenues and operates in about 25 countries
worldwide, with the biggest business
units in the U.S. and Asia.
Fagerquist says the increase in 401(k)
plan complexity, litigation and fiduciary
regulation led the company to examine
its in-house investment expertise. " We
became aware of the rise of the outsourced
model, and the significance of the workload
we were doing as a collateral duty to
the lives of the company employees. "
After exploring numerous options,
Teradyne hired SEI, headquartered in
Oaks, Pennsylvania, as its partner, to act
as 3(38) discretionary manager overseeing
investments and 3(21) adviser for setting
the fund menu. SEI worked closely with
the firm to build a custom investment
menu strategy for its demographics, which
include many highly educated professionals,
and chose appropriate funds to
offer them that would help meet their
retirement goals at a lower overall cost.
SEI fiduciary managers use a
SNAPSHOT
PLAN SPONSOR
Teradyne
KEY PLAYER
Steve Fagerquist,
vice president of
human resources
combination of advisory and delegated
investment services to address a plan
sponsor's overall investment objectives.
Mike Cagnina, vice president and
managing director of North American
sales for SEI, gives an example: " Once it's
decided to put an international strategy
on a plan sponsor's core menu, SEI hires
multiple managers within that investment
option-we may have four or five
institutional money managers whom we
" The core lineup
offers both
passive and
active options. "
believe are best in class inside the strategy.
I emphasize 'inside the strategy' because,
for the participants that choose to invest
in that international fund, we are overseeing
those managers, hiring and firing
the managers, and re-weighting those
managers based on market conditions on
behalf of the plan sponsor, every day. "
Teradyne no longer has to directly
oversee the underlying managers, and the
plan committee does not necessarily have
to alter and disrupt its work force if an
issue arises with an individual manager.
But the switch to fiduciary management
involved more than just the
committee and SEI. Fagerquist says, " It
was a necessary and fairly complex set of
interactions between the company fiduciary
committee, recordkeeper Fidelity,
and SEI to communicate and deliver this
PARTICIPATION
RATE
95.5%
AVERAGE
DEFERRAL RATE
11.7%
big change. "
For participants, Fagerquist says,
SEI worked with Teradyne to provide
an intensive in-person, multi-site set of
presentations, as well as written communication.
" Fidelity partnered with SEI,
and us, around the written communications.
From the beginning, we knew that
communications were key to pointing out
advantages of this to the participants. "
Besides these well-managed funds,
Fagerquist says, Teradyne gained other
benefits. Under the new plan, participants
pay proportionally less in plan
administrative fees. And, as part of the
change, Teradyne took the opportunity to
re-enroll employees, with opt-out provisions,
into age-appropriate target-date
fund (TDF). Participants went from 14%
participation in TDF strategies to 57%.
The new Teradyne 401(k) plan has
13 TDFs, geared to five-year increments,
and 10 core funds. SEI manages all of the
funds except for a Fidelity stable value
fund. The funds use almost 40 investment
managers. Before hiring a fiduciary
manager, the plan had TDFs plus 18 core
funds with 14 investment managers.
" The core lineup offers both passive
and active options, " Cagnina explains.
" People may have a need for one versus the
other, and as they go in and out of favor we
don't want that recent effect to populate
only one methodology and not the other.
So it allows participants who want to build
it themselves to have the options to do so. "
Fagerquist says, " We now deliver a
better product to participants, which is our
ultimate goal. " -Judy Faust Hartnett
NUMBER OF
PARTICIPANTS
3,566
TOTAL ASSETS
$737 million
(as of August 30)
56 PLANSPONSOR.com September 2017
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PLANSPONSOR - September 2017

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