E-mail Used as Expanding Part of 401(k) Educational Effort

February 6, 2001 (PLANSPONSOR.com) - E-mail is now being used as a 401(k) educational tool by American Express Retirement Services.

The provider uses e-mail as part of a pre-conversion educational effort for workers at C.H. Robinson Worldwide, Inc., which has 3,600 employees in a global network of 136 offices.
 
American Express said this is “one of the first” times e-mail was used to communicate changes in advance of a change in service providers.
 
In the campaign, Robinson workers get weekly e-mails about changes in retirement provisions, as well as about changes in 401(k) coverage, and savings and investment programs. The messages contain color, graphics and links that are “visually more appealing than simple email text,” the provider said.
 
The e-mails allow employees to link directly to C.H. Robinson’s intranet pages that contain more information on the selected topic.
 
Growing Trend
 
Amex’s use of e-mail to communicate employee benefit changes is part of a sea change in how financial and benefit information is being disseminated.  An upcoming PLANSPONSOR magazine article cites a January 2001 survey by the International Foundation of Employee Benefit Plans which found that one-third of plan sponsors currently make employee benefits information available online. Another third of sponsors surveyed said they plan to have benefits information online in the next year.
 
One driving force for using the Web to disseminate 401(k) and other benefits changes is cost. Studies so far clearly show savings have been achieved. Greenwich Associates found from its studies that benefits staffing and administrative employment has “been trending downward for years,” according to Bill Jarvis, a Greenwich Associates principal.

At corporate funds, he said there are now 1.9 “full time equivalents” (FTEs) handling benefit communications, down from 2.2 last year.  At public funds, there are 4.7 FTEs compared to 4.5 in 2000, and at endowments there are 1.2 FTEs compared to 1.0 last year.
 
“The Internet can achieve savings in lieu of a call center since experience has shown that about 70% to 80% of participant questions are often the same. So the net can liberate a sizeable number of relatively highly-trained people from that role,” Jarvis said.
 

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Participants Eye Fed, Buy High?

February 5, 2001 (PLANSPONSOR.com) - Participants had their eye on the markets in January, but might be buying high and selling low, according to transfer activity reflected in the Hewitt 401(k) Index.

Trading activity peaked on January 3 and 4, with roughly 3 times the normal trading volume on those days.

However, net participant transfers flowed into equities on January 3, a day when the S&P 500 rose more than 5%, and the NASDAQ soared more than 14% on news of the surprise Fed rate cut.

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Participants heading toward equities on that day would likely have been buying at a relatively high price, since most 401(k) mutual fund trading is processed at the closing NAV, or net asset value, at the close of business. 

About Face

On January 4 participants did an about face, again with a relatively high trading volume, but moving toward fixed income on a net basis.  With major indexes largely unchanged on that day, participants might have avoided selling “locking in their losses” by selling at a low price. 

Overall the Hewitt 401(k) Index found that on most days during the month, when the market was up, most participant money headed toward stocks, and when markets were down, the majority of transfers headed toward fixed income.

Fed Focused

Interest rate moves at the Federal Reserve appeared to serve as triggers, with above average trading activity occurring only on or immediately after the Fed cut rates in January.

Contributions continued to flow heavily toward stocks, attracting nearly 80% of new monies.

At the end of January, participant balances were still heavily weighted toward company stock, which again represented the largest overall participant allocation.  Other allocations included:

  • 29.04% – company stock
  • 26.65% – large cap US stocks
  • 17.37% – GIC/stable value
  • 5.84% – Balanced
  • 4.36% – mid cap US stocks
  • 3.77% – Lifestyle
  • 3.69% – international
  • 2.86% – money market
  • 2.40% – bonds
  • 2.44% – small cap US stocks
    1.12% – specialty/sector funds
  • 0.32% – self-directed window
  • 0.14% – emerging markets.

The Hewitt 401(k) index is based on data collected daily from 1.5 million 401(k) participants with approximately $68 billion in collective assets.


 

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