Benefits August 16, 2007

Spectrem: Most 401(k) Plan Participants not Satisfied with Provider Web Site

August 16, 2007 (PLANSPONSOR.com) - One quarter of 401(k) plan participants are satisfied with their plan Web site and about 65% visit their plan provider's Web site once a month, a recent survey from the Spectrem Group found.
Reported by

The survey of about 400 plan participants showed that three-quarters were somewhat satisfied or are very dissatisfied with their provider’s Web site. Of those mentioning a specific reason for their lukewarm comfort level, a preference for using hard-copy materials (20%) or for dealing with people (8%) were cited most often. Older participants were more likely than younger participants to prefer a mailed copy.

Never miss a story — sign up for PLANSPONSOR newsletters to keep up on the latest retirement plan benefits news.

Some of the reasons for preferring paper over electronic materials may have to do with safety. Nearly nine in 10 participants say they are either “very” (44%) or “somewhat” (41%) concerned over the electronic transmittal of their personal information.

Participants with larger account balances tend to visit their plan’s Web site more frequently. While three-fourths (76%) of those with balances greater than $50,000 visit the Web site at least once a month, fewer than one-half (46%) of those with smaller balances were likely to visit even once.

Those with balances under $50,000 (19%) were more likely than those with greater balances (7%) to investigate plan features. Participants with balances of $50,000 and above were more likely to use it for transferring funds among investment options. <$50,000, 6%; <$50,000, 11%) or using the financial/retirement planning tools (<$50,000, 3%; <$50,000, 11%) provided.

When e-mail alerts are relevant to retirement funds, such as informing when a fund moves up or down, 63% of participants believe this would be at least somewhat important. Nearly one in five (17%) felt these reminders would be very important.

While this pattern was similar across demographic segments, those under the age of thirty-five (31%) were the most likely to feel that these alerts would be very important.

Those with account balance greater than $50,000 and those over age 35 are most likely to include their retirement plan Web site in their “favorites folder.”

The most common reason for plan sponsors to visit their own Web sites is to get information for participant questions (15%), followed by checking participant balances/activity (13%), and to make administrative changes (12%).

The most common capability of plan sponsor Web sites is for downloading forms (72%), followed by fund performance reports (71%), confirmation of transactions (63%), and online enrollment (59%).

More information is at info@spectrem.com or by phone at 312.382.8284.

Benefits August 15, 2007

Study: Public Pensions Wrong Place for Divestment

August 15, 2007 (PLANSPONSOR.com) - No one can argue that using public pension plan divestment as a tool to help stop genocide is well intentioned, but the effort may still not be the best thing for the plans, a research paper argued.
Reported by

Author Alicia H. Munnell, of the Center for Retirement Research at Boston College, argues in ” Should Public Plans Engage in Social Investing ?” that pension programs are ill suited as tools to bring about social change in other countries (See Cover: Doing the Right Thing? ).

Get more!  Sign up for PLANSPONSOR newsletters.

“Even assuming that divestment is an effective mechanism to stop genocide and reduce terror risk and that state legislatures and pension fund boards are the right place to make foreign policy, the issue remains whether pension funds are an appropriate vehicle for implementing that policy,” Munnell wrote. “The answer seems unquestionably ‘no’. “

One big reason: Divestment policies may well put plan sponsors at odds with the notion that a primary function is to generate the highest returns for their participants (See Public Pension Fund Divestment: A Fiduciary Risk? ).” In many instances, the environment sur­rounding public pension fund investing is politically charged and encouraging public pension fund trust­ees to take ‘their eyes off the prize’ of the maximum return for any given level of risk is asking for trouble,” Munnell claimed.

Plus, she pointed out, any plan losses will have to be made up not by those making the political decisions now but future generations of taxpayers.

In the paper, Munnell also asserted:

  • the academic literature suggests that social investing screens are likely to have very little impact on the target company and that the impact on the pension fund depends on the scale of the screen. “Overall, the results show that the differences in risk-adjusted returns be­tween the screened port­folios and unscreened portfolios are negligible and in most cases zero,” Munnell wrote.
  • Requirements from the Employee Retirement Income Security Act (ERISA) that plan sponsors owe participants a duty to act with prudence and loyalty to participants’ interests have kept the social investing issue out of the private pension realm. ” Thus, ERISA fiduciary law has effectively constrained social investing in private sector defined benefit plans. Social investing is a public pension fund phenomenon,” she wrote.
  • Forcing state plans into divestment postures may run afoul of legal rulings that have held divestment policies unconstitutional for infringing on the federal government’s right to conduct foreign policy (See Court Blocks Illinois Sudan Law ).
  • Using a pension plan as a political tool “is a slippery slope” that may eventually grow in scope to the point where it can severely impact performance.“At some point, the administrative costs of broad-based divestiture will balloon and excluding large numbers of companies will definitely hurt returns,” she contended.

The study is here .

«