WEST PALM BEACH, Fla. - Fewer defined contribution plan sponsors considered changing their service providers or began searches in 2001 than the year before, according to a survey by 401kExchange.
However, those plan sponsors that are dissatisfied are more likely to take action this year than last year, the survey revealed.
Some 11.7% of plan sponsors surveyed indicated they plan to change service providers this year, down from 13% in 2000, said Fred Barstein. Mr. Barstein is founder and chief executive officer of 401kExchange of West Palm Beach, a web-based exchange for 401(k) plan searches that also provides industry research and service provider ratings.
Fewer "companies change because they have more important things to worry about," Mr. Barstein said.
Those that are unhappy are more likely to look elsewhere. Nearly half of all dissatisfied plan sponsors stated they were actively seeking a new service provider, compared with 40.3% who indicated they were doing so last year.
The service provider ratings system created by 401kExchange also reveals a greater degree of satisfaction this year with money managers. Under the system, managers are ranked by plan sponsors on a scale of one to five. Five means the employer would highly recommend a service provider, a four means the service provider is very good but the sponsor would not necessarily recommend it, and a three means the plan sponsor is satisfied.
Large plans happy
Larger plan sponsors - those with assets of $100 million or more - were more satisfied with their fund manager this year, with an average rating of 4.1, up from 3.6.
This is not the only survey to register plan sponsor satisfaction. According to a survey by Transamerica Retirement Services, Los Angeles, 78% of plan sponsors surveyed reported their plan is serviced by a single provider. Of those who have just one provider, nearly two-thirds, or 64%, indicated they are "very satisfied" with their provider, with another 31% stating they are "somewhat satisfied." Among the sponsors who have two or more providers, 65% reported being "very satisfied" with the primary company providing their investment portfolio, and 69% are "very satisfied" with their plan administrator.
When it comes to fees charged by fund managers, plan sponsors are sending a mixed message, according to the 401kExchange survey. Fewer plan sponsors - 6.5% vs. 8.9% last year - said they are satisfied with their fees, yet only 4.3% (vs. 5.5% last year) cited fees as something needing improvement.
Fidelity Investments was the top fund manager when ranked by number of large plan clients, with 25.1% of plans using Fidelity funds. The Vanguard Group was in second place, listed by 12.5% of the plan sponsors, followed by Putnam Investments with 7.6% and T. Rowe Price, 4.8%.
However, the rankings change when sorted by plan sponsor satisfaction. CIGNA Retirement & Investment Services, Hartford, Conn., which is in eighth place when ranked by number of large plan clients, becomes the top manager - with a 4.4 satisfaction rating. It was followed by Fidelity with a 4.2 rating; Charles Schwab & Co Inc., 4.14; Vanguard, 4.13 rating; and J.P. Morgan/American Century Retirement Plan Services, 4.
More plan sponsors noted that record keepers are doing a better job with fees, up to 21.1% in 2001 from 9.6% last year, he said.
"It's a pretty huge jump," Mr. Barstein said.
Record keeping competitive
They also are happier with the record keeping services, up to 22.6% from 18.8%, and customer service, up to 33.3% from 25.8%.
"I think it is very competitive in record keeping right now," Mr. Barstein said. "We're seeing some of that cost shifted to the fund side and a lot of record keeping given away."
This trend traveled down-market last year, he said. "Now with a $10 million plan they are waiving all kinds of fees," Mr. Barstein said.
However, fees can only be waived when the record keeper also manages money. Companies like Hewitt Associates LLC and Towers Perrin, which do not manage money, cannot do that, he said.
The record keepers with the most large plan clients also were not necessarily the most highly ranked. CIGNA took the top spot with the most satisfied customers with a 4.39 rating, and Fidelity was second, with 4.2. They were followed by American Express, 4.12; Vanguard, 4; and T. Rowe Price, 3.96.
Plan sponsors also are more satisfied with plan administration, with 19.1% noting their plan administrator is doing a good job this year, up from 9.5% in 2000.
Once again, those who are dissatisfied are more likely to search for a replacement, up to 10.8% from 9.3% in 2000, the survey said.