Thirty-eight percent of the plans that have been directly affected by the mutual fund trading scandal have already made changes, 31% are considering changes and 8% have plans to make changes. Among those companies that have already made changes to their plans, 65% of the changes occurred in the fourth quarter of 2003 and 35% have occurred in 2004. Among those planning on making changes, 80% will occur some time during the first quarter of 2004, according to a survey of 307 CFOs conducted by Financial Executives International (FEI) and Duke University’s Fuqua School of Business.
Most common among the companies that have already made changes is to add new providers to the plan (52%). This was followed by eliminating all the funds from the tainted family (47%) and selectively eliminating tainted funds, but not the whole family (25%). Adding a provider was also the most popular option among companies planning on a change and considering a change, 77% and 49%, respectively. However, those considering changes are more likely to selectively eliminate tainted funds than companies that plan to make changes, 32% versus 24%. Whereas 41% of those planning on changes are considering eliminating all funds from the family, a move contemplated by only 31% of the companies considering change.
Most of the CFOs polled said changes are being made to their 401(k) plans out of concerns about legal or fiduciary consequence if they do not make the changes. About half simply prefer not to deal with an investment provider they find untrustworthy. Only 15% of the companies considering changes are doing so because of pressure from their employees. Fund performance is a reason for change among about a third of companies that have already made changes to their 401(k) plans.
Across all companies, even those plans that have not yet been embroiled in the scandal, half are considering or have already implement plan changes. Of those, 21% have already made changes, 6% are planning to make changes, and 23% are considering changes.
Sixty two percent of the companies that are not changing their 401(k)s answered that they have had a satisfactory relationship with their fund provider. Fifty-two percent say that their employees appear satisfied with the current investment options and have not requested any change. Finally, 37% responded that their employees have ample opportunities and can opt on their own to avoid tainted funds.
More information is available at www.cfosurvey.org .