LOUISVILLE, Ky. - Defined contribution hirings and allocations rose in 1995, according to figures compiled by Eager & Associates, a management consulting firm.
Eager's 1996 Tracker Annual Report found placements in defined contribution plans rose nearly 40% from 1994; total dollars placed in searches topped $14.5 billion.
The report noted bundled providers, particularly mutual fund complexes, continued their popularity. Fifty-two percent of searches involved adding options to existing plans, with equities being the most popular.
Among domestic equity placements, index and large-capitalization/core assignments were popular, according to the report. The dollar volume of international placements dropped to 17% from 33%.
Too much of a good thing?
KANSAS CITY, Mo. - All of the education 401(k) plan participants have been receiving has had one side affect - to raise fund performance expectations, perhaps to unreasonable levels.
About one-third of 750 self-described "retirement savers" who are 401(k) participants said they expect annual investment returns between 10% and 14% during the next five years, a survey by Twentieth Century Mutual Funds found; 12% of 401(k) plan investors expected annual returns between 15% and 19%.
By contrast, the largest portion of non-401(k) plan participants, 32%, said they expected returns between 5% and 9% in the same period; 20% expected returns per year to be between 10% and 14%.
Perhaps even more worrying than the high hopes was the 16% of participants who said they didn't have any idea what returns to expect over five years. Non-plan participants were even more in the dark about performance expectations; 15% did not know what returns they could anticipate over a five-year span.
Defined contribution plan participants did seem more likely to recognize the need for considerable retirement savings than those respondents not enrolled in a 401(k) plan.
While 21% of plan participants said their goal was to have more than $1 million saved for retirement, only 11% of non-plan participants named the same lofty figure. Most non-participants named a figure between $100,000 and $249,000 as their retirement goal, the survey concluded.
Only 10% of plan participants said they did not have a specific dollar goal they were aiming toward for retirement; 18% of non-plan participants also lacked a target dollar figure.
Internet use attractive
CHICAGO - The lure of using the Internet to service defined contribution plan participants has become irresistible. About one-quarter of the 99 vendors responding to Pensions & Investments' 1996 directory of defined contribution service providers now offer services on the Internet.
The majority use the Internet primarily to provide basic fund, performance and company information to participants. Benefits-related information is more commonly posted by third-party record keeper/administrators and employee benefit firms such as Buck Consultants Inc., New York; Kwasha Lipton, Fort Lee, N.J.; and Watson Wyatt Worldwide, Washington. Some vendors offer sponsors report-generating capabilities and plan-level data via the Net.
Only two firms now offer participants the ability to manage their defined contribution plan accounts directly on the Internet - Fidelity Investments, Boston, and BZW Barclays Global Investors - Master Works Group, San Francisco. One other survey respondent, American Express Institutional Services, Minneapolis, indicated it also will offer account transactions later this year, according to the company's questionnaire.
Fourteen firms said they will have services from home pages to online inquiry capabilities by the end of 1996.
Legend Group widens reach
PALM BEACH GARDENS, Fla. - The Legend Group is continuing its expansion into the 403(b) market through alliances with regional banks.
The third-party administrator, which specializes in 403(b) plan services, has struck deals to provide record keeping and administrative services for the proprietary mutual funds offered by Mercantile Bank, St. Louis; First Union Bank, Charlotte, N.C.; Bank of America Corp., Los Angeles; U S Bank Corp., Portland, Ore.; and NBD/First Chicago, Detroit. Legend also is negotiating with four other major banking groups, which will establish the company's presence in all 50 states. Legend also has formal agreements to distribute mutual funds from 12 different fund families for use by voluntary and compulsory 403(b) plans.
Michael J. Provines, president of Legend, said his firm is looking beyond its current niche - servicing the voluntary, supplemental plan market for universities, hospitals and public schools through local financial advisers. Voluntary 403(b) plans are pre-tax vehicles for employee contributions only; enrollment is optional and there is no employer contribution. Legend is now targeting compulsory 403(b) plans, which enroll all employees in the plan and include an automatic employer contribution. Employees may also contribute to a compulsory 403(b) plan.
Barry B. Burr and Mercedes M. Cardona contributed to this column.