I’ve been lamenting the fact that pension plans are starting to fall out of favor with many companies and just recently Devon Energy announced they’d be replacing their traditional 401(k) and pension plans with something they’re calling a Super 401(k). The Super 401(k) would take some control out of the hands of employees but in return they would get a 22% match for a 6% contribution. Is giving up control worth the extra money? Do employees really have much of a choice?
To the first question, it’s not that bad because it looks like the Devon Energy plan will be using Fidelity Lifecycle funds, which isn’t a bad choice. Lifecycle funds are riskier when you’re young, relying on growth for appreciation, and then conservative when you’re nearing retirement, leaning more towards income generating investments. So, the control, which is more akin to a pension than to a 401(k), doesn’t seem like a big deal.
Do employees have a choice? At Devon Energy they do, but maybe not so in the future. We might be seeing more Super 401(k)s.
For more information, you can read up about the Super 401(k) on Business Week.