From the November 2009 issue of Treasury & Risk magazine

Bronze AHA Winner in Retirement & Benefits

Delivering Wow to 401(k) Participants:, the online seller of shoes and clothing, saw participation in its 401(k) plan jump from 19% to 39% after it revamped the plan's governance and investment lineup and instituted automatic enrollment.

Few changes had been made to the 401(k) plan since it was started in 2003, and in 2008, Zappos decided it was time to clear away the cobwebs. At Zappos, "our first core value is to deliver wow through service," says treasury analyst Scott Schaefer. "We wanted to do that internally, we wanted to deliver the wow to our employees."

The human resources department decided to start automatically enrolling new employees at a 1% deferral rate, using Fidelity's target-date funds as the default investment. (The company has not offered a match because it said it would rather use that money to fund other employee benefits.) Zappos also created an Investment Policy Statement, which put in place a plan advisory committee.

That committee assessed the plan's investment lineup, freezing additional contributions to 12 funds it decided were underperforming or redundant and adding eight funds to fill gaps in the offerings. Zappos also considered creating a non-qualified deferred compensation plan for highly compensated employees, but a survey found there wasn't enough interest. And to assess plan costs, it initiated a request-for-proposal process that is currently on hold amid Amazon's acquisition of Zappos.

The education done regarding the changes to the plan and the company's increased communications efforts have made employees happier about the plan, Schaefer says. "It seems like the overall morale regarding the plan increased substantially."


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