august 25, 2010 shrm poll: 401(k) investment education and advice organizations are providing to...

August 25, 2010

SHRM Poll: 401(k) Investment Education and Advice Organizations Are Providing to Plan Participants

401(k) Investment Education and Advice | ©SHRM 2010

Introduction

• The 401 (k) plans covered in this poll include both traditional employer-sponsored 401 (k) plans as well as Roth 401 (k) plans.

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401(k) Investment Education and Advice | ©SHRM 2010 3

Yes; 82%

No; 14%

Not applicable; the plan sponsor does not offer 401(k) plans; 4%

Does your organization sponsor a 401(k) plan?

Note: n = 578. Privately owned for-profit organizations (94%) were more likely than nonprofit (51%) and government (39%) sectors to report that they sponsor a 401(k) plan.


Unsure about the number of participants in our 401(k) plans

501 or more plan participants

151 to 500 plan participants

1 to 150 plan participants

0% 10% 20% 30% 40% 50% 60%

6%

52%

24%

19%

How many participants are in your 401(k) plan(s)?

Note: n = 471. Percentages do not total 100% due to rounding. Only respondents who serve as representatives of a 401(k) plan sponsor were included in this analysis.

Publicly owned for-profits (73%) were more likely than privately owned for-profits (45%) and nonprofits (44%) to have 501 or more participants in their 401 (k) plan.


Does the plan you represent provide or make available any of the following services to 401(k) plan participants?

5

Yes No Unsure

Investment advice provided directly by the plan you represent,as defined under applicable DOL rules and regulations (forexample, individualized recommendations to invest, purchase or sellinvestments and funds based on the particular needs of a planparticipant)

39% 47% 13%

Investment advice provided through an independent thirdparty (for example, Ibbotson or Financial Engines), where a third party serves in an ERISA fiduciary capacity

23% 59% 18%

Investment advice provided by or through an independent thirdparty (for example, Ibbotson or Financial Engines), where a third partydoes not serve in an ERISA fiduciary capacity 21% 60% 19%

Note: n = 423 - 435. Percentages do not total 100% due to rounding. Only respondents who serve as representatives of a 401(k) plan sponsor were included in this analysis.


Other services the plan provides or makes available to 401(k) plan participants

• Retirement planning tools online.• Pay stub modeling; investment advisors available to offer fund selections.• Our financial advisor provides investment information.• Offer investment options/assistance with directives and account management, but refer employees to personal

financial planner for advice.• Local investment broker provides training to new employees and is available bi-weekly to employees to answer

questions.• Information is provided in the quarterly statements that are sent to participants. We are also in the works of doing an

education program.• General financial services advice, which includes how to incorporate other types of retirement savings tools and

how to use them with a 401(k).• Financial and retirement advice provided to employees at no cost.• Annual education and helpful web site.• Advice is offered through a bank that has investment professionals.• A financial representative (not associated with the plan sponsor) comes in quarterly.


Yes; 87%

No; 7% Unsure; 6%

Does the plan provide or make available investment education to 401(k) plan participants?

Note: n = 436.


Automated voice response system

Individual sessions

Group seminars

Call center or helpdesk

Computer modeling (including web-based interactive tools)

Brochures or other written materials (e.g., mailings and online access)

0% 10% 20% 30% 40% 50% 60% 70% 80% 90%100%

49%

60%

80%

87%

90%

98%

38%

33%

16%

11%

7%

1%

13%

7%

4%

3%

3%

1%

Yes No Unsure

In what format is the investment education presented?

Note: n = 343-366. Percentages do not total 100% due to rounding. Only respondents whose plan provides or makes available investment education to 401(k) participants were included in this analysis.


Non-individualized asset allocation model

Investment alternatives--highlighting specific funds available in the plan

Interactive investment materials (e.g., questionnaires or software that help plan participants estimate future retirement income needs)

General financial and investment information (e.g., determining investment time horizons and assessing risk tolerance)

Investment alternatives - listing all funds available in the plan

Plan information (e.g., the terms of the plan, benefits of plan participation and increasing plan contributions)

59%

61%

87%

94%

97%

97%

17%

27%

8%

2%

1%

1%

24%

12%

5%

4%

2%

2%

Yes No Unsure

Which of the following are the subjects of that investment education?

Note: n = 339-359. Only respondents whose plan provides or makes available investment education to 401(k) participants were included in this analysis.


Yes; 51%

No; 37%

Unsure; 12%

Does the plan provide or make available investment advice to 401(k) plan participants?

Note: n = 421.

Organizations with U.S.-based operations only were more likely than multinational organizations to report that their plan provided or made available investment advice to 401(k) plan participants.


Group seminars

Managed accounts (i.e., a participant’s 401(k) investments are professionally managed by the plan)

Individual sessions

Call center or helpdesk

Computer modeling (including web-based interactive tools)

Brochures or other written materials (e.g., mailings and online access)

57%

68%

71%

74%

81%

82%

38%

20%

23%

23%

13%

15%

5%

12%

6%

3%

5%

3%

Yes No Unsure

In what format is the investment advice presented?

Note: n = 191-202. Percentages do not total 100% due to rounding. Only respondents whose plan provides or makes available investment advice to 401(k) participants were included in this analysis.


In what format is the investment advice presented?

• Individual Sessions (by operations): Organizations with operations based only in the United States (76%) were more likely than multinational organizations (57%) to report using individual sessions to present investment advice.

• Individual Session (by sector): Nonprofits (88%) were more likely than publicly owned for-profits (53%) to report using individual sessions to present investment advice.

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Comparison by Organization’s Operations and Sector


Asset class allocation

Contribution level

Fund investments

0% 10% 20% 30% 40% 50% 60% 70% 80% 90% 100%

88%

90%

94%

6%

4%

2%

6%

6%

4%

Yes No Unsure

Which of the following are the subjects of that investment advice?

Note: n = 205-210. Only respondents whose plan provides or makes available investment advice to 401(k) participants were included in this analysis.


Yes; 7%

No; 70%

Un-sure; 22%

Does the plan allow for direct marketing by the plan’s service provider(s) of products or services outside of those offered within a 401(k) plan to participants?

Note: n = 412. Percentages do not total 100% due to rounding.


Level-fee-based advice, pursuant to the PPA-eligible investment advice arrangement (provisions include, among other things, that compensation to the adviser does not vary depending on the basis of any investment option recommended).

Computer-model-based advice, pursuant to the PPA-eligible investment advice arrangement (provisions include, among other things, that the computer model has been certified by an eligible investment expert and is audited annually by an independent auditor)

15%

42%

8%

6%

33%

17%

44%

35%

Yes, currently provide No, do not currently provide but plan to provide

No, do not currently provide and do not plan to provide Unsure

Which of the following practices, if any, does your organization currently provide or anticipate providing for investment advice services to 401(k) plan participants, in light of DOL regulations recently published under the Pension Protection Act (PPA)?

Note: n = 388-391.


Yes, o

ther

cha

nges

in th

e se

rvice

pro

vision

ant

icipa

ted

No ch

ange

s in

the

serv

ice p

rovis

ion a

ntici

pate

d

Unsur

e0%

10%

20%

30%

40%

50%

60%

1%

56%

43%

In addition to your responses on computer-model-based and level-fee-based advicearrangements, do you anticipate making any other changes to how you provide investment advice services to 401(k) plan participants in light of DOL regulations recently promulgated under the Pension Protection Act (PPA)?

Note: n = 373.


Demographics: Organization Industry

IndustryHealth care, social assistance (e.g., nursing homes, EAP providers) 15%

Manufacturing—other 12%

Services—professional, scientific, technical, legal, engineering 9%

Government/public administration—federal, state/local, tribal 7%

Insurance 7%

Financial services (e.g., banking) 6%

Educational services/education 6%

Construction, mining, oil and gas 5%

Retail/wholesale trade 4%

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Demographics: Organization Industry (continued)

IndustryOther services (e.g., nonprofit, church/religious organizations) 4%

Utilities 4%

Real estate, rental, leasing 4%

Arts, entertainment, recreation 3%

Consulting 2%

Services—accommodation, food and drinking places 2%

Telecommunications 2%

Transportation, warehousing (e.g., distribution) 2%

Manufacturing—auto/auto-related 2%

High-Tech 2%

Biotech 1%

Publishing, broadcasting, other media 1%

Pharmaceutical 1%

Association—professional/trade 0%

Other 4%

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Demographics: Organization Sector

Other

Government sector

Nonprofit organization

Publicly owned for-profit organization

Privately owned for-profit organization

0% 10% 20% 30% 40% 50%

4%

11%

20%

24%

42%

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Demographics: Organization Staff Size

1 to

99

emplo

yees

100

to 4

99 e

mplo

yees

500

to 2

499

emplo

yees

2500

to 2

4999

em

ploye

es

2500

0 or

mor

e em

ploye

es

0%

10%

20%

30%

40%

4%

21%

34% 34%

7%

20

Note: n = 282


Demographics: Other

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Note: n = 490

U.S.-based operations 74%

Multinational operations 26%

Single-unit company: companies in which the location and the company are one and the same

35%

Multi-unit company: companies that have more than one location

65%

Multi-unit headquarters determines HR policies and practices

61%

Each work location determines HR policies and practices

2%

A combination of both the work location and the multi-unit headquarters determine HR policies and practices

37%

Is organization a single-unit company or a multi-unit company?

Are HR policies and practices determined by the multi-unit corporate headquarters, by each work location or both?

Does the organization have U.S.-based operations (business units) only or does it operate multinationally?

Note: n = 473

Note: n = 329

• 20% of organizations indicated that employees at their work location were unionized.

Note: n = 468


SHRM Poll: 401(k) Investment Education and Advice

• Response rate = 21%• Sample comprised of 578 randomly selected HR

professionals from SHRM’s membership.• Margin of error is +/- 4%• Survey fielded July 20 – August 2, 2010

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Methodology

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august 25, 2010 shrm poll: 401(k) investment education and advice organizations are providing to...

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