Many industry experts predict increased use of the Internet will help to make participant investment education more effective and efficient.
"There's a lot of focus on education, but it is not very efficient yet," said Michael Sternklar, principal in charge of outsourcing services for Kwasha H.R. Solutions, a unit of PricewaterhouseCoopers LLP, Fort Lee, N.J. "Service providers are producing bigger and bigger booklets, which are going into the recycle bin."
The new issue, he said, is how to use technology for things beyond distributing education, he said.
"Blanketing employees with information is useless," said William F. Shaw, vice president of MFS Investment Management, Boston. "Over time, the Internet will supersede print."
He sees widespread computer conferencing and online meetings in the not-so-distant future.
About 52% of plan sponsors provided some sort of self-study education by way of either the Internet or Intranet in 1998, up from only 31% the year before, a survey by the Profit Sharing/401(k) Council of America shows.
The idea is to use the Internet to help employees make better decisions about their retirement, Mr. Sternklar said. More employers are providing Internet access at work through kiosks, he said.
"The trend will be for more online functionalities and more information online," he said. "We have over 1 million people who use our website."
Fairly soon, participants will be able to point and click on the information they are most interested in, Mr. Sternklar said.
"There will be real online financial education, financial planning and, still way out, real financial advice," he said.
Yet even computer-experienced employees still want paper documents.
An in-house survey of IBM Corp. employees found that while more than half use the Internet, 90% still want a hard copy of the pension plan newsletter.
Investment education for defined contribution plan participants has improved, but "it has a long, long way to go," said David Blitzer, chief investment strategist for Standard & Poor's, a division of The McGraw-Hill Cos., New York.
The most significant impediment to the goal of having an investment-savvy work force is the difficult-to-reach segment of less educated, less well-paid employees, Mr. Blitzer said.
These people want someone to tell them where to put their money, he said. But so far, most companies are opting to tell employees how to invest (investment education) as opposed to where to invest (investment advice).
Only about 17% of plan sponsors offer outside investment advisory services, although 10% plan to do so in the next 12 months and another 37% indicated they would consider providing advice in the future, according to a survey by Hewitt Associates LLC, Lincolnshire, Ill.
The top reason for not providing advice is uncertainty about how to do so given current regulations, Hewitt's survey indicates. The second most cited reason is cost.
Yet plan sponsors feel pressure to create investment-savvy employees because the 401(k) plan often is the primary, or sole, retirement plan.
According to the Hewitt survey, a 401(k) is the primary retirement plan for 41% of workers. A survey by Fidelity revealed only 50% of participants nearing retirement have a defined benefit plan and many do not have significant outside savings, said Kathryn Hopkins, executive vice president of Fidelity Investments Institutional Services Co. Inc., Boston.
Minding the gap
One investment education tool plan sponsors increasingly are providing to participants is a calculator to do "gap analysis," or calculate how much money they will have at retirement.
"Nine months ago a number of companies were fighting getting that specific," Mr. Sternklar said. "Few plan sponsors were offering them to their employees. Eighteen months from now that will be the norm."
One key trend that takes advantage of a company's Intranet or Internet access will be online workshops, said William J. Arnone, partner at Ernst & Young LLP, New York.
"Companies will put workshops online, where people could do the workshop any time, any place," Mr. Arnone said. "People are doing it now in a primitive way."
While there will be lags in some industries and with some groups of employees, most companies will move to "web-enable their work force," Mr. Arnone said.
Online, people could ask e-mail questions or see the e-mail questions of others, Mr. Arnone explained.
"We could educate people on a much more personalized level," Mr. Arnone said. Personalized education works better than generic education, he added.
One trend is getting people's real account data integrated into these online retirement tools, said Dirk Quayle, executive vice president of Business Logic Corp., Chicago.
"The next frontier is bringing data in from users' other accounts, like brokerage accounts," he explained. "What we are trying to do is easily bring aggregated data from other sources. It's not going to happen overnight."
Participants in this brave new world could benefit from so-called "screen scraping." In this process, participants give their providers all their user identification names and passwords and the software collects the financial data from all online sources, including brokerage and stock option information, Mr. Quayle said.
What will make this possible is standardizing how data moves around the 401(k) industry, he explained.
"Some pieces are in place and others are coming soon," Mr. Quayle said.
The `human' touch
Some providers are focusing on a more human touch. Aetna's new approach is to start with a seminar with between 20 and 30 participants run by licensed financial planners. These two-hour meetings are conducted at the work site and review the basic elements of investing, estate planning and financial planning, said Joan M. Roby, managing director of financial education with Aetna Retirement Services Inc., Hartford, Conn.
"A lot of people are saving, but they are not diversified," she explained.
Following the workshops, the participants are given homework in the form of workbooks and exercises. Then they are invited to use Aetna's health check software, a financial planning tool. If they still have questions, they can bring their spouses to a one-on-one financial planning session.
According to a limited Aetna survey, about 60% of non-participant employees who attended the seminars enrolled in their company's 401(k) plans and 8% increased their deferral percentage, Ms. Roby said. Close to 58% moved into new funds, she said.