NEW YORK - Although the number and percentage of 401(k) plans offering mutual fund windows and self-directed brokerage accounts to plan participants remain relatively small, the percentage of assets allocated to these options has grown substantially in the past two years according to a new study by Buck Consultants.
The 1997 Buck survey on 401(k) plan design found that while only about 3.7% of plans offer mutual fund windows, about 36.7% of plan assets are allocated to mutual fund window account options in those plans, up from 27% in 1996. Similarly, while only 1.6% of plans offer self-directed brokerage accounts in their 401(k) plans, about 16% of assets are allocated to brokerage accounts in the plans which offer the option, according to Buck. This is virtually unchanged from last year.
Other findings include:
* 401(k) plan participation rate slipped slightly, to 77% in 1997 from 78% in 1996.
* Plans providing a company match dropped noticeably, to 88% in 1997 from 91% in 1996.
* The use of a cash-matching amount for participant contributions dropped to 77% from 79%.
* Most plans (97%) offer at least one equity investment fund.
* Sixty-one percent of plans provide daily valuation, up from 53% in 1996.
* Ninety-six percent of respondents offer four our more investment vehicles. Growth stock funds were the most common option, offered by 72% of employers in 1997; followed by balanced, 67%; growth and income stock, 62%; and stable value funds, 62%.
There was a moderate shift in the average allocation to several asset classes in 1997.
Assets allocated to equity index funds increased to an average of 16.3% from 15%, and the percentage of assets allocated to company stock declined to 26.5% from 31% the year before.
The percentage of assets allocated to stable value funds decreased to 28.4% from 34% in 1996, while the percentage of assets allocated to money market funds declined to 11.1% from 14%.
The average number of investment options for plans with 15 options or fewer is 7.5 in 1997, compared with six in 1996.
The national survey, based on responses from 668 employers with 401(k) plans, also found 92% have taken steps to educate participants about investments and savings principles - up from 87% in 1996. A majority, 60%, of employers surveyed began their education efforts because employees were asking for more information.
The survey also found that plans allowing participants to make daily changes in investment elections to existing account balances rose to 61% this year, up from 53% last year and 28% in 1994. The number of employers allowing employees to change investment elections on future contributions every payroll period rose to 58%, from 40% in 1996 and 20% in 1994.
