The Harmonized Savings Plan at BP Amoco

Posted: 5 Jul 2006

See all articles by Luis M. Viceira

Luis M. Viceira

Harvard Business School - Finance Unit; National Bureau of Economic Research (NBER)

Date Written: October 26, 2000

Abstract

SUBJECT AREAS: Capital markets, Efficient markets, Financial planning, Asset Allocation, Asset Management, Investments, Investment Management, Mutual funds, Pension funds, Performance measurement, Risk Management, Behavioral Finance, Defined-contribution pension fund design

CASE SETTINGS: Chicago, IL; Mutual fund; Petroleum industry; 1999

This case provides a vehicle to discuss the design of corporate DC pension plans, retirement savings decisions, and retail investing. This case examines the decision of BP Amoco to redesign its defined contribution pension plan for US employees after the merger of BP and Amoco in 1998. As part of the merger process, management must decide how to best accomplish the integration (or "harmonization") of the pre-merger defined-contribution (DC) pension plans of each company, which are very different in the nature and number of their investment options. The investment options in the BP plan include a large number of actively managed mutual funds, plus company stock. By contrast, the investment options Amoco plan include a few index funds specifically tailored by Amoco to reduce expense ratios as much as possible, and company stock. The success of this integration is viewed as critical for employee morale in the face of the merger. Management is also aware of the implications of DC plan design for the long-term welfare of employees, in light of the increasing reliance of employees on this type of plan to finance retirement.

Suggested Citation

Viceira, Luis M., The Harmonized Savings Plan at BP Amoco (October 26, 2000). HBS Publishing Case No.: 9-201-052; Teaching Note No.: 5-206-121. Available at SSRN: https://ssrn.com/abstract=914206

Luis M. Viceira (Contact Author)

Harvard Business School - Finance Unit ( email )

Boston, MA 02163
United States
617-495-6331 (Phone)
617-496-6592 (Fax)

HOME PAGE: http://www.people.hbs.edu/lviceira

National Bureau of Economic Research (NBER)

1050 Massachusetts Avenue
Cambridge, MA 02138
United States

Register to save articles to
your library

Register

Paper statistics

Abstract Views
1,205
PlumX Metrics