CINCINNATI - The Kroger Co. is using the 10th anniversary of its 401(k) plan to introduce a financial education module just for longer-term employees.
The new investment education program will be open only to employees who have participated in the $500 million plan since its inception and to employees whose current 401(k) account balance is greater than their previous year's gross salary.
Kroger will collaborate with its bundled service provider, Merrill Lynch, Plainsboro, N.J., to develop an intensive financial planning seminar, said J. Perry Conley, director of deferred benefits.
As the nation's largest grocery retailer with more than 140,000 employees, Kroger has a diverse work force. It has fairly high turnover, with many young workers unlikely to stay for a long period. The company has to be "somewhat passive about marketing the 401(k) plan to a certain segment of our employee population, those who aren't likely to stay with the company long enough to make joining the 401(k) plan worth it for them or us," said Mr. Conley.
By offering the financial planning seminars to long-term employees, he said Kroger is targeting people with a real stake in the company. "There's a real appetite among these employees for specific investment information delivered to them in a usable form. We know very well what doesn't work - a generic flyer sent to 8,000 employees that our regional units simply can't follow up on in any personal way, for example. We've done enough with the shotgun approach. We're going to use a rifle now to really zero in on employees and give them what they really need," said Mr. Conley.
Kroger won't ignore the rest of its less long-serving employees, however. The educational seminars eventually will be offered to other segments of the work force.
Bundling trend to continue
RESEARCH TRIANGLE PARK, N.C. - Midsize to large defined contribution plan sponsors will continue the trend toward the bundling of 401(k) plan services.
A survey of 301 large plan sponsors conducted by Phoenix-Hecht found 22% already use highly integrated 401(k) plan services from a single vendor or through an alliance. Such highly integrated programs include daily valuation, record keeping and at least six investment options provided by a single vendor.
Based on survey data, the Phoenix-Hecht report predicted the percentage of sponsors using highly integrated programs will rise to 50% in the next several years for plans with assets between $100 million and $1 billion. Slightly more than half of the survey respondents (52%) characterize their plans as unbundled, compared with 36% who say they use bundled services, and 6% who use a bundled approach from a mutual fund alliance.
Twenty-two percent of respondents said they definitely or possibly will change service arrangements during the next two years. Thirty-nine percent of those who would make changes said the preferred new form of service would be an alliance; 34% said they would use bundled services from a single provider; 7% said they would move to an unbundled arrangement.
Record keeping continues to be a volatile area of plan administration. Record-keeper changes were made by 15% of respondents in the past 12 months and an additional 15% said they will or possibly will change record keepers within the next 12 months. Almost one-quarter of those surveyed indicated they had considered consolidating the administration of their multiple defined contribution plans with a single provider during the previous year.
SmartChoice now available
MINNEAPOLIS - American Express Institutional Services has introduced SmartChoice, a PC-based software program for defined contribution plan investors.
The software package is designed to be customized for each client, including the specific 401(k) plan provisions and investment options offered in the plan. Plan participants can use the program to model retirement savings, including Social Security income projections. The program also allows participants to assess the impact of asset allocation changes and deferral rate changes.
American Express tested the software program with plan participants and found in a subsequent user survey that 35% of users would make a change to their 401(k) based on the results of a SmartChoice session. Of those who would make a change, 55% would increase employee contributions, while 66% would change their asset allocation.
401(k) design guide published
CHICAGO - Probus Publishing Co. has just published a basic guide to establishing 401(k) plans for new plan sponsors.
"Designing a 401(k) Plan" takes a defined contribution plan neophyte through the process of setting up or revamping a 401(k) plan in a design form that satisfies compliance requirements, as well as participants' retirement goals.
Written by two Chicago-based PaineWebber Inc. consultants, Robert A. DiMeo and Thomas R. Schneider, the handbook includes more relevant information than is typically found in how-to books of this genre. Participant behavior and psychology, for example, is discussed as a component of plan design, and sponsors are encouraged to select a plan design that will suit their individual employee base.
The cachet of selecting name-brand mutual funds that will have broad appeal to participants is also treated as part of the investment option selection process, together with more standard performance and investment style criteria.
Other sections in the book treat investment option performance measurement and benchmarking, participant communications and legal and regulatory issues in a simple, clear manner. A series of worksheets, checklists and forms help new plan sponsors get organized throughout the planning and implementation process.
