BARRINGTON, Ill. -- Alternative Resources Corp. needed a hipper, "cooler" 401(k) to match its changing company style. And so, by mid-July, the $20 million plan will have new investment options and a new bundled service provider.
Everything, including enrollment meetings, will be online.
ARC executives are replacing the plan's eight funds with a set of three lifestyle funds and a menu of six core investment options.
The new core funds are INVESCO Dynamics Fund, Janus Overseas Fund, AXP New Dimensions Fund, American Express Trust Equity Index Fund II, PIMCO Total Return Fund and American Express Trust Income Fund II.
American Express Retirement Services, Minneapolis, is replacing Merrill Lynch & Co. Inc., Plainsboro, N.J., as bundled provider.
"Technologically, we were looking for a firm that could conduct outreach to our employees," said Sharon A. McKinney, ARC senior vice president of human resources.
ARC's staff of consultants provide technology management and staffing solutions to its customers. The firm has about 4,000 consultants all over the country, most of whom never report to the company's corporate offices in Barrington, Ms. McKinney explained. The company also employs about 550 people as support staff.
"It's really a virtual community," she said. "Very few work in a traditional corporate environment."
ARC also needed a new approach to the investment options offered by its retirement plan. Ms. McKinney joined the firm last year, after having worked for GE Capital Fleet Services, Stamford, Conn., as senior vice president of global human resources.
"I came in and took a look at the 401(k) plan and almost got sick," Ms. McKinney said. "It had a very, very low participation rate."
The ARC plan was "suffering and needed to be rebuilt," she said.
And consequently, she added, its asset size -- $20 million -- was modest. The participation rate was 43% overall, but less than about 30% of the tech population.
"Nobody could tell us what the strategy was," Ms. McKinney said.
To assist her in improving the situation, Ms. McKinney, herself still new to the firm, hired Joyce A. Dickerson as director of employee benefits to manage the plan. Ms. Dickerson had been benefits manager at AptarGroup Inc., Crystal Lake, Ill.
"Our strategy was to up the ante and make the benefits more valuable and more meaningful."
"We enhanced the plan by adding funds that were more attractive," Ms. McKinney said.
The old funds included Merrill Lynch Retirement Reserves Money Fund, Merrill Lynch Federal Securities Fund, Merrill Lynch Corporate Bond Fund, Merrill Lynch Capital Fund, Merrill Lynch Global Allocation Fund, Merrill Lynch S&P 500 Index Fund and AIM International Fund.
Another reason for the change was that executives at the firm wanted to save some costs
In addition, "We wanted to come up with a program that reflects our diverse population," Ms. Dickerson said. "We wanted to show that ARC is progressive in its program."
" `Webification' is just rippling through our organization," Ms. McKinney said. "Technology consultants want to work for a cool company, and you can't be cool unless you are leading edge. We were very uncool."
In an effort to enhance the benefit offering and make it more "cool," ARC became the first company to take advantage of an interactive, online education and plan information meeting offered by American Express.
The multimedia presentation has been customized to ARC. It includes an interactive video with graphics, a 401(k) website link, plan highlights, frequently asked questions and the ability to click in and out of the video to education modules in the website, said Lisa Hoene, vice president of employee education for American Express.
It is available to all employees with Internet access, 24 hours a day.
ARC might be in the vanguard of companies using the Internet for their 401(k) plans. Although the majority of plans -- 44% -- use an Internet system for plan administration, and most of these permit balance inquiries, only 5% permit online enrollment, according to a 1999 survey by the Profit Sharing/401(k) Council of America, Chicago. Moreover, only about 29% of plan sponsors provide one-on-one investment education via the Internet, the survey said.
ARC's use of online meetings and the investment strategy modeling are part of its "self-serve" approach, Ms. McKinney said. So far, however, the firm will not be providing investment advice.
Even though ARC is not out of the blackout period, executives have seen a positive response to the changes in the 401(k) plan, Ms. Dickerson said. Many participants have responded to the communication campaign, which also includes telephone meetings and techie-looking postcards with the slogan, "Are Your Dreams Y3K Compliant?"
On average, the participants who have responded to the campaign so far have elected a salary deferral rate of almost 8%. In the past, the participant base contributed an average deferral of less than 3%. The company is keeping its match of 25 cents for every dollar of employee contribution up to the first 6% in pre-tax contributions; but an increase is "on the radar screen," she added.
"We hoped to be a showcase plan," said Ms. McKinney. "I think in the end we will have greater success."
