Employee benefits

American Century Investments of Kansas City, Mo. has teamed up with Automatic Data Processing of Roseland, N.J. to provide 401(k) plans to small businesses.

Retirement is the main reason people save and invest in only three of ten leading nations - in the U.S., Germany and the U.K., according to a survey commissioned by American Express of Minneapolis, Minn. People in France, Hong Kong, Italy, Singapore and Taiwan save money to have a cushion in case of an emergency, particularly in case of being laid off from their jobs.

Most employers are outsourcing their retirement plans, but a large number are not paying much attention to how well their plans are being managed for them, according to a study completed this summer for Delaware Investments of Philadelphia by Greenwald & Associates of Washington, D.C. It may be because of the bull market, according to one Delaware executive.

Only six percent of 401(k) plan participants who switch jobs roll their money over to the incumbent 401(k) provider, according to a study. Thirty-seven percent of participants place their savings in an IRA, according to the study by Hewitt Associates, the management consulting firm in Lincolnshire, Ill. Hewitt's analysis of 193,000 defined contribution distributions nationwide in 1998 also showed that 57 percent of the investors chose to cash out of their plans.

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.