ProManage Inc., Chicago, is turning participants' inertia to its advantage.
Executives at the firm, which manages participant account assets, know it's hard to get participants to actually make the move to sign up for an asset-management service. So they've made it automatic.
Participants who want to choose their own asset allocations and investment options have to opt out of the ProManage service, explained Michael Falk, chief financial analyst.
So far, five plans with combined assets of about $80 million have hired ProManage and participation in the service is automatic, he said.
Potomac Corp., Wheeling, Ill., is one of the newest sponsors to add ProManage's service. Every active employee automatically was enrolled in ProManage starting April 1, said Mary Jo Adams, 401(k) administrator.
So far, 77% of Potomac's active employees have remained with ProManage, Ms. Adams said. "People with smaller account balances are more likely to go into it to start with."
This is the experience of Swedish American Health System, which added ProManage as a pilot program in 1999, said Tom Koelbl, vice president of human resources, who runs the 401(k) and 403(b) plans, which have a combined $88 million. The bulk of the assets are in the 403(b) plan, which has the same investment options as the 401(k).
Swedish American automatically enrolls all participants, active and non-active, in the ProManage service. Over the three-year period, 86% to 87% of participants have remained in the service, Mr. Koelbl said.
And the plan is better diversified. Before, about 55% of assets were in money market or bond funds.
"When people came on board as new employees, they signed up and never looked at it again," he said. "We're trying to help the employees be smarter investors and get a better return."