LAFAYETTE, Calif. - Most 401(k) plan participants don't have a clue what the total costs charged to their account are, according to a survey jointly conducted by consultant Pension Dynamics Corp. and Prodigy, the online communications company. The survey, which drew 1,310 responses, took place within Prodigy's Mutual Fund Interest Group in August and asked individuals eight questions about 401(k) plans.
Fifty-four percent of respondents said they did not know what fees were charged for retirement account services. Only 45% said they knew how much was subtracted from their retirement account for money management and administrative services.
Many participants like the convenience of being able to change their asset allocation through an automated telephone response system. But when confronted with an idea of the cost of the service (1% of total plan assets annually), 65% said they could live without the feature. Another 17% said they wanted the feature, even at that cost, and 16% said they weren't sure.
Stephen J. Butler, president of Pension Dynamics, said his research into mutual fund expenses found them rising.
Using data from Morningstar Inc., Chicago, Mr. Butler found that over 10 years, annual expenses at diversified U.S. stock funds rose to 1.41% of assets from 1.21%, while at the same time, the average fund's assets increased almost fivefold.
New Internet software
YARDLEY, Pa. - Computer security specialist SSDS Inc. has designed one of the first private-label software programs for the Internet that can be customized by record keepers and mutual fund companies for their own products and services. The program also is suitable for use by large defined contribution plans, said Kevin F. Crook, an SSDS spokesman.
Most Internet applications are being written vendor-by-vendor, in-house, said Mr. Crook, and aren't suitable for widespread implementation.
The Online Retirement Account Manager, nicknamed 401ko, gives defined contribution plan participants control over their accounts via the Internet, including contribution level changes, asset allocation shifts and research into their investment options. Modeling tools, investment education and links to other financial sites on the World Wide Web also are included as modules in the program.
The 401ko program - which received a good reception from sponsors when it was demonstrated at the recent Profit Sharing/401(k) Council of America's annual meeting - is simple to use and fairly plain in appearance. Unlike some Internet programs, 401ko is not loaded with flashy graphics, moving images or gimmicks. The format focuses on a filing card system and is easily navigable.
Implementation of 401ko includes a full client system security analysis and consulting and support services to ensure solid fire walls for the Internet application.
DC plan savings set record
CHICAGO - The Profit Sharing/401(k) Council of America's 39th survey of defined contribution plans found Americans are saving more through their plans than ever before. The average account balance has more than doubled since the beginning of the decade, with the average account reaching $65,294 in 1995, up from $31,246 in 1990.
Equity funds are becoming more popular with participants, with 59% of participant contributions going into equity options in 1995, compared with 45% in 1990. Guaranteed investment contracts are becoming less popular, attracting only 16% of employee money, compared with 28% five years previously. Cash and money market funds also are losing assets, with just 5% invested in them in 1995, compared with 11% in 1990.
More part-time employees now have access to 401(k) plan investing than in the past. In 1995, 48% of plans allowed part-timers to contribute to their defined contribution plans, compared with 35% in 1992.
Participants can invest their money these days in far more options than five years ago. In 1996, three-fourths of plans offered five or more investment fund options for employee contributions. Only 16% of plans offered more than five choices in 1990.
Access to account information also is getting easier. In 1995, more than half of all employees (59%) in the companies surveyed and 92% of employees working for companies with more than 5,000 employees could check account balances daily. Most companies provide daily valued record keeping (38%) or quarterly valuation (30%), compared with 1990 when 43% of companies only valued employee accounts once per year.
The survey, based on 1995 data, included 668 companies with more than 1.7 million plan participants and $111 billion in defined contribution assets.
Employers add options
WINDSOR, Conn. - Companies seem to be responding favorably to employee requests for additional and more diversified investment options, according to the results of an as-yet-unreleased survey of 401(k) plan participant attitudes by Access Research.
In its second survey of more than 1,000 401(k) plan participants, the Access survey found the average number of investment options rose to 6.3 in 1996, up from 4.6 in 1994. There was an increase in the availability of all types of equity funds, except company stock. More international/global stock funds were offered for the first time than any other kind of equity fund; 42.4% of participants said they now have access to an international fund, up from 27.1% in 1994.
Along with the increase in the number of options and their relative diversity, participant-directed contributions to equity options rose to 73.1% in 1996, up from 64.4% two years ago. Aggressive growth and international stock funds both received higher average contributions this year, compared to 1994.
T. Rowe Price uses intranet
BALTIMORE - Unlike some competitors, T. Rowe Price Associates Inc. hasn't jumped onto the Internet. Instead, the firm is taking a more conservative approach, beginning with a private dial-up intranet.
On-line Access allows plan participants to dial up the toll-free, private network and access full account information. Users can make changes online to contribution rates, portfolio asset allocation and transfers between funds. There also are links to fund performance information, said spokeswoman Rowena M. Itchon.
About two-thirds of T. Rowe Price's client base accepted the company's special offer. To use the service, plan participants each must purchase a $15 software package to access and use the private network, available in Windows 3.1 and Windows 95 and Macintosh formats. On-line Access also includes Netscape Navigator, a Web browser.
T. Rowe Price will move to offering similar services through the Internet when security issues are better understood, said Ms. Itchon.
SunGard picks VisualConnect
BIRMINGHAM, ALA. - SunGard Employee Benefits Systems purchased the VisualConnect system from InterVoice Inc., Dallas, to provide defined contribution plan participants Internet access to account information.
SunGard provides record keeping services to more than 500 defined contribution plans.
Providing the information bridge between Web servers, corporate databases and information systems, VisualConnect gives Internet users the ability to access and interact with a wide variety of transaction and workflow-based applications.
Plan sponsors can also access the SunGard Internet site for customer service support and troubleshooting for record-keeping system problems.
Performance pay rare
WASHINGTON - Executive retirement plans very rarely link compensation to company performance, a survey from KPMG Peat Marwick L.L.P. found.
Just 5% of companies link executive deferred compensation to corporate performance among the 240 Fortune 1000 companies that responded to the survey of supplemental retirement plans. Last year, 8% of those surveyed used a performance benchmark to determine compensation levels.
Eighty-two percent of companies use Supplemental Executive Retirement Plans simply to provide enhanced benefits, said respondents.
Twenty-five percent of plans use SERPS to make up benefits lost from a prior plan and 22% use them as a tax deferral tool.
SERPS seem to be most used by midsized and large companies, with 88% offering some type of plan to supplement retirement benefits available to the larger employee population. Excess plans are used by 81% of those surveyed to provide benefits that can't be supplied under tax-qualified retirement plans; 54% offer "top hat" or non-excess SERPS, which cover only executives and aren't linked to tax-qualified plans; 46% of companies surveyed offer both.
The KPMG survey shows increasing interest in SERPS, with 61% of companies that don't now have such a plan indicating they are considering adopting one soon.