A growing number of service providers are offering, through the Internet, online transactional capabilities and other features giving participants direct access to their accounts.
Led by Fidelity Investments, defined contribution service providers are expanding Internet capabilities to the 401(k) market.
More than 2 million participants from 1,000 defined contribution plan clients of Fidelity Investments already have Internet account access, including account management capabilities. And Fidelity said an additional 1,000 clients with 401(k) and 403(b) plans are expected to add Internet service by the end of this year.
The Vanguard Group of Investment Companies, Valley Forge, Pa., began offering full Internet transaction capabilities to clients who want it last month.
New York Life Benefit Services Inc., Norwood, Mass., began offering plan participants using its bundled 401(k) services access to their accounts in May.
The NYL Participant Access program provides online access to about 270,000 participants, who may review or change portfolio investments and contributions.
Participants in the NYL program also may model and apply for loans and calculate projected retirement benefit, all presented with a graphical interface.
Metropolitan Life Insurance Co., New York, announced last month the introduction of a fully transactional Internet World Wide Web site for 401(k) plans.
Transaction ability new
Many major vendors - including Fidelity; Vanguard; Merrill Lynch Group Employee Services, Princeton, N.J.; State Street Global Advisors, Boston; and T. Rowe Price Associates Inc., Baltimore - have been offering clients online access to account information for several months. But most have not yet started offering broad-based transactional capabilities.
Internet technology brings participants a wide variety of specific data concerning their plans, investment options and investment performance in a concise, graphical and straightforward fashion.
Fidelity executives believe the Internet will revolutionize the delivery of 401(k) services and begin to replace voice-response systems with low-cost online capabilities.
Plan participants now are using Fidelity's NetBenefits service to check account balances, including quotes on positions owned, total market value, vested balances and asset allocation charts.
Additionally, they are able to review 90-day transaction histories and fund performance, obtain information on loans and withdrawals as well as conduct online investment exchanges.
Vanguard is set to begin rolling out a similar service to companies and non-profits with a participant base of 1.7 million, for whom Vanguard provides record-keeping services.
T. Rowe Price is testing its planned Internet service with a select group of 30 plans before offering it to all clients.
Employees test system
Shelton Unger, Vanguard's principal-institutional investments, said Vanguard has offered online access to account information for the past year and is testing its new online transaction service internally with Vanguard employees who participate in the Vanguard 401(k) plan.
The online transactions will be offered to Vanguard record-keeping clients individually, she said. Each client will be contacted to see if they want to "turn on" the transactional capability.
Ms. Unger also said she does not anticipate an increase in transaction volume with addition of Internet service. It supplements the traditional voice-response system to gain access to accounts or modify investment option packages.
She said already nearly 15% of Vanguard's total client interactions are done via the Internet. That includes requests for information, e-mail and other online inquiries.
Lucent Technologies Inc., Murray Hill, N.J., added Fidelity's Internet transaction services in April for its $9 billion management 401(k) plan. The plan has 10 active investment funds, six of which are Fidelity options. Fidelity also serves as record keeper.
Accounts checked at Lucent
Tony D'Andrea, director-capital accumulation plans, said Lucent employees are using the Fidelity online service nearly 1,700 times each day. Most of the hits are to check account information, followed by account transactions, said Mr. D'Andrea.
He noted transaction volume hasn't increased with the addition of the Internet service. Transactions have remained steady, at two to three per participant per year, even though daily moves are possible.
"It doesn't encourage (participants) to make changes. The point is that these are long-term retirement savings but we offer daily valuation. The idea is to help move people from savers to investors. We believe that by offering this new online process, we want to do whatever we can to help people become more informed investors," said Mr. D'Andrea.
He said the introduction of Internet transaction and information technology to Lucent plan participants eventually might rival the use of traditional voice-response systems. He acknowledged, however, Lucent has a higher concentration of computer literate people than many other companies.
"We believe in it and the company believes in it. We feel our employees should be on the leading edge of what's available to them," he said.
He said the Internet capabilities being developed and implemented now might be a generational function. "As people become more computer and Internet literate, it will lower the cost (of providing 401(k) services) and as for the next generation, this is what they will know and understand."
Revolutionizing service delivery
At Fidelity,"we believe the positive response to this service is the beginning of an emerging trend that could potentially affect millions of American workers who participate in their employer-sponsored retirement plans," said Bob Reynolds, president of Fidelity Investments Institutional Retirement Group.
"Use of the Internet will revolutionize how we deliver services, offering around-the-clock access to accounts and providing an additional dimension on-screen."
Peter Smail, president of Fidelity Institutional Retirement Services Co., said it would be reasonable to expect transactions to increase once the online transaction capability is added to existing account data files.
"It is too early to tell for certain whether transactions will increase, but following the introduction of voice response, we did see an increase in transaction activity," said Mr. Smail.
He said Fidelity is "moving aggressively" with its Internet strategy and will continue to offer phone access, voice-response as well as Internet transactional capabilities to participants.
"We want plan participants to interface with us in the manner most convenient for them. . . . The more awareness we can give participants, the more they will interact with their accounts. The Internet statement on demand will revolutionize the way we will deliver services," said Mr. Smail.
Ford to use the Internet
Lee Mezza, manager of North American compensation and benefits at Ford Motor Co., Dearborn, Mich., said Ford soon will implement Fidelity's Internet transaction service for hourly and salaried 401(k) plans - with combined assets of $8 billion.
Ford employees have had access to on-line account information through Fidelity since January, he said.
Online transactions will supplement the current voice-response and toll-free phone systems and will provide an additional tool for participants in managing their accounts and making asset allocation shifts among Ford's 62 investment options, he said.
Mr. Mezza said he does not expect an increase in account transactions with the Internet access.
"It won't replace the voice-response system in the near term, but I believe it (the Internet) will assume a larger and larger share over time.
"From a participant perspective, the information is well presented, and you can do the research yourself. The data is there, readily available 24 hours per day," he said.
