BALTIMORE - Defined contribution plan sponsors have a new tool to benchmark the cost of providing plan services. The 401k Provider Directory Averages Book, published by HR Investment Consultants Inc., provides average cost and service data for small and medium-size plans. A universe of the top 128 401(k) vendors was used to calculate average costs using vendor charges.
Background research found that regardless of plan size, more than 75% of the total plan cost is from investment management expenses. The book also shows a wide range of pricing exists between the low and high cost providers of identical services.
Joseph W. Valletta, a spokesman for the company, said the book was prepared in response to questions from plan sponsors. "We've taken the contents of our database and put together a benchmarking guide that anyone anywhere can consult to see if they are paying a fair rate for plan services. We've designed the book for sponsors who do not want to use an outside consultant when they are considering making changes to their plan and are reviewing the costs of their current and potential plan design," said Mr. Valletta.
LARKSPUR, Calif. - Financial Design Associates produces a quarterly newsletter for subscription by participants whose companies offer them a Personal Choice Retirement Plan through Charles Schwab Trust Co., San Francisco. The PCRA accounts are self-directed brokerage options, offering access to direct equity and bond investment, as well as to 1,300 mutual funds in Schwab's Marketplace program. Financial Design is not affiliated with Schwab.
The newsletter offers advice, at the specific request of the participant, about funds in the Marketplace program. The newsletter also provides model portfolios with suggestions for the specific funds which best meet the asset allocation of the model.
The newsletter is somewhat more technical and detailed than most designed for the 401(k) plan market. But this approach is suitable, since the participants subscribing to it are already using a self-directed brokerage account and probably have a higher-than-normal degree of investment savvy, said Paul Solli, editor. Similar quarterly newsletters are being developed for funds from Fidelity Investments and The Vanguard Group of Investment Cos., said Mr. Solli.
Financial Design also has developed a mutual fund classification and performance evaluation system with BARRA, Berkeley, Calif., for use with the funds in the Schwab Marketplace.
Financial Design also publishes a much simpler, generic 401(k) workbook and investment primer, supported by slide shows for group meetings.
Financial Design plans to jump onto the Internet and make all of its educational materials available on the World Wide Web. The connection can eliminate the need for print delivery of educational materials for sponsors with a high-tech work force.
ANNAPOLIS, Md. - Investment advisory firms which offer money management services to individual participants are gaining in popularity.
One of the original players, Scarborough Group Inc., soon will be offering its individual account management services to Ford Motor Co. employees. Detroit-based Ford will be introducing at least 50 Fidelity mutual funds to its $5 billion-plus 401(k) plan through a mutual fund window by November, confirmed John Ferguson, director of Ford's national employee services center. The newly revamped plan also will offer nine core options.
Mr. Ferguson stressed that Ford is not endorsing Scarborough. Scarborough offers individual account management services directly to employees of a number of large companies, including AT&T Co. and General Motors Corp.
Scarborough officials say they manage more than $500 million from more than 5,000 401(k) participants. The firm's assets under management has been doubling every year since 1988, said Mike Scarborough, president.
NEW YORK - Prudential Securities selected Putnam Investments, Boston, and Fidelity Investments Institutional Services Co., Boston, to provide mutual funds for a new 401(k) program called PruArray.
The program, including record keeping and administration, is geared to plans with as few as 50 employees. It includes a 24-hour toll free information phone line and a package of employee communication, enrollment and education materials. Local Pru Securities financial advisers assist in providing employee education and monitoring the program.
FARMINGTON HILLS, Mich. - Michigan National Bank hired Acumen Financial, Cambridge, Mass., to provide customized participant education for its defined contribution plan clients. Acumen will draw personal data from the bank's record-keeping system and will provide an individual report for each plan participant, setting savings goals and suggesting appropriate asset allocation.
NEW YORK - Oppenheimer Management Corp. introduced the OppenheimerFunds 401(k) for small plans with between 25 and 200 employees. Twenty diversified Oppenheimer funds will be offered within the program, some with institutional pricing available. Oppenheimer will provide employee investment education materials.
In what the two companies are calling a joint venture, Massachusetts Mutual Life Insurance Co., Springfield, Mass., Oppenheimer's parent company, will provide record keeping, compliance, trust and participant communications. Distribution and marketing will be largely through financial planners.
MassMutual's own bundled 401(k) service will continue to be offered as well.
INDIANAPOLIS - American United Life Insurance Co.'s pension division added nine investment options to its retirement program, bringing the total number of choices to 22.
Defined contribution plan sponsors may now offer participants funds from Fred Alger Management Inc., the Calvert Group, INVESCO North America, PBHG, T. Rowe Price Associates Inc., the Vanguard Group of Investment Cos. and an expanded array of funds from Fidelity Investments Institutional Services Co.
The new funds are in addition to options managed by AUL itself, Fidelity and Twentieth Century Investors Inc. within the company's bundled defined contribution plan program.
NEW YORK - Montgomery Asset Management L.P., San Francisco, was added to the 401(k) mutual fund alliance set up by Buck Consultants. Buck's 401(k) Connections alliance now includes 13 investment managers, which manage a diverse range of mutual and commingled funds and GIC options.
NEW YORK - New York Life Insurance Co. received final regulatory approval in May from the New York State Banking Department and the New York State Insurance Commissioner to form a limited purpose trust company. New York Life is the first insurance company to receive authorization to set up a trust company in New York.
The subsidiary, NYL Trust Co., initially will provide support for New York Life's bundled 401(k) program, primarily acting as trustee for plan assets. Its scope will be broadened in the future to include other trust services for institutional clients.
