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401(k) Study - SHRM
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August 25, 2010 SHRM Poll: 401(k) Investment Education and Advice Organizations Are Providing to Plan Participants
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Page 1: Shrm 401(K) Study

August 25, 2010

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

Page 2: Shrm 401(K) Study

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.

2

Page 3: Shrm 401(K) Study

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

Yes, 82%

No, 14%

Not applicable; the plan sponsor does

not offer 401(k) plans, 4%

3

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.

Page 4: Shrm 401(K) Study

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

6%

52%

24%

19%

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

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

4

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.

Page 5: Shrm 401(K) Study

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

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 (for

example, individualized recommendations to invest, purchase or sell

investments and funds based on the particular needs of a plan

participant)

39% 47% 13%

Investment advice provided through an independent third

party (for example, Ibbotson or Financial Engines), where a third party

serves in an ERISA fiduciary capacity23% 59% 18%

Investment advice provided by or through an independent third

party (for example, Ibbotson or Financial Engines), where a third party

does not serve in an ERISA fiduciary capacity21% 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.

Page 6: Shrm 401(K) Study

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

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.

6

Page 7: Shrm 401(K) Study

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

Yes, 87%

No, 7%Unsure, 6%

7

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

Note: n = 436.

Page 8: Shrm 401(K) Study

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

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

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)

49%

60%

80%

87%

90%

98%

38%

33%

16%

11%

7%

1%

13%

7%

4%

3%

3%

1%

Yes No Unsure

8

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.

Page 9: Shrm 401(K) Study

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

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

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

9

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.

Page 10: Shrm 401(K) Study

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

Yes, 51%No, 37%

Unsure, 12%

10

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.

Page 11: Shrm 401(K) Study

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

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

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

11

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.

Page 12: Shrm 401(K) Study

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

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.

12

Comparison by Organization’s Operations and Sector

Page 13: Shrm 401(K) Study

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

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

Asset class allocation

Contribution level

Fund investments

88%

90%

94%

6%

4%

2%

6%

6%

4%

Yes No Unsure

13

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.

Page 14: Shrm 401(K) Study

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

Yes, 7%

No, 70%

Unsure, 22%

14

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.

Page 15: Shrm 401(K) Study

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

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

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

15

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.

Page 16: Shrm 401(K) Study

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

0%

10%

20%

30%

40%

50%

60%

Yes, other changes in the service provision anticipated

No changes in the service provision anticipated

Unsure

1%

56%

43%

16

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.

Page 17: Shrm 401(K) Study

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

Demographics: Organization Industry

Industry

Health 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%

17

Note: n = 472. Percentages do not total 100% due to rounding.

Page 18: Shrm 401(K) Study

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

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%

18

Note: n = 472. Percentages do not total 100% due to rounding.

Page 19: Shrm 401(K) Study

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

Demographics: Organization Sector

4%

11%

20%

24%

42%

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

Other

Government sector

Nonprofit organization

Publicly owned for-profit organization

Privately owned for-profit organization

19

Note: n = 472. Percentages do not total 100% due to rounding.

Page 20: Shrm 401(K) Study

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

Demographics: Organization Staff Size

4%

21%

34% 34%

7%

0%

10%

20%

30%

40%

1 to 99 employees 100 to 499 employees 500 to 2499 employees 2500 to 24999 employees

25000 or more employees

20

Note: n = 282

Page 21: Shrm 401(K) Study

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

Demographics: Other

21

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

Page 22: Shrm 401(K) Study

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

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

22

Methodology

For more poll findings, visit:

www.shrm.org/surveys

Follow us on Twitter:

http://twitter.com/SHRM_Research


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