Malfeasance insurance: how plan sponsors are coping with the mutual-fund scandal. providers Part 1
Roy Harris
THE MUTUAL-FUND industry contends that the fast-spreading allegations of improper trading at fund companies should not worry the approximately 400,000 corporate sponsors of 401(k) plans. But worry they do.
[paragraph] That, at least, is the conclusion of a new survey by CFO magazine, in which a full 86 percent of respondents express concern about mutual-fund mismanagement. More than half, in fact, say they are quite or extremely concerned, especially about conflicts of interest among fund traders and high management fees.
Overall, the worrying doesn’t seem to have translated into drastic action, at least not yet. Rather, as the investigations of fund abuses proceed, many sponsors are waiting to see how funds in their 401(k) portfolios may be affected before they do anything. The CFO survey indicates, for example, that less than one-third of finance executives would support dropping an affected fund immediately from the 401(k) portfolio, while 57 percent would institute a review first.
“Companies are asking how high up the problems went, how serious they were, and what actions have been taken to remedy the situations,” says Patrick Reinkemeyer, president of Morningstar Inc.’s consulting group. Before they make a decision to drop a mutual fund, plan sponsors want to know “to what degree the fund’s ability to manage money has been compromised.” From the sponsor’s perspective, deciding on a particular fund’s future in the plan “is not easy,” says Reinkemeyer. “The standards can’t be the same for Calpers [the California Public Employees’ Retirement System] as they are for a neighborhood car wash.”
Even as the number of accused mutual-fund companies proliferates, most finance executives still believe that funds in general can deliver adequate retirement options to employees. Less than a third of our respondents say they are less confident about that ability now than they were two years ago, while 59 percent say there has been no change and percent say they are actually more confident.
Many of the CFOs who are concerned about individual funds in their portfolios hesitate to take precipitous action until the full dimension of the problem is understood. “This is a very tricky period,” says David Wray, president of the Chicago-based Profit Sharing/401(k) Council of America. “A lot of people are being very cautious until they’re convinced that all the fallout has fallen.”
THE ALTERNATIVES
So what’s a sponsor to do? Instead of simply eliminating a tainted fund from a portfolio, some are choosing to add alternative funds in the same category. The idea is to give participants a choice, rather than to direct them from one fund into another. Paradoxically, some of the funds identified in the first wave of the scandal are engaged in aggressive cleanups–and fee reviews–that may make them among the safest and best-priced options.
“Where in the world would you move if you wanted to be sure you were safe?” asks Textron Inc. CFO Ted French. “You could find yourself jumping out of the frying pan into the fire.” That would certainly be the case, he says, if the Textron investment committee he chairs were to ax one of its funds and then learn that the replacement fund was also a target of investigators.
It’s hardly an academic question for the Providence-based diversified manufacturer, which has Boston-based Putnam Investments as its plan administrator–and offered 7 of Putnam’s funds among the Textron plan’s 11 choices. “We had plenty of feedback from Putnam’s bad press,” according to French. “One of our offered funds was the International Fund, where the bad guys were,” he says, and “employees called us or E-mailed us asking, ‘Why are they still around? Why don’t you just shoot them today?'”
Textron’s investment committee–which includes French as well as the treasurer, assistant treasurer for investment management, vice president of human relations and benefits, controller, and an attorney for the investment-management group–decided to hear Putnam out before taking any action. Eventually, the committee decided to keep the Putnam funds, including the International Fund. Textron then launched an informational newsletter campaign to explain its actions to the 25,000 employees who together have about $1.6 billion invested in the 401(k) plan.
“There’s no grumbling now,” says French. “Our communications were effective.”
PLAN REVIEW
A deliberate plan review–in which the offenses and corrective actions at individual funds are only two of the elements studied–is recommended by benefits specialist Jeff Robertson of Portland, Oregon, law firm Bullivant Houser Bailey PC. “Saying ‘There’s a Janus fund in my portfolio, so I have to switch,’ is not the way to go about this,” he says. “Investment committees should start with a prudent overall policy, and then make a prudent review of all the funds.” That means looking at multiple plan elements that could affect participants. “If there’s an investigation, that’s a minus, while performance could be a plus,” Robertson says, and factors like fee structure, managerial changes, and the availability of alternative funds would enter in as well.
Of course, says Paul Bracaglia, Philadelphia-based partner in the human-resources services group of Price waterhouseCoopers LLP, plan providers must also “weigh the market dynamics of the accusations, and especially the impact on the fund of other investors taking money out.” Mutual funds are harder to manage when significant outflows occur. “And if I have to create x amount of liquidity in order to meet the redemptions that day,” he says, “I might be forced to make a sell decision earlier.”
Another question is, What happens if the fund was chosen because of a particular manager, and that manager is fired? “In some organizations, the manager is the superstar. He’s the Allen Iverson of the team,” says Bracaglia. If that manager no longer works at a fund, the plan may decide to replace it. Some of Bracaglia’s clients have puzzled over whether to eliminate an entire fund family based on accusations against a few funds, or to replace only the specific funds identified. Plan sponsors have gone both ways, he adds, making decisions based on the specific facts and disclosures.
Noting that giant Calpers dropped a number of funds last fall after they were charged with abuses, attorney Robertson suggests that corporate 401(k) trustees tend to be less motivated by political issues, and gear decisions more to such factors as the corporate risk of lawsuits stemming from scandal-tarred funds in the company portfolio. “CFOs’ concerns are going to be issues of fiduciary responsibility rather than bad press,” says Robertson.
For his part, Morningstar’s Reinkemeyer doesn’t consider bad press alone to be a legitimate reason to act, even if it reflects pressure from plan members. “If a fund is dropped for political reasons, participants’ interests are not being kept in the forefront,” he says.
BAD APPLES
The welfare of the participants–not politics–guides fund decisions made by the five-member investment committee at Houston-based Continental Airlines, says Jacques Lapointe, vice president of finance. He remembers when the biggest 401(k) issue was how to teach the company’s 49,000 qualified employees that a company-matched retirement-plan contribution “is the single best investment they can make every year.” Until last year, Continental considered its plan quite ordinary, with “nothing exotic or obscure,” just the usual funds from brand names like Fidelity and T. Rowe Price. Still, the fact that one was a Janus product came up for discussion last September, when Janus was the target of an investigation by the New York State Attorney’s office.
The investment committee–on which Lapointe serves along with the airline’s senior vice president of finance and treasurer, its controller, the HR vice president, and the cash-management director–“went over everything, all the allegations made against specific funds,” says Lapointe, and set up a call with Janus. The Janus presentation was persuasive, he says, and as a result, Continental decided to retain the Janus offering. Continental’s conclusion: “They had a couple of guys [guilty of] some market timing, but those guys are no longer with the firm. It was not a systemic problem; it was just those bad apples.”
Lapointe’s view is that “every mutual fund in the country must have had one or two guys who just got too cute.” Continental’s investment committee was impressed that Janus seemed to be dealing with its situation quickly. “I feel we did our due diligence very well,” says Lapointe, and that members kept in mind the high stakes involved. “As a member of the investment committee,” he notes, “I have liability.”
There have been few employee concerns at Continental. In fact, Lapointe says he received only two phone calls asking about the market-timing scandals and Continental’s inclusion of a Janus product. “If I were not on the committee and were just an employee, I would hope and expect that the company would be doing just what we’re doing,” he says.
Lapointe believes subsequent headlines–or, rather, Janus’s absence from those headlines–have borne out the committee’s decision. “If I were still reading stories about Janus in the Wall Street Journal or in CFO magazine, that fund would probably be long gone by now,” he says. (At press time, Janus had not reached a settlement, and said it was still “cooperating with the ongoing investigation” in New York and by the Securities and Exchange Commission.)
Of course, discussions about the mutual-fund scandal are occurring at plenty of companies unaffected by any revelations to date. As the scandal expands, says Jean Blackwell, CFO of Cummins Inc. and chairperson of its benefits-policy committee, “people are taking their fiduciary responsibilities much more seriously.” Blackwell–who in the past has served as the Columbus, Indiana, engine maker’s general counsel and as its vice president of HR–has observed that committee members these days “will push back and disagree,” where in the past they were more inclined to go along with the recommendations of the benefits staff.
Cummins currently has all Vanguard funds in its plan, which covers 14,000 U.S. employees, and Blackwell notes that Vanguard has yet to be mentioned by any investigator. Cummins is now engaged in its regular review of fund offerings, administrators, and recordkeepers. The company doesn’t rule out adding some funds that have been mentioned in investigations if they can show that their problems have been resolved. “We’re doing our best to pick funds that balance fees, risk, information flow, and potential returns, as well as a number of other factors,” says Blackwell. She knows that some funds mentioned in the earliest wave of charges seem to have taken strong corrective measures, and to have lowered their fees.
Blackwell believes that investment committees at other companies are also asking funds for more information these days, whether or not those funds have been targeted by investigators. She is sure there will be more surprises as the investigations proceed. “It will get uglier,” she predicts.
REPAIRING THE DAMAGE
“Putnam is fixing its system,” says Textron CFO French, who observes that “the interesting point is all the administrative issues that come up when you add choices” to a 401(k) portfolio.
For Putnam and other mutual-fund companies, of course, restoring confidence among customers like Textron is of primary importance.
Putnam CEO Charles “Ed” Haldeman says he “went to see a large number of our clients in the November and December period. We felt we had an obligation to have a face-to-face meeting … and to say to them that what had gone on at Putnam in the year 2000 was wrong.” He says that the trading records of all 12,700 traders working at Putnam since 1998 have now been reviewed, and 15 employees have been dismissed.
“With regard to market-timing issues,” states Haldeman, “Putnam fully understands the scope of that problem, and has dealt with it entirely.” Putnam notes that it quickly settled with the SEC, made “100 percent restitution,” and changed commission policies. It also reduced its fees.
John Brown, head of Putnam’s institution business, concedes that the firm has lost clients in the wake of the scandal. He says that “on balance, the private-sector clients have kept more assets with us than the public-sector funds.”
“Back in November, we were at the tip of the spear,” says Brown, because Putnam was one of the first companies to have the market-timing activities of some traders exposed. But most corporate clients “are going through a long process,” he says. “Nobody’s shooting from the hip.”
A CFO Survey
WORRY ABOUT THE MUTUAL-FUND SCANDAL
How concerned are you about alleged mismanagement of mutual funds?
Extremely concerned 18.1%
Quite concerned 33.3%
Somewhat concerned 34.5%
Not concerned 14.1%
In particular:
Traders’ conflicts of interest
Extremely concerned 37.3%
Quite concerned 35.6%
Somewhat concerned 18.6%
Not concerned 8.5%
Market timing by traders
Extremely concerned 16.9%
Quite concerned 35.6%
Somewhat concerned 33.3%
Not concerned 14.2%
Secrecy surrounding mutual-fund operations
Extremely concerned 26.6%
Quite concerned 37.9%
Somewhat concerned 24.9%
Not concerned 9.6%
Government’s failure to detect mutual-fund abuses
Extremely concerned 28.2%
Quite concerned 37.9%
Somewhat concerned 21.5%
Not concerned 12.5%
High management fees
Extremely concerned 30.7%
Quite concerned 40.3%
Somewhat concerned 19.9%
Not concerned 9.1%
…HAS NOT PROMPTED DRASTIC ACTION.
If one of your fund providers were implicated in the mutual-fund
scandal, what would you do?
Drop it from our plan immediately 30.1%
Consider dropping it from our plan 56.8%
No course of action decided on 11.9%
Other 1.1%
Compared with two years ago, how confident are you about your
company’s ability to provide adequate retirement options for
employees?
Much less confident 5.7%
Somewhat less confident 25.6%
No change 58.5%
Somewhat more confident 8.0%
Much more confident 2.3%
Source: CFO magazine survey, February 2004: 196 responses,
for a 6% response rate.
CFO BUYER’S GUIDE 401 (k) providers
ABN AMRO ASSET MANAGEMENT
Chicago
(800) 207-8426; ext. 2578
www.abnamro40lk.com
FULL SERVICE
Total no. of full-service plans 412
Total assets in full-service plans $4.6 billion
No. participants in full-service 140,000
plans
No. of funds available: 18
managed internally
No. of funds available: 1,000+
managed externally
Avg. asset-allocation rates in stable value 20%, fixed
full-svc. Plans income 5%, equity funds 72%,
self-directed <1%, co. stock 1%,
other <1%
Avg. participation rate 75%
Avg. deferral rate 5%
INVESTMENT ONLY
No. yrs. offering 10 svcs. to 21
401(k) plans
No. of existing 10 plans handled 45
Total 10 assets under management $518 million
Target market for 10: avg. plan $25 million
asset size
Services available:
* classes of securities managed See footnote 1, below
for plans
* investment styles offered See footnote 2, below
* primary investment style See footnote 2, below
* frequency of market commentary Quarterly
* frequency of investment results As requested
discussion
AIM INVESTMENTS
Houston
(800) 347-1919
www.aiminvestments.com
FULL SERVICE
Total no. of full-service plans 2,819
Total assets in full-service plans $1.01+ billion
No. participants in full-service NA
plans
No. of funds available: 61
managed internally
No. of funds available: 500+ (external fund families)
managed externally
Avg. asset-allocation rates in NA
full-svc. Plans
Avg. participation rate NA
Avg. deferral rate NA
INVESTMENT ONLY
No. yrs. offering 10 svcs. to 24
401(k) plans
No. of existing 10 plans handled 100+
Total 10 assets under management $9.9 billion
Target market for 10: avg. plan NA
asset size
Services available:
* classes of securities managed A, B, C, R, institutional
for plans
* investment styles offered Value, growth, GARP, fixed income
* primary investment style Value, growth, GARP
* frequency of market commentary Daily
* frequency of investment results Daily
discussion
ALLIANCE BENEFIT GROUP
Peoria, IL
(800) 242-2356
www.abgnational.com
FULL SERVICE
Total no. of full-service plans 3,369
Total assets in full-service plans $5.9 billion
No. participants in full-service 210,000
plans
No. of funds available: 0
managed internally
No. of funds available: 9,000
managed externally
Avg. asset-allocation rates in stable value 16%, fixed
full-svc. Plans income 14%, equity funds 62%,
self-directed 4%, co. stock 4%
Avg. participation rate 88%
Avg. deferral rate 6.5%
INVESTMENT ONLY
No. yrs. offering 10 svcs. to
401(k) plans
No. of existing 10 plans handled
Total 10 assets under management
Target market for 10: avg. plan
asset size
Services available:
* classes of securities managed
for plans
* investment styles offered
* primary investment style
* frequency of market commentary
* frequency of investment results
discussion
AMERICAN EXPRESS
RETIREMENT SERVICES
Minneapolis
(800) 437-0600
www.americanexpress.com/sponsors
FULL SERVICE
Total no. of full-service plans 297
Total assets in full-service plans $28.5 billion
No. participants in full-service 1 million
plans
No. of funds available: 92
managed internally
No. of funds available: Unlimited
managed externally
Avg. asset-allocation rates in stable value 27%, fixed
full-svc. Plans income 9%, equity funds 47%,
self-directed 1%, co. stock 13%,
other 3%
Avg. participation rate NA
Avg. deferral rate 6.6%
INVESTMENT ONLY
No. yrs. offering 10 svcs. to 23
401(k) plans
No. of existing 10 plans handled 62
Total 10 assets under management $8.8 billion
Target market for 10: avg. plan > $1 million
asset size
Services available:
* classes of securities managed A, Y, CF (commingled funds), E
for plans
* investment styles offered All 9 style boxes from
Morningstar
* primary investment style See footnote 3, below
* frequency of market commentary Monthly
* frequency of investment results Quarterly
discussion
AMERICAN UNITED LIFE INSURANCE
Indianapolis
(317) 285-1877
www.eretirement.aul.com
FULL SERVICE
Total no. of full-service plans 6,621
Total assets in full-service plans $4.4 billion
No. participants in full-service 288,081
plans
No. of funds available: 5
managed internally
No. of funds available: 85
managed externally
Avg. asset-allocation rates in stable value 25%, fixed
full-svc. Plans income 5%, equity funds 60%,
other 10%
Avg. participation rate 50%
Avg. deferral rate NA
INVESTMENT ONLY
No. yrs. offering 10 svcs. to
401(k) plans
No. of existing 10 plans handled
Total 10 assets under management
Target market for 10: avg. plan
asset size
Services available:
* classes of securities managed
for plans
* investment styles offered
* primary investment style
* frequency of market commentary
* frequency of investment results
discussion
AMERITAS LIFE INSURANCE **
Lincoln, NE
(800) 923-2732
www.ameritas.com
FULL SERVICE
Total no. of full-service plans 413
Total assets in full-service plans $370.9 million
No. participants in full-service 14,753
plans
No. of funds available: 2
managed internally
No. of funds available: 40
managed externally
Avg. asset-allocation rates in stable value 42.5%, fixed
full-svc. Plans income 9.3%, equity funds 48.2%
Avg. participation rate NA
Avg. deferral rate NA
INVESTMENT ONLY
No. yrs. offering 10 svcs. to
401(k) plans
No. of existing 10 plans handled
Total 10 assets under management
Target market for 10: avg. plan
asset size
Services available:
* classes of securities managed
for plans
* investment styles offered
* primary investment style
* frequency of market commentary
* frequency of investment results
discussion
AMVESCAP RETIREMENT
Atlanta
(800) 538-6370
www.amvescapretirement.com
FULL SERVICE
Total no. of full-service plans 1,203
Total assets in full-service plans $22 billion
No. participants in full-service 617,000
plans
No. of funds available: 105
managed internally
No. of funds available: 650
managed externally
Avg. asset-allocation rates in stable value 22%, fixed
full-svc. Plans income 6%, equity funds 54%,
self-directed 1%, co. stock 15%,
other 2 %
Avg. participation rate 76%
Avg. deferral rate 5%
INVESTMENT ONLY
No. yrs. offering 10 svcs. to 16
401(k) plans
No. of existing 10 plans handled 15,000
Total 10 assets under management $10.9 billion
Target market for 10: avg. plan NA
asset size
Services available:
* classes of securities managed Mutual funds, commingled
for plans trust funds, sep. accounts
* investment styles offered See footnote 4, below
* primary investment style Fundamental bottom-up growth
funds
* frequency of market commentary Quarterly
* frequency of investment results Monthly
discussion
BANK OF AMERICA
Charlotte, NC
(704) 388-4674
www.bankofamerica.com
/plansthatwork
FULL SERVICE
Total no. of full-service plans 1,665
Total assets in full-service plans $24.8 billion
No. participants in full-service 1.2 million
plans
No. of funds available: 53
managed internally
No. of funds available: 442
managed externally
Avg. asset-allocation rates in stable value 25%, fixed
full-svc. Plans income 5%, equity funds 50%,
self-dir. 5%, co. stock 5%,
other 10%
Avg. participation rate 70%
Avg. deferral rate 6%
INVESTMENT ONLY
No. yrs. offering 10 svcs. to
401(k) plans
No. of existing 10 plans handled
Total 10 assets under management
Target market for 10: avg. plan
asset size
Services available:
* classes of securities managed
for plans
* investment styles offered
* primary investment style
* frequency of market commentary
* frequency of investment results
discussion
BARCLAYS GLOBAL INVESTORS
San Francisco
(415) 597-2200
www.barclaysglobal.com
FULL SERVICE
Total no. of full-service plans
Total assets in full-service plans
No. participants in full-service
plans
No. of funds available:
managed internally
No. of funds available:
managed externally
Avg. asset-allocation rates in
full-svc. Plans
Avg. participation rate
Avg. deferral rate
INVESTMENT ONLY
No. yrs. offering 10 svcs. to NA
401(k) plans
No. of existing 10 plans handled 124
Total 10 assets under management NA
Target market for 10: avg. plan $1 billion
asset size
Services available:
* classes of securities managed See footnote 5, below
for plans
* investment styles offered Cash management, indexed,
enhanced indexed, active
* primary investment style Corporate defined contribution
* frequency of market commentary Monthly & quarterly
* frequency of investment results As needed
discussion
CHARLES SCHWAB CORPORATE SERVICES
Richfield, OH
(877) 456-0777
www.schwabplan,com:
www.schwab.com
FULL SERVICE
Total no. of full-service plans 697
Total assets in full-service plans $20.4 billion
No. participants in full-service 372,439
plans
No. of funds available: 57
managed internally
No. of funds available: 1,800
managed externally
Avg. asset-allocation rates in stable value 11%, fixed
full-svc. Plans income 7%, equity funds 55%,
self-directed 16%, co. stock 6%,
other 5%
Avg. participation rate 85%
Avg. deferral rate 6%
INVESTMENT ONLY
No. yrs. offering 10 svcs. to
401(k) plans
No. of existing 10 plans handled
Total 10 assets under management
Target market for 10: avg. plan
asset size
Services available:
* classes of securities managed
for plans
* investment styles offered
* primary investment style
* frequency of market commentary
* frequency of investment results
discussion
CIGNA RETIREMENT AND
INVESTMENT SERVICES ***
Hartford
(800) 574-0615
www.cigna.com
FULL SERVICE
Total no. of full-service plans 2,408
Total assets in full-service plans $29.6 billion
No. participants in full-service 1 million +
plans
No. of funds available: 44
managed internally
No. of funds available: Unlimited
managed externally
Avg. asset-allocation rates in stable value 35%, fixed
full-svc. Plans income 9%, equity funds 47%,
self-directed 1%, co. stock 6%,
other 2%
Avg. participation rate 81%
Avg. deferral rate 7%
INVESTMENT ONLY
No. yrs. offering 10 svcs. to
401(k) plans
No. of existing 10 plans handled
Total 10 assets under management
Target market for 10: avg. plan
asset size
Services available:
* classes of securities managed
for plans
* investment styles offered
* primary investment style
* frequency of market commentary
* frequency of investment results
discussion
CITISTREET
Quincy, MA
(877) 488-8886
www.citistreetonline.com
FULL SERVICE
Total no. of full-service plans NA
Total assets in full-service plans $112 billion
No. participants in full-service NA
plans
No. of funds available: 0
managed internally
No. of funds available: 3,000+
managed externally
Avg. asset-allocation rates in stable value 16%, fixed
full-svc. Plans income 13%, equity funds 49%,
self-dir. 5%, co. stock 16%,
other 1%
Avg. participation rate NA
Avg. deferral rate NA
INVESTMENT ONLY
No. yrs. offering 10 svcs. to
401(k) plans
No. of existing 10 plans handled
Total 10 assets under management
Target market for 10: avg. plan
asset size
Services available:
* classes of securities managed
for plans
* investment styles offered
* primary investment style
* frequency of market commentary
* frequency of investment results
discussion
COMERICA BANK
Detroit
(800) 872-1242
www.comerica.com
FULL SERVICE
Total no. of full-service plans 463
Total assets in full-service plans $4.2 billion
No. participants in full-service 140,000
plans
No. of funds available: 66
managed internally
No. of funds available: 250
managed externally
Avg. asset-allocation rates in stable value 14%, fixed
full-svc. Plans income 8%, equity funds 66%,
self-dir. <1%, co. stock 10%,
other 2%
Avg. participation rate 74%
Avg. deferral rate 6%
INVESTMENT ONLY
No. yrs. offering 10 svcs. to
401(k) plans
No. of existing 10 plans handled
Total 10 assets under management
Target market for 10: avg. plan
asset size
Services available:
* classes of securities managed
for plans
* investment styles offered
* primary investment style
* frequency of market commentary
* frequency of investment results
discussion
DAILYACCESS **
Mobile, AL
(888) 535-4322
www.dailyaccess.com
FULL SERVICE
Total no. of full-service plans 577
Total assets in full-service plans $1.7 billion
No. participants in full-service 75,000
plans
No. of funds available: 0
managed internally
No. of funds available: 1,000+
managed externally
Avg. asset-allocation rates in stable value 5%, fixed
full-svc. Plans income 21%, equity funds 73%,
self-dir. <1%, co. stock <1%,
other 1%,
Avg. participation rate 79%
Avg. deferral rate 5%
INVESTMENT ONLY
No. yrs. offering 10 svcs. to
401(k) plans
No. of existing 10 plans handled
Total 10 assets under management
Target market for 10: avg. plan
asset size
Services available:
* classes of securities managed
for plans
* investment styles offered
* primary investment style
* frequency of market commentary
* frequency of investment results
discussion
DIVERSIFIED INVESTMENT ADVISORS
Purchase, NY
(800) 770-6797
www.divinvest.com
FULL SERVICE
Total no. of full-service plans 1,257
Total assets in full-service plans $16 billion
No. participants in full-service 1.1 million
plans
No. of funds available: 6
managed internally
No. of funds available: 16
managed externally
Avg. asset-allocation rates in NA
full-svc. Plans
Avg. participation rate 75%
Avg. deferral rate 6%
INVESTMENT ONLY
No. yrs. offering 10 svcs. to 21
401(k) plans
No. of existing 10 plans handled 300
Total 10 assets under management $9 billion
Target market for 10: avg. plan $33 million
asset size
Services available:
* classes of securities managed Institutional
for plans
* investment styles offered See footnote 6, below
* primary investment style Diverse
* frequency of market commentary Quarterly
* frequency of investment results Quarterly or as needed
discussion
EQUITABLE LIFE
ASSURANCE SOCIETY
New York
(866) 401-3030
www.equitable.com
FULL SERVICE
Total no. of full-service plans 9,117
Total assets in full-service plans $2.9 billion
No. participants in full-service 222,585
plans
No. of funds available: 49
managed internally
No. of funds available: 150+
managed externally
Avg. asset-allocation rates in stable value 5%, fixed
full-svc. Plans income 25%, equity funds 70%
Avg. participation rate NA
Avg. deferral rate NA
INVESTMENT ONLY
No. yrs. offering 10 svcs. to
401(k) plans
No. of existing 10 plans handled
Total 10 assets under management
Target market for 10: avg. plan
asset size
Services available:
* classes of securities managed
for plans
* investment styles offered
* primary investment style
* frequency of market commentary
* frequency of investment results
discussion
FEDERATED INVESTORS
Pittsburgh
(800) 245-5000
www.federatedinvestors.com
FULL SERVICE
Total no. of full-service plans 577
Total assets in full-service plans $2.4 billion
No. participants in full-service 100,000
plans
No. of funds available: 100
managed internally
No. of funds available: 125
managed externally
Avg. asset-allocation rates in stable value 31%, fixed
full-svc. Plans income 10%, equity funds 46%,
co. stock 13%
Avg. participation rate NA
Avg. deferral rate NA
INVESTMENT ONLY
No. yrs. offering 10 svcs. to 24
401(k) plans
No. of existing 10 plans handled NA
Total 10 assets under management $15.1 billion
Target market for 10: avg. plan NA
asset size
Services available:
* classes of securities managed International & domestic
for plans equity, fixed income
* investment styles offered Same as above
* primary investment style Multiproduct Manager
* frequency of market commentary Daily
* frequency of investment results Quarterly or as needed
discussion
FIDELITY INVESTMENTS
Boston
(800) 343-3548
www.fidelity.com
FULL SERVICE
Total no. of full-service plans 12,681
Total assets in full-service plans $477.7 billion
No. participants in full-service 9.1 million
plans
No. of funds available: Unlimited
managed internally
No. of funds available: Unlimited
managed externally
Avg. asset-allocation rates in stable value 17%, fixed
full-svc. Plans income 10%, equity funds 55%,
self-directed 1%, co. stock 16%,
other 1%
Avg. participation rate 68%
Avg. deferral rate 7%
INVESTMENT ONLY
No. yrs. offering 10 svcs. to 21
401(k) plans
No. of existing 10 plans handled 1,089
Total 10 assets under management $28.1 billion
Target market for 10: avg. plan NA
asset size
Services available:
* classes of securities managed Retail, stable value, commingled
for plans pools, sep. accounts
* investment styles offered All
* primary investment style All
* frequency of market commentary Quarterly
* frequency of investment results Quarterly or as needed
discussion
FIFTH THIRD BANK
Cincinnati
(800) 336-6782; ext. 0162
www.53.com
FULL SERVICE
Total no. of full-service plans 1,521
Total assets in full-service plans $7.2 billion
No. participants in full-service 136,400
plans
No. of funds available: 28
managed internally
No. of funds available: 65
managed externally
Avg. asset-allocation rates in stable value 9%, fixed
full-svc. Plans income 12.2%, equity funds 59.5%,
self-directed <1% co. stock 6.7%,
other 12.2%
Avg. participation rate 82%
Avg. deferral rate 6%
INVESTMENT ONLY
No. yrs. offering 10 svcs. to 21
401(k) plans
No. of existing 10 plans handled 236
Total 10 assets under management $513 million
Target market for 10: avg. plan $7 million
asset size
Services available:
* classes of securities managed Instutional, A & R shares
for plans
* investment styles offered Growth, core, value, fixed income
* primary investment style Growth
* frequency of market commentary Daily & quarterly
* frequency of investment results Semiannually
discussion
FRANKLIN TEMPLETON INVESTMENTS
San Mateo, CA
(800) 530-2432
www.franklintempleton.com
FULL SERVICE
Total no. of full-service plans 521
Total assets in full-service plans $2.5 billion
No. participants in full-service 110,000
plans
No. of funds available: 35+
managed internally
No. of funds available: 400+
managed externally
Avg. asset-allocation rates in stable value 18%, fixed
full-svc. Plans income 10%, equity funds 57.7%,
self-dir. 0.1%, co. stock 3.3%,
other 10.9%
Avg. participation rate 71%
Avg. deferral rate 7.3%
INVESTMENT ONLY
No. yrs. offering 10 svcs. to 24
401(k) plans
No. of existing 10 plans handled NA
Total 10 assets under management $15.1 billion
Target market for 10: avg. plan NA
asset size
Services available:
* classes of securities managed See footnote 7, below
for plans
* investment styles offered Value, growth, alternative
fixed income, equity, money
mkt., int’l/global & domest.
* primary investment style Same as above
* frequency of market commentary Varies
* frequency of investment results Varies
discussion
FRED ALGER MANAGEMENT
New York
(800) 223-3810
www.alger.com
FULL SERVICE
Total no. of full-service plans
Total assets in full-service plans
No. participants in full-service
plans
No. of funds available:
managed internally
No. of funds available:
managed externally
Avg. asset-allocation rates in
full-svc. Plans
Avg. participation rate
Avg. deferral rate
INVESTMENT ONLY
No. yrs. offering 10 svcs. to 10
401(k) plans
No. of existing 10 plans handled NA
Total 10 assets under management $1.3 billion
Target market for 10: avg. plan NA
asset size
Services available:
* classes of securities managed U.S. equity, balanced
for plans
* investment styles offered See footnote 8, below
* primary investment style Growth equity
* frequency of market commentary Monthly
* frequency of investment results Monthly
discussion
GREAT-WEST LIFE &
ANNUITY INSURANCE
Greenwood Village, CO
(800) 537-2033
www.gwrs.com
FULL SERVICE
Total no. of full-service plans 8,374
Total assets in full-service plans $20 billion
No. participants in full-service 894,252
plans
No. of funds available: 31
managed internally
No. of funds available: 1,863
managed externally
Avg. asset-allocation rates in stable value 19%, fixed
full-svc. Plans income 8%, equity funds 62%,
self-directed 0.3%, co. stock 4%,
other 6%
Avg. participation rate 72%
Avg. deferral rate 6%
INVESTMENT ONLY
No. yrs. offering 10 svcs. to
401(k) plans
No. of existing 10 plans handled
Total 10 assets under management
Target market for 10: avg. plan
asset size
Services available:
* classes of securities managed
for plans
* investment styles offered
* primary investment style
* frequency of market commentary
* frequency of investment results
discussion
THE HARTFORD
Simsbury, CT
(800) 874-2502
http://retire.hartfordlife.com
FULL SERVICE
Total no. of full-service plans 6,062
Total assets in full-service plans $4.2 billion
No. participants in full-service 225,000
plans
No. of funds available: 15
managed internally
No. of funds available: 158
managed externally
Avg. asset-allocation rates in stable value 19%, fixed
full-svc. Plans income 8%, equity funds 62%,
self-directed 0.3%, co. stock 4%,
other 6%
Avg. participation rate 70%
Avg. deferral rate NA
INVESTMENT ONLY
No. yrs. offering 10 svcs. to
401(k) plans
No. of existing 10 plans handled
Total 10 assets under management
Target market for 10: avg. plan
asset size
Services available:
* classes of securities managed
for plans
* investment styles offered
* primary investment style
* frequency of market commentary
* frequency of investment results
discussion
ING LIFE INSURANCE & ANNUITY
Hartford
(866) 723-4646
www.ing.com
FULL SERVICE
Total no. of full-service plans 17,222
Total assets in full-service plans $20.6 billion
No. participants in full-service 866,211
plans
No. of funds available: 118
managed internally
No. of funds available: 111
managed externally
Avg. asset-allocation rates in stable value 12.9%, fixed
full-svc. Plans income 17.4%, equity funds
66.8%, self-directed 0.1%,
co. stock 2.8%
Avg. participation rate 85% (9)
Avg. deferral rate NA
INVESTMENT ONLY
No. yrs. offering 10 svcs. to
401(k) plans
No. of existing 10 plans handled
Total 10 assets under management
Target market for 10: avg. plan
asset size
Services available:
* classes of securities managed
for plans
* investment styles offered
* primary investment style
* frequency of market commentary
* frequency of investment results
discussion
INGHAM GROUP **
Miami
(888) 458-5557 or (305) 671-2200
www.ingham.com
FULL SERVICE
Total no. of full-service plans 530
Total assets in full-service plans $650 million
No. participants in full-service 35,000
plans
No. of funds available: Unlimited
managed internally
No. of funds available: Unlimited
managed externally
Avg. asset-allocation rates in stable value 5%, fixed
full-svc. Plans income 20%, equity funds 60%,
self-directed 10%,
co. stock 2%, other 3%
Avg. participation rate 85%
Avg. deferral rate 6%
INVESTMENT ONLY
No. yrs. offering 10 svcs. to 14
401(k) plans
No. of existing 10 plans handled 300
Total 10 assets under management $250 million
Target market for 10: avg. plan $2 million
asset size
Services available:
* classes of securities managed All classes
for plans
* investment styles offered
* primary investment style
* frequency of market commentary
* frequency of investment results
discussion
INVESTMART **
Pittsburgh
(866) 866-6610
www.investmart.com
FULL SERVICE
Total no. of full-service plans 2,142
Total assets in full-service plans $5.7 billion
No. participants in full-service 252,116
plans
No. of funds available: 0
managed internally
No. of funds available: 500+
managed externally
Avg. asset-allocation rates in Varies by client
full-svc. Plans
Avg. participation rate NA
Avg. deferral rate NA
INVESTMENT ONLY
No. yrs. offering 10 svcs. to 25
401(k) plans
No. of existing 10 plans handled <50
Total 10 assets under management $100 million
Target market for 10: avg. plan $2 million
asset size
Services available:
* classes of securities managed All
for plans
* investment styles offered
* primary investment style
* frequency of market commentary
* frequency of investment results
discussion
JANUS CAPITAL GROUP
Denver
(800) 525-1068
www.janus.com
FULL SERVICE
Total no. of full-service plans
Total assets in full-service plans
No. participants in full-service
plans
No. of funds available:
managed internally
No. of funds available:
managed externally
Avg. asset-allocation rates in
full-svc. Plans
Avg. participation rate
Avg. deferral rate
INVESTMENT ONLY
No. yrs. offering 10 svcs. to Approx. 16
401(k) plans
No. of existing 10 plans handled NA
Total 10 assets under management $27.5 billion
Target market for 10: avg. plan NA
asset size
Services available:
* classes of securities managed Mutual funds w/various
for plans share classes & sep. acc.
* investment styles offered
* primary investment style
* frequency of market commentary
* frequency of investment results
discussion
JPMORGAN RETIREMENT
PLAN SERVICES **
Kansas City, MO
(800) 988-9084
www.plansponsorportal.com
FULL SERVICE
Total no. of full-service plans 273
Total assets in full-service plans $44.2 billion
No. participants in full-service 718,301
plans
No. of funds available: 114
managed internally
No. of funds available: Unlimited
managed externally
Avg. asset-allocation rates in Stable value 17%, fixed
full-svc. Plans income 5%, equity funds 41%,
self-directed 1%,
co. stock 29%, other 7%
Avg. participation rate 65%
Avg. deferral rate 7.8%
INVESTMENT ONLY
No. yrs. offering 10 svcs. to 14
401(k) plans
No. of existing 10 plans handled 87
Total 10 assets under management $7 billion
Target market for 10: avg. plan NA
asset size
Services available:
* classes of securities managed Mutual funds, separate
for plans accounts, commingled funds
* investment styles offered
* primary investment style
* frequency of market commentary
* frequency of investment results
discussion
LINCOLN FINANCIAL GROUP **
Fort Wayne, IN
(800) 454-6265; ext, 2688
www.lfg.com
FULL SERVICE
Total no. of full-service plans 12,164
Total assets in full-service plans $4.8 billion
No. participants in full-service 372,302
plans
No. of funds available: 37
managed internally
No. of funds available: 3,000+ nonproprietary funds
managed externally
Avg. asset-allocation rates in stable value 30%, fixed
full-svc. Plans income 20%, equity funds 50%,
self-directed <1%,
co. stock <1%
Avg. participation rate 71%
Avg. deferral rate 7%
INVESTMENT ONLY
No. yrs. offering 10 svcs. to
401(k) plans
No. of existing 10 plans handled
Total 10 assets under management
Target market for 10: avg. plan
asset size
Services available:
* classes of securities managed
for plans
* investment styles offered
* primary investment style
* frequency of market commentary
* frequency of investment results
discussion
LORD, ABBETT
Jersey City, NJ
(800) 256-9044
www.lordabbett.com
FULL SERVICE
Total no. of full-service plans 5,863
Total assets in full-service plans $916 million
No. participants in full-service 86,557
plans
No. of funds available: 25
managed internally
No. of funds available: NA
managed externally
Avg. asset-allocation rates in stable value 7.9%
full-svc. Plans fixed income 12.7%,
equity funds 79.4%
Avg. participation rate NA
Avg. deferral rate 6.1%
INVESTMENT ONLY
No. yrs. offering 10 svcs. to
401(k) plans
No. of existing 10 plans handled
Total 10 assets under management
Target market for 10: avg. plan
asset size
Services available:
* classes of securities managed
for plans
* investment styles offered
* primary investment style
* frequency of market commentary
* frequency of investment results
discussion
(1) Money market, stable value, fixed income domestic equities,
int’l equities (2) Intermediate bonds, large-cap growth & value,
mid-cap blend, small cap growth & value (3) Large cap equity, mid-cap
eq., small-cap eq., stable value, global fund, fixed income
(4) Large-cap core, large-cap growth, mid-cap growth, small-cap growth,
various sectors (5) Cash, equities (domestic & int’l), fixed income,
balanced, asset allocation, life-cycle funds (6) Int’l, aggressive
equity, small-cap, mid-cap growth value, growth, index & more.
(7) Stocks, bonds, cash through mutual funds, sep. accounts, commingled
trust & other investment prods. (8) All-cap growth equity, large-cap
growth equity, mid-cap growth equity, small-cap growth equity, socially
responsible growth equity, balanced (9) When ING conducts enrollment
sessions.
** Also provides recordkeeping-only services; see listing at
www.cfo.com.
*** On November 17, 2003, Cigna Corp. announced it would sell its
retirement operations to Prudential Financial Inc.
CFO BUYER’S GUIDE 401 (k) providers
FOR THE RECORD (KEEPERS) WHILE MANY OF THE COMPANIES listed on the
Buyer’s Guide charts offer recordkeeping services, we have broken out
companies that concentrate in this area (but which are not full-service
providers) so as to present a data points for them. All of the
companies listed below have alliances with money managers.
ACCURECORD
Engelwood, NY
(800) 777-3770
www.accurecord.com
RECORDKEEPING
No. yrs. offering RK svcs. to 401(k)s 22
No. RK-only plans 3,091
No. participants in RK-only plans 213,549
Target mkt. for RK-only svcs. ([dagger]) S, M, L
Avg. participation rate in RK-only plans NA
Avg. deferral rate in RK-only plans NA
ADP RETIREMENT SERVICES
Roseland, NJ
(800) 432-401K
www.adp40lk.com
RECORDKEEPING
No. yrs. offering RK svcs. to 401(k)s 15
No. RK-only plans 30,755
No. participants in RK-only plans 1.3 million
Target mkt. for RK-only svcs. ([dagger]) S, M, L
Avg. participation rate in RK-only plans NA
Avg. deferral rate in RK-only plans NA
BISYS RETIREMENT SERVICES
Dresher, PA
(215)648-8000
www.bisysretirement.com
RECORDKEEPING
No. yrs. offering RK svcs. to 401(k)s 21
No. RK-only plans 20,000
No. participants in RK-only plans 1.8 million
Target mkt. for RK-only svcs. ([dagger]) S, M, L
Avg. participation rate in RK-only plans NA
Avg. deferral rate in RK-only plans NA
CERIDIAN RETIREMENT
PLAN SERVICES
St. Petersburg, FL
(877) 677-7401
www.ceridian-rps.com
RECORDKEEPING
No. yrs. offering RK svcs. to 401(k)s 23
No. RK-only plans 2,325
No. participants in RK-only plans 435,000
Target mkt. for RK-only svcs. ([dagger]) S, M, L
Avg. participation rate in RK-only plans 85%
Avg. deferral rate in RK-only plans 4.5%
CPI QUALIFIED PLAN
CONSULTANTS
Great Bend, KS
(800)279-9916; ext. 765
www.cpigpc.com
RECORDKEEPING
No. yrs. offering RK svcs. to 401(k)s 24
No. RK-only plans 2,609 (10)
No. participants in RK-only plans 564,673
Target mkt. for RK-only svcs. ([dagger]) S, M, L
Avg. participation rate in RK-only plans 72.3%
Avg. deferral rate in RK-only plans 6%
HEWITT ASSOCIATES
Lincolnshire, IL
(847) 295-5000
www.hewitt.com
RECORDKEEPING
No. yrs. offering RK svcs. to 401(k)s 24
No. RK-only plans 170
No. participants in RK-only plans 5.7 million
Target mkt. for RK-only svcs. ([dagger]) M, L
Avg. participation rate in RK-only plans NA
Avg. deferral rate in RK-only plans NA
([dagger]) S = 1 to 199 employees; M = 1,000 to 4,999 employees;
L = 5,000+ employees (10) All recording clients receive administrative
services; has no clients for which it does just recordkeeping.
Special thanks to Dalbar Inc. of Boston for its help in putting
together this survey.
CFO internet address directory
Ace Group www.acelimited.com
Aetna www.aetna.com
American Dental Association www.ada.org/DRPLAN
American Express www.AmericanExpress.com/BusinessExtrAACard
Ariba www.ariba.com/service
Arizona State University www.wpcareymba.com
Best Software www.bestsoftware.com
Crowe Chizek and Company www.crowechizek.com/curve
EMCOR www.emcorgroup.com
Expedia www.expediacorp.com/da2
Fidelity Investments www.fidelity.com/workplace
FRx Software www.frxsoftware.com/brilliantcfo
Grant Thornton www.grantthornton.com
Hewitt Associates www.hewitt.com/results
Highwoods Properties www.highwoodspreserve.com
IBM www.ibm.com/services/thinking
Ikon www.ikon.com/choice
Jefferson Wells www.jeffersonwells.com/sarbanes
KeyBank www.key.com/industrysolutions
Mercedes-Benz MB2B.MBUSA.com
Mellon Bank www.mellon.com
Microsoft Business Solutions www.microsoft.com/BusinessSolutions/Insight
Microsoft Placeware www.microsoft.com/takeyourseat
Morgan Stanley www.morganstanley.com
Paisley Consulting www.paisleyconsulting.com
PricewaterhouseCoopers www.pwc.com/newrealities
PRIDCO www.pridco.com
Principal Financial Group www.principal.com
Robert Half International www.roberthalfmr.com
SAP www.sap.com/ideas
SAS www.sas.com/compliance
Sprint PCS www.sprint.com/facts
Sungard www.availability.sungard.com
UBS Warburg www.ubs.com
Union Bank of California www.uboc.com
UnitedHealth Group www.myiplan.com
USI Real Estate www.usirealestate.com/whitepaper
Wausau Insurance www.wausau.com
Wharton School of Business execed.wharton.upenn.edu/4030
Editor’s Note:
A list of providers in Part 1 (listed alphabetically from A-L) begins on page 62. Part 2 of the 401(k) guide (M-Z) will appear in the May issue.
ROY HARRIS (ROYHARRIS@CFO.COM) IS SENIOR EDITOR AT CFO.
COPYRIGHT 2004 CFO Publishing Corp.
COPYRIGHT 2004 Gale Group
