401(k)

Retirement planning and retirement plans are key factors in mutual fund sales and offer an opportunity for growth for the industry, a new Investment Company Institute report suggests.

The City of New York's 457 deferred compensation plan, which has $250 million in assets under management, in November will begin offering employees a separate account managed by Citizens Advisers of Portsmouth, N.H. Citizens is the investment adviser to the socially- and environmentally- responsible Citizens Funds.

Employees in defined contribution plans invested their money wisely enough to reap an average return of 11 percent between 1985 and 1995, on par with the 12 percent return that defined benefit pension plan portfolio managers averaged in those 11 years, according to KPMG, the New York accounting and consulting firm. KPMG based its figures on Form 5500 series reports that companies are required to file with the Internal Revenue Service. KPMG published its findings in the August issue of "Benefits Spectrum", a newsletter it sends to clients.

Scudder Kemper Investments of Boston has signed a deal with Financial Engines of Palo Alto, Calif., the Internet investment advisor, to provide online investment advice to sponsors of especially mid-sized defined contribution plans. The deal was announced August 2.

Fidelity Investments Institutional Services Co. of Boston wants to expand sales of its 401(k) and other defined contribution products through financial advisors with new enrollment materials designed to be more attractive and comprehensible than the materials they replace.

The U.S. Department of Labor in conjunction with the Investment Company Institute and other trade groups is urging employers to use a new form that requires 401(k) providers to make detailed disclosures about their fees.

It may no longer be enough for a mutual fund company to supply defined contribution plan participants with a trusted brand name, a diversified portfolio of funds, strong performance and a glossy investment kit.

Why would a mutual fund company want to be bothered offering a 401(k) plan to a company with fewer than 100 employees when a 401(k) account at a single Fortune 500 company can mean tens of millions of dollars of assets under management?

T. Rowe Price of Baltimore, Md. is using Extranet technology to provide administrative services and reporting for its 1,000 401(k) plan sponsors.

"We should send letters to the parents of the Gen X'ers telling them to tell their kids to join their 401(k) plans,'" Kathy Sharpless, managing director and director of communications of Putnam Investments, remembers a dean from a leading college saying at a 401(k) roundtable that Putnam held a year ago.

Salomon Smith Barney and SSB Citi Asset Management Group, both of New York, have introduced a new 401(k) program aimed at small to mid-size companies. Called k Choice, it is Citigroup's first 401(k) program to offer mutual funds from all three of SSB Citi Asset Management's fund families: Salomon Brothers Mutual Funds, Smith Barney Mutual Funds and CitiFunds.

New York Life Benefit Services does not care how old its customers are.

Both Credit Suisse Asset Management and Merrill Lynch have chosen 401(k) partners to give Internet-based investment advice and guidance to participants of 401(k) plans for which Merrill and Credit Suisse provide management services.

Fidelity Investments has developed a new 401(k) plan for small non-profit organizations. The new product, MaximumK, was created by Fidelity Investments Tax-Exempt Services Co. MaximumK is designed for companies with less than 1,000 employees and up to $10 million in assets. There are about 15,000 organizations in the U.S. that fit this profile, according to Fidelity. These groups include physician practices, research organizations, small church groups and labor unions, Fidelity said. Fidelity says it plans to keep costs low by eliminating customization usually provided to larger plans. Sponsors are given a choice of up to 25 Fidelity funds. MaximumK was offered to a limited group of organizations earlier in the year. It began selling the product generally May 5. A dedicated sales force is selling the plan.

McLeodUSA of Cedar Rapids, Iowa, has selected MassMutual Retirement Services of Springfield, Mass., as the supplier for McLeod's $50 million, 4,000-participant 401(k) plan.

Americans pay scant attention to a future employer's 401(k) or other retirement savings plan when they accept a new position, a survey by Fidelity Investments of Boston has found.

Ford Motor Co. of Detroit has made Fidelity PortfolioPlanner, an online retirement tool sold by Fidelity Investments of Boston, available to all Ford employees. PortfolioPlanner helps 401(k) investors with retirement planning and asset allocation decisions, and gives them examples of model portfolios.

First Trust Corp. of Denver has created a program whereby employers can offer employees as many as 2,000 mutual funds from 200 fund families for their 401(k), 403(b) or 457 savings plans. First Trust is calling the new program OptionsPlus.

Mutual fund companies have found it difficult to make major inroads in the small business market, but Fidelity Investments is trying to make headway by selling and administering plans directly over the Internet.

PNC Bank has made several improvements, including the addition of new fund families, to Vested Interest, its bundled 401(k) product.