In fact, the authors of the Deloitte & Touche 2002 Annual 401(k) Benchmarking Survey suggest that 401(k) plan sponsors have opted for a “wait and see” approach, rather than taking major steps in the wake of the Enron controversy, which highlighted concerns about participant investment practices.
Waiting on Washington?
Of course, part of the problem may be Washington – and with last night’s results, that could be ready to change. “One probable reason for the low rate of change is that sponsors may be waiting on specific congressional guidance before taking action,” Leslie V. Smith, Survey Director and Director, Employee Benefits Group of Deloitte & Touche, said in a press release. In fact, roughly a third of plan sponsor respondents cited investment advice as a critical issue for their programs.
The other reason may be participant satisfaction with the status quo. Participant satisfaction with plan investment options held steady at a 93% rate, according to plan sponsor respondents. The average number of investment options available to participants was 12.7, virtually unchanged from the prior year’s survey.
Still, nearly half the respondents claim to evaluate and benchmark plan investment performance on a quarterly basis, and within the last year, 28% have actually replaced a fund due to poor performance.
Less than 6% of responding plans that offer employer stock are considering any changes to the restrictions on that investment. Those that are, say they are:
- 4.0% – eliminating or reducing restrictions on investment of company match
- 5.7% – eliminating or reducing restrictions on diversification of company stock
- 1.7% – eliminating future investment in company stock
- 1.7% – capping investments in company stock
While only 24% of survey respondents currently offer employer stock as a core option, down from a third a year ago, an average of 20% of total plan assets remain invested in that option. Over half (59%) of the respondents offering employer stock in their plan currently impose no investment limits on that option, although 15% of those are currently considering an option. The roughly one-fourth of respondents who currently impose a limit reported an average limit of 30%, according to Towers Perrin.
More than 85% of responding employers offer matching contributions of some type, and 25% of plans surveyed have embraced the safe harbor levels for their match, compared with just 3% in the prior survey.
When it comes to participation, survey responses suggested a shift from “traditional” communication methods like face-to-face meetings and printed materials. Among survey respondents:
- 71% offer customized communications programs, compared with 15% a year ago
- 37% offer a generic communication program,
- 37% offer a personalized program, and
- 29% say their program is “targeted”
While nearly all (95%) have a formal written service agreement with their provider, only 25% have performance standards that put fees at risk. Respondents said they were most interested in changes or improvements to turnaround time, a wider range of products and services, and a wider range of quality investment choices.
While 82.6% of firms said their plan was an effective recruiting tool, and 71.2% cited the plan’s benefit as a retention tool, both measures were lower than a year ago, by 2.1% and 6.1%, respectively.
The 2002 Annual 401(k) Benchmarking Survey was conducted in June and July 2002, with data collected via either hardcopy or Web-based questionnaires. In all, 823 surveys were completed.