For major energy firms, finding and retaining qualified employees is almost as challenging — and important — as finding and producing oil and natural gas.
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Devon Energy Corp. this month launched a radically different retirement benefits plan designed to lure and keep new employees in an extremely tight labor market.
"In the energy industry, everybody's trying to retain or steal employees,” said Dudley Hyde, a veteran employee benefits attorney who helped Devon develop the new benefits plan.
Devon, under the new plan, contributes heavily to employees' retirement funds even if the employee contributes nothing. The company adds from 8 percent to 16 percent of each employee's total compensation into a 401(k) fund, depending upon years of service.
"I'm not aware of any employer in Oklahoma that makes employer contributions of this size without the employee being required to put some money in,” said Hyde, a shareholder with the Oklahoma City law firm of McAfee & Taft.
Devon expects about 57 percent of its current work force will be eligible for retirement in the next decade.
Devon also matches dollar-for-dollar employee contributions of up to 6 percent of each employee's total compensation. For a 15-year employee, annual company contributions can total 22 percent of total compensation.
The new "super 401(k)” plan, designed to be revenue-neutral for the company, replaces Devon's traditional pension plan for new employees and for any existing employee who chose to switch before Jan. 1.
In exchange for its generosity, Devon exerts greater control over how employees can invest those funds. Under the new plan, workers must use "target date” funds that are designed to move funds in increasingly conservative investments as workers near their retirement "target.”
For instance, a 30-year-old worker might chose to invest in a fund targeted at year 2045. If the worker wanted to be more aggressive with his portfolio, he could switch to a later target year. A conservative investor might target an earlier year.
The new plan forced a decision upon more than 3,000 U.S.-based Devon employees, who had to choose whether to stick with the traditional pension plan or switch to the super 401(k). The decision was nearly immediate and irrevocable.
"It was something you needed to be pretty intentional about considering,” Devon spokesman Chip Minty said. "There's a lot of money at stake there.”
The company provided online calculators and other information to help employees consider scenarios.
"There was some water-cooler talk,” said Minty, who like most Devon employees opted to stick with the pension plan. "We were absolutely pleased to have the option.”
Dee Jerome, Devon manager of compensation and benefits, said younger employees' attitudes about traditional pension plans are different from those of older workers. That change prompted many of the features offered in the new plan, Jerome said.
"We thought the new work force today would appreciate a defined contribution plan much better than a pension-type plan where they could see a pot of money accumulating annually,” Jerome said. "One of drivers of our new work force is that something like that is portable. Once they become vested in it, they can take it with them from company to company.”
At the same time, the new plan rewards longevity, Jerome said.
Other companies have taken notice of Devon's plan, Jerome said.
"We beat our competition in that regard,” he said.
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Dee Jerome
Devon's ‘Super 401(k)'
Devon Energy Corp. contributes up to 22 percent of an employee's total compensation to a retirement plan. The company puts in from 8 percent to 16 percent, even if the employee contributes nothing.
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