KANSAS CITY, Mo. - Cost is less of a driving factor in selecting a bundled 401(k) plan service provider than administrative and record-keeping capabilities, according to a survey conducted by Twentieth Century Investors.
Defined contribution plan sponsors ranked selection criteria for bundled providers in the following order: record-keeping ability, participant service, investment performance, participant communication, investment options offered, overall cost and the company's reputation.
Twentieth Century surveyed 250 human resources and financial executives from 401(k) plans with at least $10 million in assets and 1,000 employees. Based on the data, Twentieth Century introduced a turn-key bundled program for midsized plans that offers investment management, record keeping, employee education and communications.
Weiss, Peck & Greer L.L.C., New York, and American Benefit Plan Administrators Inc., El Monte, Calif., formed a partnership to provide multiemployer plans with defined contribution plan services.
Investment management options will include Weiss Peck & Greer's three lifecycle funds and its other equity and bond mutual funds. Clients will be able to offer investment options from external managers within the program. WPG also will provide employee investment education. ABPA, a third-party plan administrator specializing in union plans, will provide trust, administrative and record-keeping services.
CHICAGO - Kemper Funds Group introduced the Kemper Horizon Fund, an asset allocation fund based on the lifecycle fund model.
The new fund consists of three investment portfolios with different risk parameters. The Horizon 20+ Portfolio is the most aggressive of the portfolios, with an asset allocation of 80% equities and 20% fixed income under normal circumstances. The Horizon 10+ Portfolio maintains a 60% equity and 40% fixed income balance, while the Horizon 5 Portfolio has a 40% equity and 60% bonds mix.
For all three portfolios, equity holdings normally will be approximately 70% domestic and 30% international. Domestic holdings will be split between growth and value style equity investments. Thomas M. Regner, who now serves as chief equity portfolio strategist, will be the portfolio manager.
The lifecycle funds were introduced primarily to serve the defined contribution plan market, said Steve Radis, a Kemper spokesman, but will be available to retail investors.
NEW YORK - New York Life Insurance Co., which introduced a bundled 401(k) product for the midsized plan market in the first quarter of 1995, now has set its sights on the small plan market.
"We have distribution through our agents who have sold (insurance) to small business. Agents are asking for small group annuities for small businesses," said Alice Kane, executive vice president of New York Life. "We have to make the buy, build or rent decision."
To break into the middle-market defined contribution plan business, the firm bought ADQ, an actuarial plan design consultant and record keeper, and renamed it New York Life Benefits.
In the small plan market, an acquisition likely would be of a firm engaged in supporting distribution of the 401(k) product by financial intermediaries, Ms. Kane said.
As part of its defined contribution effort, the firm also has begun advertising its MainStay family of mutual funds, advised by subsidiary MacKay-Shields, on cable television and in print.
"The participant and the retail investor is the same person," Ms. Kane said.
In other developments, she said MainStay might introduce more international funds, possibly through an acquisition.
EDISON, N.J. - Cascade Technologies Inc., a major provider of record-keeping software for large defined contribution plan administrators, established an informational home page on the World Wide Web. The page now provides basic product and system information; expansion of the site to include online technical and end-user support is planned.
Cascade also is planning to support the delivery of defined contribution plan services to participants via the WWW. The company's latest client/server-based record-keeping system, ProCAS 2000, will provide integrated support of participant services available through the WWW site by the end of 1996, said Michael F. George, vice president-marketing.
The development will enable Cascade's software licensees - large banks, insurers, mutual fund companies and benefit consulting firms - to provide plan participants with access to account balance information as well as online transactional capabilities such as managing their investments and changing their contribution rates.
"We consider the Web just another media in which we can interface with the plan participant. Use of the Web or private online networks are just like a natural extension of what we've already been doing successfully for years with voice-response systems. It's another way for our clients to provide administrative services," said Mr. George.
LINCOLNSHIRE, Ill. - The latest survey from Hewitt Associates L.L.C. shows a marked increase in the use of technology by 401(k) plan sponsors.
Fifty-two percent of large sponsors surveyed offer daily valued record keeping services, compared with 29% in 1993 and 18% in 1991. The use of automated voice-response systems for employee inquiries and account management is also up, to 61% in 1995.
Both statistics represent a big jump from just four years ago, when most sponsors only allowed account transfers once per quarter and provided hard copy monthly summary statements.
Sponsors, in the main, aren't building their own technology to offer more sophisticated 401(k) plan services.
Ninety-one percent of plans now use an outside record keeper either exclusively or as a support to an internal system, compared with 89% in 1993 and 81% in 1991.
CLEVELAND - KeyCorp introduced a small-business version of its bundled 401(k) program, PRISM. The turnkey package provides investment management through five Victory mutual funds, managed by KeyCorp: the Diversified Stock, Special Value, International Growth, Balanced and Investment Quality Bond funds, as well as a money market option.
KeyCorp also will provide daily valued record keeping, custom-tailored education and communication materials, employee meetings and trust services for companies with fewer than 100 employees.
The program initially will be available - through KeyCorp sales staff, as well as brokers - in Cincinnati; Buffalo, N.Y.; northern Indiana; Syracuse, N.Y.; and Albany, N.Y.
VALLEY FORGE, Pa. - The Vanguard Group of Investment Cos. introduced a new education-oriented format for the mutual fund prospectuses issued to retail and institutional clients. It offers clear, jargon-free writing with many more charts and graphs than are typically found in fund prospectuses. Risk is explained in detail in plain English, rather than "legalese," said John Woerth, a company spokesman.
The new format also includes a sidebar on many pages of the report, explaining concepts and providing definitions.
For defined contribution plan participants, Vanguard has shortened the prospectus further and customized it for plan use.
Marlene Star contributed to this column.
