Retirement benefits

WASHINGTON - Saving enough for retirement is tough these days. While there are a large variety of retirement vehicles to choose from and last year's tax bill increased contribution limits, as life expectancies increase, saving for retirement has become a tremendous challenge. Consequently, so has providing retirement-oriented investment products, according to Jonathan Pond, an investment adviser and financial writer in Watertown, Mass.

Two competing bills in the House and the Senate that would reform 401(k) plans to protect investors in the wake of the Enron bankruptcy appear to have polarized legislators. The two biggest points of contention are whether 401(k) investors should be allowed to own company stock and whether mutual fund companies in a plan are capable of providing objective investment advice.

In the wake of the Enron collapse, 401(k) plan providers and plan sponsors have been in a quandry over whether to provide investment advice.

More than a decade ago, Fidelity Investments of Boston formed Institutional Retirement Services Co. to target the small-business 401(k) market. Today, with the retirement plan market tighter than ever, fund firms have begun to pursue the ultimate small business: individual 401(k)s.

The downfall of Enron of Houston evidently has not caused some retirement plan participants to be wary of how much they have invested in their company's stock, according to a recent survey by Boston Research Group of Hopkinton, Mass.

Transamerica Retirement Services, a Los Angeles-based retirement services provider that specializes in small to mid-sized companies, has found that smaller companies are moving faster than anticipated to help their employees take advantage of increased retirement plan contribution limits set forth in the Economic Growth and Tax Relief Reconciliation Act of 2001.

Hartford Life of Hartford, Conn., is expanding its 401(k) small-business operations, a niche that has been largely ignored by many other retirement savings plan providers. So far, the strategy has worked for Hartford Life. It expanded its 401(k) business by 55% in 2001, with sales of $850 million.

Lawmakers in the House and Senate last week reviewed two 401(k) reform bills that now include provisions designed to make it easier for investors to get advice about their retirement plans.

The financial collapse of Enron, and reports that the firm's workers lost millions in their retirement plans when the company declared bankruptcy, has spawned a spate of recent legislative measures designed to protect 401(k) investors. But many of the initiatives are facing criticism from industry officials who say that lawmakers should be cautious in reacting to the Enron debacle.

Retirement plan providers are closely eyeing the new employer-only 401(k) plans as a vehicle that could capture greater rollover assets, open new markets and provide inroads to the high-net-worth crowd.

At the height of the bull market, employee benefits packages were used to recruit new talent, but with massive layoffs occurring across the economy, those packages, including 401(k) benefits, are being trimmed.

A poor economy and rising unemployment rates are making an already difficult defined contribution market even harder for plan providers. Because plan sponsors are occupied with more pressing business concerns in a difficult economic environment, changing or adding a plan provider to their defined contribution plan is not a priority. That has made gaining market share very difficult for many 401(k) providers, say industry observers.

The Department of Labor last week endorsed a proposal in the House of Representatives that would allow 401(k) investors to receive advice from employer-sponsored financial planners, giving the initiative renewed momentum and prompting its proponents to assert that the House will pass it by year end.

As fall approaches, Thomas Clough, the president of New York Life Benefit Services, is excitedly readying a team of marketers to walk into office buildings and talk to workers of all ages and all incomes about their 401(k) plans.

A lot of Americans are looking at the short-term when it comes to their retirement plan balances. Thirty percent of investors who faced a choice about their plan balances, either because of leaving a job or retiring, said they took a cash payment, according to a recent study by Putnam Investments of Boston.

The average American worker's confidence in his ability to retire comfortably is declining, and fewer workers are actively saving for retirement this year than last year, according to a recent survey. In fact, roughly four out of every 10 respondents indicated that they are unsure if they will have enough money to live comfortably throughout their retirement, according to a survey issued earlier this month by the Employee Benefit Research Institute of Washington, D.C.

Nationwide Financial Services of Columbus, Ohio has come up with an innovative approach to providing asset management services to publicly-held 401(k) sponsors that allows employees to actively trade shares of their employers' stock within their 401(k) plans.

Michael Perez recently became president of Emplanet, a provider of automated 401(k) services based in Westborough, Mass. Perez gained prominence in the 401(k) industry as a senior executive for Fidelity Investments' Retirement Service Company in Boston. As a Fidelity senior vice president of sales, he sold plans to companies such as Shell Oil, United Airlines and John Deere and maintained total assets of $20 billion. At the start of his 15-year tenure at Fidelity, he played a key role in the development of bundled 401(k) services, which quickly became an industry standard, according to Emplanet. He was also in the forefront of Fidelity's entry into pension and health and welfare administration in the early 1990s as well as its payroll and human resources information services programs. Before joining Fidelity, he was assistant vice president for the Northern Trust Corporation, where he performed investment analysis. He spoke with freelance reporter John P. Mello Jr. on issues affecting the 401(k) industry.

INVESCO Funds Group of Denver announced last month that Manulife Financial and Sun Life Financial, both of Toronto, have added INVESCO products to their annuity product lines. Last week, the company announced that several INVESCO sector funds have been added to the product lines of five more insurance companies.

Convincing companies to become sponsors of new 401(k) plans can be an extremely difficult task. That is a concept that Persumma Financial of Newton, Mass., part of the MassMutual Financial Group, should understand well.