The largest and most dominant defined contribution service providers held on to the top spots in the annual Pensions & Investments ranking, but the top five firms in the various categories include some new names this year including Merrill Lynch Group Employee Services, Princeton, N.J., and Delaware Investment and Retirement Services Inc., Philadelphia.
Fidelity Investments, Boston, is still firmly entrenched as the single largest defined contribution service provider based on the number of plan participants covered by full service bundled and unbundled categories.
Among the top bundled service providers Fidelity far exceeded its closest competitor, Merrill Lynch, in total participants covered. At 4.8 million, Fidelity reported about 800,000 more participants than last year. Merrill covers 1.6 million participants in its bundled services, up from 1.4 million last year. Merrill, which moved into second place from third last year, was named bundled provider early this year for Wal-Mart Stores Inc., Bentonville, Ark., which has nearly 640,000 employees, and will begin accepting deferrals later this year in its new 401(k) plan.
Rounding out the top five bundled service providers is Principal Mutual Life Insurance Co., Des Moines, Iowa, with 1.5 million participants and 27,000 total plan sponsors; Vanguard Group of Investment Cos., Malvern, Pa., with 1.3 million participants and 546 plan sponsors, and Aetna Inc., Hartford, Conn., with 1.1 million participants and 30,064 plan sponsors. Vanguard slipped to the fourth position among bundled providers from second place a year ago.
One new name appears among the top five defined contribution investment management and record keeping providers. Delaware Investment & Retirement Services, Philadelphia, jumped all the way to the fifth position from 15th a year earlier.
Delaware covers more than 2 million participants with 7,177 total plan sponsors, compared with 615,000 participants and 6,555 plan sponsors the previous year.
Mary R. Barneby, president of Delaware Investment & Retirement Services Inc., said the firm has a "nice mix" of small and large plan sponsor clients and has built on its reputation as a major service provider to a wide range of institutional clients.
"We have always had a strong institutional orientation in this firm. Our international equity product did very well this year and as a stand-alone product has put us in good stead with some larger institutional clients," she said.
State Street Global Advisors moved up to fourth place among defined contribution investment management and record keeping providers behind Fidelity, Hewitt Associates L.L.C. and Vanguard.
State Street also moved up a notch, into third behind Fidelity and Vanguard, among top providers ranked by total defined contribution assets under management. That growth comes from a record setting year in 1996, said James Phalen, executive vice president and managing director-retirement and investment services at SSgA. Mr. Phalen said SSgA attracted several large plan sponsors including Sears, Roebuck & Co., Chicago; Chevron Corp., San Francisco; Boeing Co., Seattle; and Lockheed Martin Corp., Bethesda, Md.
"It was clearly a record time period for us and unusual in terms of the very large companies which made decisions. Very often you don't have that many large companies coming in one year," he said.
Plan sponsors will continue to show strong interest in bundled services, but the bundled approach is being redefined and broadened as the business evolves, he noted.
"Bundled used to mean all the component parts - administration, communications, record keeping, trust services and investments," Mr. Phalen said. "Now that term is being redefined by the industry in response to plan sponsor needs where you can buy administration and communications and some part of your investment management. We try to sell the theme that you need an investment policy just as in a defined benefit plan and you should evaluate the investment components based on that investment policy. But now service providers are starting to offer more outside investment options as part of their bundled services."
Coopers & Lybrand shows up among the top 10 providers of defined contribution investment management and record keeping providers following its acquisition of Kwasha Lipton L.L.C., Fort Lee, N.J. Coopers has 1.5 million total participants and 550 plan sponsor clients. Prior to the acquisition by Coopers, Kwasha Lipton provided record-keeping services to 150 defined contribution plan sponsors with 750,000 participants.
Delaware also moved up to second among providers of investment management services only from third a year earlier with 2 million total participants from 68 plan sponsor clients.
Vanguard Group took over the top spot among providers of investment management services only with 2.2 million participants and 1,397 total plan sponsor.
J.P. Morgan slipped to seventh among investment management only providers from the top spot last year with a total of 600,000 participants, down from 1.2 million a year earlier, and 95 plan sponsor clients, down from 100.
Hewitt Associates, Lincolnshire, Ill., held on to the top spot among the top providers of record-keeping services after doubling the number of total participants for which it provides record keeping services to 4.4 million from 2.4 million a year earlier.
Coopers & Lybrand moved into second place among providers of record-keeping services with a 1.5 million total participants. Coopers was followed by Watson Wyatt & Co., Washington, with 800,000 participants; Northern Trust Retirement Consulting Group, Atlanta, with 730,000; and MetLife Defined Contribution Group, New York, with 686,000.