BOSTON - Plan sponsors were modest in their assessment of their 401(k) plan service providers in a recent customer satisfaction survey by DALBAR Inc.
In the overall composite rankings, not one of the vendors was rated "excellent" by large, medium, small or very small plan sponsors, although some received the highest ranking in individual categories. And relatively few service providers were even graded "very good" by their clients in the overall service composite stakes.
DALBAR surveyed 3,500 401(k) plan sponsors in December 1994, seeking to gauge their satisfaction with service providers. Plan sponsors of all sizes indicated, through their relatively low satisfaction gradings, that employee education is one area where vendors still have much room for improvement.
Plan sponsors were asked to rate their service providers on a scale from one (very dissatisfied) to four (very satisfied). "Excellent" ratings were awarded to vendors with average scores ranging from 3.75 to 4, "very good" from 3.5 to 3.74, and "good" from 3 to 3.49.
The composite rating comprises a combination of the ratings given by sponsors to the overall value of service and the overall quality of service they receive from their 401(k) servicers. Only Fidelity Institutional Retirement Services Co., Boston, and the Principal Financial Group, Des Moines, Iowa, were among the top 10 service providers in all four plan size categories - the very small (fewer than 100 employees), small (100 to 999 employees), midsized (1,000 to 4,999 employees) and large (more than 5,000 employees).
The predominance of insurance company vendors as favorites among very small plan sponsors (seven were among the top 10 providers in this category) very quickly faded as plan size increased.
Mutual fund companies and benefit consultants took over the preeminent spots from the insurers in the small plan category, taking six slots; midsized plans, again at six; and large plans, accounting for seven spots in the top 10 rankings.
Predictably, big mutual fund providers T. Rowe Price Associates, Baltimore, and the Vanguard Group of Investment Cos., Valley Forge, Pa., were included in the small-, medium- and large-plan favorites in the overall composite ranking.
The only employee benefits consulting firms ranked within the top 10 were Hewitt Associates L.L.C., Lincolnshire, Ill., and Kwasha Lipton, Fort Lee, N.J., both of which serve mainly midsized and large clients.
Employee education seems to be the major source of disquiet among plan sponsors, who are otherwise reasonably satisfied with the service they are receiving from their vendors. It was the service category that overall received the lowest satisfaction marks from sponsors of all sizes, according to the survey authors at DALBAR.
Not one vendor's employee education program warranted even a "very good" rating by sponsors in the small, medium and large plan segments.
Interestingly, the survey authors found large plan sponsors cited "poor investment performance" as the major reason for making a change to their plan provider.
Midsized plans, however, said poor service was their primary driver for change.
Overall, midsized and large plan sponsors seemed happier with the investment management provided by their vendors than small and very small plan sponsors.