The 10 Top-Rated 401(k) Plans

Plans given BrightScope’s highest ratings offer generous matches and extensive investment choices.

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Generous employer matches, broad and often imaginative investment choices, and low fees are the common attributes of the nation's most attractive 401(k) plans, according to rankings from BrightScope, a firm that tracks the performance of more than 50,000 retirement plans which it says contain 90 percent of all retirement plan assets. The top 10 plans BrightScope identified for U.S. News had to have assets exceeding $1 billion to be included in the ranking.

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BrightScope identifies six primary factors in its comparative evaluations of retirement plans: total plan costs, employer generosity, investment menu quality, employee participation rate, the average amount of employee contributions or salary deferrals, and the average size of employee account balances.

In Southwest Airlines Pilots' Retirement Savings Plan, which ranks third on the list, employee contributions are matched dollar-for-dollar up to the first 9.3 percent of an employee's compensation, according to John Nordin, a Southwest pilot for nearly 28 years and chair of the committee that oversees the plan.

"That 9.3 percent figure is very magical," Nordin says, and helps explain why 98 percent of Southwest's pilots participate in the 401(k). While many companies reduced or eliminated their matches because of the recession, Nordin says Southwest's matching rate has increased from 7.3 percent three years ago.

Beyond its generous employer contribution, Nordin praises the plan for its very broad menu of investment choices. Employees can choose from 19 funds, including index funds, actively managed funds, and lifetime-allocation funds, which are keyed to participants' birth dates and similar to target-date funds. In addition, plan participants may divert up to 95 percent of their fund balances into a brokerage account at Charles Schwab and invest the funds in more diverse asset classes.

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Bayer Corp., which ranks sixth on the BrightScope list, "made no changes [to the plan] during the roller-coaster cycle of the economy," says Susan Murphy, Bayer's director of retirement planning.

Bayer matches employee contributions dollar-for-dollar for the first 2 percent of payroll, and 50 cents on the dollar for the next 4 percent. While the company does not offer matching contributions beyond 6 percent of payroll, Murphy says the average rate of employee contribution is 10 percent of salary.

This may be partly because Bayer has an aging workforce. The average age of the plan's roughly 20,000 participants (88 percent of all employees) is between 50 and 54, she says.

Another clear appeal of the plan stems from Bayer's decision to freeze its big, traditional, defined-benefit pension plan at the end of 2005. To help compensate for the loss of that benefit, Murphy explained, Bayer contributes an additional 5 percent of each employee's compensation into their 401(k) plan.

The plan, which Vanguard advises and helps manage, offers a diversified menu of investment choices. It also includes a program in which Vanguard will actually manage an employee's investment account. About 15 percent of participants use this managed account option, Murphy estimates.

The top-rated plans on BrightScope's list tend to include well-compensated workforces and employers in prosperous enterprises. For example, three oil companies made the list. However, Nortel Networks, which ranks ninth on the list, has filed for bankruptcy. "We are in Chapter 11 proceedings at this time," a company official said via email, "and it would not be appropriate to discuss" the company's 401(k) plan. BrightScope evaluates the generosity of Nortel's plan as "great."

Here is a list of the 10 plans, each plan's current BrightScope rating, and its total assets as of the end of 2009:

1. The Savings Plan of Saudi Arabian Oil Company: BrightScope ranking of 90.82; net assets $1,388,937,728.

2. Southern California Permanente Medical Group Retirement Plan: ranking of 90.13; net assets $1,691,711,872.

3. Southwest Airlines Pilots' Retirement Savings Plan: ranking of 89.61; net assets $1,605,461,760.

4. United Airlines Pilots' Directed Account Plan: ranking of 89.48; net assets $2,833,532,160.

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5. Amgen Retirement and Savings Plan: ranking of 88.83; net assets $2,034,202,368.

6. Bayer Corporation Savings and Retirement Plan: ranking of 87.54; net assets $2,873,252,096.

7. Employees Savings and Retirement Plan of Credit Suisse: ranking of 87.36; net assets $2,181,910,784.

8. BP Employee Savings Plan: ranking of 87.31; net assets $8,229,215,744.

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9. Nortel Networks, Inc. Long-Term Investment Plan: ranking of 87.24; net assets $1,623,474,048.

10. ExxonMobil Savings Plan: ranking of 86.88; net assets $18,138,716,160.

Twitter: @PhilMoeller