PRINCETON, N.J. - Benefits managers say employees are better prepared for retirement than they were previously, but believe most employees still lack a good understanding of important factors affecting retirement and savings plans, according to a new Merrill Lynch study.
Merrill Lynch's Eighth Annual Retirement and Financial Planning Survey of Employers found in 1996 that 77% of benefits managers said employees were "very well prepared" or "somewhat prepared" for their eventual retirement compared with 64% in 1995.
Fewer than 40% of employees have a good understanding of the important factors affecting retirement and savings. The best understood factors and concepts were the effect of inflation on savings (40%) and diversification (39%), while the least understood were asset allocation (30%) and dollar cost averaging (27%).
The percentage of employees who say they feel very knowledgeable about choosing investment options decreased to 50% in 1996 from 67% three years ago.
Although benefits managers say their firms match just more than one-third of the dollars contributed by employees to 401(k) plans, only 15% of employees contribute the maximum amount to their plans.
403(b) growth slows a bit
PURCHASE, N.Y. - Total assets of 403(b) retirement savings plans are projected to grow at an average annual rate of 10% to 11% over the next five years, according to a report of the 403(b) market by Diversified Investment Advisors. That growth rate is slightly below the 12% annual rate of the past five years.
The report said more than 75,000 non-profit organizations sponsor 403(b) plans and said total assets as of year-end 1995 were $330 billion.
Among other findings:
Although guaranteed and fixed-return investment products constitute the lion's share of 403(b) assets, the mix has moved to greater use of mutual funds and other variable or market-valued investment options in recent years.
Plan sponsors are demanding increased service for their plan administrators and their employees. Consequently, plan executives want knowledgeable retirement plan representatives, both locally and at the home office, who can provide outsourcing functions for their 403(b) plans.
High-quality service to participants is the most important selection criterion for not-for-profits, according to respondents at 83% of organizations polled. The category includes all contact between the service provider and participant, from communications material disseminated at open enrollment meetings to the reporting of investment returns and account balances.
The study was conducted by Access Research on behalf of Diversified.
Merrill offers outside funds
PLAINSBORO, N.J. - Merrill Lynch Group Employee Services' bundled 401(k) program for small companies has started offering outside mutual funds to its bundled clients.
In addition to its proprietary funds, Merrill will offer a total of 15 outside funds from MacKenzie Ivy Funds, Massachusetts Financial Services, John Hancock Funds Inc. and Oppenheimer Funds representing major asset classes.
Fidelity buys McQuade
BOSTON - Fidelity Investments acquired McQuade Inc., a small actuarial consulting firm, allowing Fidelity for the first time to offer retirement plan and benefits outsourcing consulting services.
The consulting services will be integrated into a new business unit to be formed by Fidelity within its Institutional Retirement Group.
T. Row Price expands offerings
BALTIMORE - T. Rowe Price Investment Services Inc. has enhanced the services it provides to midsized defined contribution plans by offering record keeping for company stock and an expanded menu of external investment funds.
Self-directed brokerage services also will be added soon, according to a company spokesman.
Plans with 200 to 1,000 employees and assets of up to $30 million also will have access to improved participant education and outsourcing services including enrollment, loans, changes in deferral amounts and distributions by telephone.
Pru extends DC program
NEW YORK - Prudential Investments has extended its bundled defined contribution program, PruArray, to include businesses with less than $1 million in plan assets.
Small plans will have access to most of the same services available to larger plans using PruArray, including full-service record keeping, communications and an array of investment options including Prudential's proprietary funds as well as several outside funds.
PruArray will offer access to funds from Oppenheimer Funds Inc., Zurich Kemper Investments Inc. and Zweig Securities Corp. Additional funds from Alliance Fund Distributors Inc., Massachusetts Financial Services and PIMCO Funds are expected to become available later this summer.
PruArray for small businesses will be available through Prudential Securities financial advisers and PRUCO registered representatives nationally.
