Most retirement plan sponsors are responding to the continuing revelations of mutual fund trading violations by shuffling their investment option lineup, according to a survey of CFOs from Financial Executives International.
FEI states that a "significant minority" of companies (23%) already has made changes to the investment options available to employees in their 401(k) plans, and another 29% are considering changes. The remaining 48% dont anticipate making changes at this time.
"Were seeing some of the wide reaching ramifications of mutual fund wrongdoing," reported Colleen Sayther, president and CEO of FEI. "Companies have some hard decisions to make in terms of whats a reasonable response to an allegation about a 401(k) provider, but survey results indicate companies are voting with their feet. Defined contribution vendor relationships are typically very long term. The fact that half the firms in our survey may change their current investment vehicles represents a sea change."
The survey also hints at changes in stock option plans next year. Thirteen percent of the respondents said they will eliminate the use of stock options in 2004, and another 60% plan to reduce stock option compensation. The remaining 27% of companies say that they will not change the use of options in their employee compensation plans.
Among the public companies that will decrease the use of stock options, 28% will not replace the options with any other form of compensation, according to the CFOs. Stock grants will be increased to replace the reduction in stock options at 52% of the companies.