"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.