Benefits November 19, 2003

Participants Have More, But Don't Appear to be Taking Advantage

November 19, 2003 (PLANSPONSOR.com - Participants have more investment options available to them than they did a year ago - but they don't appear to be taking advantage of it, according to PLANSPONSOR's seventh annual Defined Contribution Survey.
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A year ago, the average number of fund offerings was 15.94, but it ticked up to 16.68 in this year’s survey of more than 3,200 plan sponsors. However, despite access to additional funds, participants continued to invest in just 4.64, on average, compared with 4.65 a year ago (see Image Conscious ).

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Advice “Slice”

Employers are clearly responding to employee concerns about their retirement investments. Nearly half, 43.5%, of this year’s employer respondents offered participants access to investment advice, an increase from the 37% who did so in 2002. Smaller programs were noticeably more likely to provide access to financial advice than larger plans.

Another emerging trend was found in that 41% of those employers offering participants access to advice are doing so through their defined contribution providers – a trend likely related to the burgeoning number of providers that have crafted advice solutions compatible with the Department of Labor’s so-called SunAmerica decision in December 2001, which indicated that it is okay for plan providers to offer investment advice, even on their own investment products, as long as that advice is generated by an independent third-party vendor.

Just 26% of the plan sponsor respondents currently offering advice do so from the major online advice providers – combined, while a comparable 25% do so from a planner outside the plan, and 13% from another source. Nearly two-thirds (61.7%) of plan sponsors that offer advice pick up the tab for the service.

Plan Designs

Another option widely touted as a participation driver is automatic enrollment, though only 18% of this year’s respondents offered such a program, roughly the same percentage as in last year’s survey. Larger plans were noticeably more inclined to do so than smaller programs. More than a quarter of plans with more than $500 million in assets did so, while, a year ago, less than one in five of that size did.

Similarly, self-directed brokerage accounts (SDBAs) continued to be offered by roughly one in four plan sponsors, while one in five made that option available via the Internet.

Enron does not appear to have had much impact on the presence of employer stock in these programs. Holdings of company stock were slightly less common-offered by just 12.1% of this year's respondents, compared to 14.7% in last year's survey. However, the average percentage participant investment in that asset class rose to 25% among 2003 survey respondents from just 21.8% a year ago, and constituting 12.3% of the total outstanding shares rather than the 9.3% reported in last year's data.

A growing number of providers have emerged touting their ability to offer an investment policy product, and one might well have expected to see a rise in the number of employers with a written statement of investment policy. However, the number with one already in place remained almost unchanged from a year ago, with only about two-thirds of plan sponsors reporting having one in place. Larger plans were more likely to have one (81% of the largest programs did), but less than 60% of plans with less than $5 million in assets did.

Tomorrow - what employers want.

Compliance November 18, 2003

EBSA Rakes in $1.4 Billion in FY 2003

November 18, 2003 (PLANSPONSOR.com) - The Employee Benefits Security Administration (EBSA) has cracked its enforcement whip to the tune of $1.4 billion in fiscal year 2003.
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>EBSA’s 2003 haul represented a 60% increase over the previous year’s results and came from a variety of different enforcement actions.   This included civil investigations, criminal investigations and voluntary fiduciary correction program (VFCP) applications, according to a news release.

>While the number of civil investigations closed may have dropped 13.64% during the past year, the percentage of civil investigations closed with results was up 18.28%.   EBSA attributes this trend to “improved targeting and more resource-intensive investigations.”    Not seeing a drop was the number of criminal investigations closed, up 13.64% from FY 2002, and the number of those investigations closed with guilty pleas or convictions, up 16.33%.

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>Additionally, EBSA’s VFCP, which encourages self-correction of benefit violations, saw a 336% increase in applications in FY 2003 and more than $8.7 million in restored assets to employee plans, an increase of 348%.

>The record windfall for the Department of Labor (DoL) division comes through its enforcement of the Employee Retirement Income Security Act (ERISA).   EBSA’s oversight authority extends to approximately 730,000 pension plans and another 6 million health and welfare plans that cover approximately 150 million workers and their dependents and include assets of nearly $4 trillion.

>Further, the increased enforcement activities reaped rewards for other DoL divisions.   Total back wages including overtime that were collected by the Department’s Wage and Hour division for workers in FY 2003 increased by 21% over the previous year, representing an 11-year high.   The number of workers receiving back wages jumped from 263,593 workers to 342,358 – nearly a 30% increase in one year.

Also recording an increase were the enforcements of the Occupational Safety and Health Administration (OSHA).   OSHA cited employers for 83,760 violations in FY 2003, a nearly 8% increase with nearly 60,000 of those violations were considered serious, an 11% increase over FY 2002.   In all, the enforcement appears to have paid off as the most recent data available show the rates of workplace injuries and fatalities fell to the lowest point ever in 2002.

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