Skip to main content
MENU
Subscribe
  • Subscribe
  • Account
  • LOGIN
  • Topics
    • Alternatives
    • Consultants
    • Coronavirus
    • Courts
    • Defined Contribution
    • ESG
    • ETFs
    • Hedge Funds
    • Industry Voices
    • Investing
    • Money Management
    • Opinion
    • Partner Content
    • Pension Funds
    • Private Equity
    • Real Estate
    • Russia-Ukraine War
    • SECURE Act 2.0
    • Special Reports
    • White Papers
  • Rankings & Awards
    • 1,000 Largest Retirement Plans
    • Top-Performing Managers
    • Largest Money Managers
    • DC Money Managers
    • DC Record Keepers
    • Largest Hedge Fund Managers
    • World's Largest Retirement Funds
    • Best Places to Work in Money Management
    • Excellence & Innovation Awards
    • WPS Innovation Awards
    • Eddy Awards
  • ETFs
    • Latest ETF News
    • Fund Screener
    • Education Center
    • Equities
    • Fixed Income
    • Commodities
    • Actively Managed
    • Alternatives
    • ESG Rated
  • ESG
    • Latest ESG News
    • The Institutional Investor’s Guide to ESG Investing
    • ESG Sustainability - Gaining Momentum
    • Climate Change: The Inescapable Opportunity
    • Impact Investing
    • 2022 ESG Investing Conference
    • ESG Rated ETFs
  • Defined Contribution
    • Latest DC News
    • DC Money Manager Rankings
    • DC Record Keeper Rankings
    • Innovations in DC
    • Trends in DC: Focus on Retirement Income
    • 2022 Defined Contribution East Conference
    • 2022 DC Investment Lineup Conference
  • Searches & Hires
    • Latest Searches & Hires News
    • Searches & Hires Database
    • RFPs
  • Performance Data
    • P&I Research Center
    • Earnings Tracker
    • Endowment Returns Tracker
    • Corporate Pension Contribution Tracker
    • Pension Fund Returns Tracker
    • Pension Risk Transfer Database
    • Future of Investments Research Series
    • Charts & Infographics
    • Polls
  • Careers
  • Events
    • View All Conferences
    • View All Webinars
    • 2022 Retirement Income Conference
    • 2022 Managing Pension Risk & Liabilities
    • 2022 WorldPensionSummit
Breadcrumb
  1. Home
  2. Print
June 14, 2004 01:00 AM

401(k) Internet use falls short of expectations

Participant understanding, access remain roadblocks

Phyllis Feinberg
  • Tweet
  • Share
  • Share
  • Email
  • More
    Reprints Print

    While Internet usage by 401(k) plan sponsors and participants is growing, it has not become the hoped-for solution to handling all of the administrative and investment needs of plan sponsors and participants.

    "The Internet will never be the sole tool (for 401(k) plan activities) because people like to get information different ways," said Lori Lucas, director of participant research at Hewitt Associates, Lincolnshire, Ill.

    David Wray, president of the Profit Sharing/401(k) Council of America, Chicago, said while web availability and usage are growing, "we're a long way from its full potential."

    The main problem is that most people just don't want to use the Internet for everything, and some people can't, either because they don't know how or they don't have access to computers. For instance, many plan executives are concerned about security when making participant loans, final distributions and other similar transactions. And, many plan participants still want their quarterly statements on paper and aren't able to use the advice services.

    ā€˜Another access channel'

    "All they've done with the web is add another access channel," said Don Bartolai, who runs the defined contribution plan consulting business for Mellon Human Resources and Investment Solutions, Chicago. "A lot of companies have workers in the field who don't have access to computers."

    "The web is about participant self-service," said Mr. Bartolai. "Not everyone can take advantage of self-service."

    "The potential of the Internet, from an administration standpoint, is high," said Mr. Wray. However, he added, many people are not at a "comfort level" with the Internet that would allow it to be the "primary solution" for 401(k) plan administration.

    Mr. Bartolai pointed out that the world of the paperless 401(k) plan is nowhere near happening. "There's an intrinsic value people associate with getting a quarterly statement on paper that they can hold in their hand," he said.

    Ben Brigaman, senior vice president with Charles Schwab Corporate Services, San Francisco, noted 63% of the 450,000 401(k) plan participants for whom Schwab is the provider want to get their quarterly statements on paper, not over the web.

    Data from the most recent PSCA survey indicates that more plan sponsors are making the Internet available to plan participants, but there is still a lot of room for growth. In addition, the survey reports what services are available over the Internet, not how many participants are actually using it.

    Enrollment was one of the main areas where administrators had hoped to see benefits from the Internet. According to the PSCA's survey of 1,046 sponsors of 401(k) plans, 35.3% allowed Internet enrollment in their 401(k) plans in 2002, vs. 13.3% in 1999. While that's certainly an advance, it's not as much as plan providers had expected.

    "Signing up is a challenging issue," said Mr. Wray. "Leaving it to the Internet won't be successful in getting new hires to join the plan. You have to talk to them early and often."

    Hewitt's Ms. Lucas added: "If you're trying to get people to join a plan, you need an e-mail or paper-based communication."

    She also noted that according to past Hewitt surveys, 30% to 40% of 401(k) plan participants "are not engaged enough (or have enough interest in the plan) to use tools on the web. "If you really want to get them to use it, you may need a more proactive approach. We encourage sponsors to use other channels."

    Many expected almost all contribution changes to be made over the Internet by now, But according to the PSCA survey, 56.8% of plan sponsors permitted participants to make contribution changes over the Internet in 2002, vs. 33.7% in 1999. "Many companies have had concerns about security," said Mr. Wray, explaining why the number isn't higher.

    Ms. Lucas said Hewitt data showed only one in six 401(k) plan participants made a transaction in which they moved money between funds "in any manner whatsoever" in 2003.

    Checking balances

    Participants do use the Internet regularly for one thing, however: checking their investment balances, he said, and 89.1% of plan sponsors allow Internet balance inquiries, up from 62.9% in 1999. That's one area that "has been very successful," said Mr. Wray. "Lots of people check their balances 24/7 on the Internet, and it has cut down on calls to the human resources departments."

    Information from plan sponsors gives a mixed picture of Internet use by 401(k) plan participants.

    Jill Youmans is vice president of human resources and global benefits at Kraft Foods Inc., which has a 401(k) plan with more than $1 billion in assets and 50,000 participants. She said about 75% of 401(k) plan transactions by salaried employees are done over the Internet, compared to about 20% for hourly workers.

    The reason is obvious: "People working in plants don't have access to computers," said Ms. Youmans.

    The story is pretty much the same with Swift Denim Textiles, Columbus, Ga., which has a $101 million 401(k) plan. "We're a manufacturing company, and people don't have access to computers," said Roy Cureton, corporate human resources manager. He said about half of the work force had made 401(k) plan transactions using the Internet in 2003.

    At Atlanta-based Bell South Corp., Internet usage has been higher. Spokeswoman Leanne Hanson said that 68% of the participants in the firm's defined contribution plans, which have a combined $6.3 billion in assets, have used the Internet for at least one type of transaction in the past year.

    And it should come as no surprise that the computer-savvy employees at IBM Corp., Armonk, N.Y., use the Internet for many of their 401(K) plan transactions.

    According to corporate spokeswoman Kendra Collins, 90% of participants in IBM's $22 billion 401(k) plan use the Internet for enrollment; 91% use it to make investment choices; and 95% use it to make changes in their contribution rates. She didn't give statistics for other Internet uses.

    The large 401(k) plan providers — including Fidelity Investments, Boston; The Vanguard Group, Malvern, Pa.; and T. Rowe Price Retirement Plan Services, Baltimore — report high Internet use among the 401(k) plan participants for which they are provider.

    Tim Buckley, chief information officer for Vanguard, said 99% of the firm's 3,200 401(k) plan sponsor clients have access to the Internet and 75% of all asset allocation and contribution changes are done online.

    Fidelity's NetBenefits website for plan participants has 500,000 unique visits per month, meaning no more than 5% of participants are using it. Fidelity has 12,000 401(k) plans as clients, accounting for 8.6 million participants..

    Recommended for You
    Read the print edition of P&I
    Read the print edition of P&I
    How low is low? Projections say it's not low enough
    How low is low? Projections say it's not low enough
    FINRA honors Wharton's Olivia Mitchell with Ketchum Prize
    FINRA honors Wharton's Olivia Mitchell with Ketchum Prize
    Strong Demand Drivers Underpin Private Credit
    Sponsored Content: Strong Demand Drivers Underpin Private Credit

    Reader Poll

    June 6, 2022
    SEE MORE POLLS >
    Sponsored
    White Papers
    Nearing the finish line: Ideas on end-state investing for corporate DB plans
    The Meaning of "Portfolio Intelligence"
    Credit Indices: Closing the Fixed Income Evolutionary Gap
    Forever in Style: Benchmarking with the MorningstarĀ® Broad Style Indexesā„ 
    Crossroads: Politics, Inflation, & Bonds
    Is there a mid-cap gap in your DC plan?
    View More
    Sponsored Content
    Partner Content
    The Industrialization of ESG Investment
    For institutional investors, ETFs can make meeting liquidity needs easier
    Gold: the most effective commodity investment
    2021 Investment Outlook | Investing Beyond the Pandemic: A Reset for Portfolios
    Ten ways retirement plan professionals add value to plan sponsors
    Gold: an efficient hedge
    View More
    E-MAIL NEWSLETTERS

    Sign up and get the best of News delivered straight to your email inbox, free of charge. Choose your news – we will deliver.

    Subscribe Today
    June 20, 2022 page one

    Get access to the news, research and analysis of events affecting the retirement and institutional money management businesses from a worldwide network of reporters and editors.

    Subscribe
    Connect With Us
    • RSS
    • Twitter
    • Facebook
    • LinkedIn

    Our Mission

    To consistently deliver news, research and analysis to the executives who manage the flow of funds in the institutional investment market.

    About Us

    Main Office
    685 Third Avenue
    Tenth Floor
    New York, NY 10017-4036

    Chicago Office
    130 E. Randolph St.
    Suite 3200
    Chicago, IL 60601

    Contact Us

    Careers at Crain

    About Pensions & Investments

     

    Advertising
    • Media Kit
    • P&I Content Solutions
    • P&I Careers | Post a Job
    • Reprints & Permissions
    Resources
    • Subscribe
    • Newsletters
    • FAQ
    • P&I Research Center
    • Site map
    • Staff Directory
    Legal
    • Privacy Policy
    • Terms and Conditions
    • Privacy Request
    Pensions & Investments
    Copyright Ā© 1996-2022. Crain Communications, Inc. All Rights Reserved.
    • Topics
      • Alternatives
      • Consultants
      • Coronavirus
      • Courts
      • Defined Contribution
      • ESG
      • ETFs
      • Hedge Funds
      • Industry Voices
      • Investing
      • Money Management
      • Opinion
      • Partner Content
      • Pension Funds
      • Private Equity
      • Real Estate
      • Russia-Ukraine War
      • SECURE Act 2.0
      • Special Reports
      • White Papers
    • Rankings & Awards
      • 1,000 Largest Retirement Plans
      • Top-Performing Managers
      • Largest Money Managers
      • DC Money Managers
      • DC Record Keepers
      • Largest Hedge Fund Managers
      • World's Largest Retirement Funds
      • Best Places to Work in Money Management
      • Excellence & Innovation Awards
      • WPS Innovation Awards
      • Eddy Awards
    • ETFs
      • Latest ETF News
      • Fund Screener
      • Education Center
      • Equities
      • Fixed Income
      • Commodities
      • Actively Managed
      • Alternatives
      • ESG Rated
    • ESG
      • Latest ESG News
      • The Institutional Investor’s Guide to ESG Investing
      • ESG Sustainability - Gaining Momentum
      • Climate Change: The Inescapable Opportunity
      • Impact Investing
      • 2022 ESG Investing Conference
      • ESG Rated ETFs
    • Defined Contribution
      • Latest DC News
      • DC Money Manager Rankings
      • DC Record Keeper Rankings
      • Innovations in DC
      • Trends in DC: Focus on Retirement Income
      • 2022 Defined Contribution East Conference
      • 2022 DC Investment Lineup Conference
    • Searches & Hires
      • Latest Searches & Hires News
      • Searches & Hires Database
      • RFPs
    • Performance Data
      • P&I Research Center
      • Earnings Tracker
      • Endowment Returns Tracker
      • Corporate Pension Contribution Tracker
      • Pension Fund Returns Tracker
      • Pension Risk Transfer Database
      • Future of Investments Research Series
      • Charts & Infographics
      • Polls
    • Careers
    • Events
      • View All Conferences
      • View All Webinars
      • 2022 Retirement Income Conference
      • 2022 Managing Pension Risk & Liabilities
      • 2022 WorldPensionSummit