SHRM Poll: 401(k) Investment Education and Advice

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

August 25, 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.

401(k) Investment Education and Advice | ©SHRM 2010 2

Does your organization sponsor a 401(k) plan?

Not applicable; the
plan sponsor does
not offer 401(k) plans,
No, 14% 4%

Yes, 82%

Privately owned for-profit organizations (94%) were more likely than nonprofit (51%) and government
Note: n = 578. (39%) sectors to report that they sponsor a 401(k) plan.


How many participants are in your 401(k) plan(s)?

1 to 150 plan participants 19%

151 to 500 plan participants 24%

501 or more plan participants 52%

Unsure about the number of participants in our 401(k)
6%
plans

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

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.

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. 401(k) Investment Education and Advice | ©SHRM 2010 4

Does the plan you represent provide or make available any of the
following services to 401(k) plan participants?

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 39% 47% 13%
investments and funds based on the particular needs of a plan
participant)
Investment advice provided through an independent third
party (for example, Ibbotson or Financial Engines), where a third party 23% 59% 18%
serves in an ERISA fiduciary capacity

Investment advice provided by or through an independent third
party (for example, Ibbotson or Financial Engines), where a third party
21% 60% 19%
does not serve in an ERISA fiduciary capacity

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. 401(k) Investment Education and Advice | ©SHRM 2010 5

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.


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

Unsure, 6%
No, 7%

Yes, 87%

Note: n = 436.


In what format is the investment education presented?

Brochures or other written materials (e.g., mailings and
online access) 98% 1% 1%

Computer modeling (including web-based interactive
tools) 90% 7% 3%

Call center or helpdesk 87% 11% 3%

Group seminars 80% 16% 4%

Individual sessions 60% 33%
7%

Automated voice response system 49%
38% 13%

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

Yes No Unsure

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. 401(k) Investment Education and Advice | ©SHRM 2010 8

Which of the following are the subjects of that investment education?

Plan information (e.g., the terms of the plan, benefits of plan
participation and increasing plan contributions) 97% 1% 2%

Investment alternatives - listing all funds available in the plan 97% 1% 2%

General financial and investment information (e.g., determining
investment time horizons and assessing risk tolerance) 94% 2% 4%

Interactive investment materials (e.g., questionnaires or software that
help plan participants estimate future retirement income needs) 87% 8% 5%

Investment alternatives--highlighting specific funds available in the
plan 61% 27% 12%

Non-individualized asset allocation model 59% 17% 24%

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

Yes No Unsure

Note: n = 339-359. Only respondents whose plan provides or makes available
investment education to 401(k) participants were included in this analysis.

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

Unsure, 12%

No, 37% Yes, 51%

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.
Note: n = 421.


In what format is the investment advice presented?

Brochures or other written materials (e.g., mailings and
82% 15% 3%
online access)

Computer modeling (including web-based interactive
tools) 81% 13% 5%

Call center or helpdesk 74% 23% 3%

Individual sessions 71% 23% 6%

Managed accounts (i.e., a participant’s 401(k)
investments are professionally managed by the plan) 68% 20% 12%

Group seminars 57%
38% 5%

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

Yes No Unsure

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. 401(k) Investment Education and Advice | ©SHRM 2010 11

In what format is the investment advice presented?

Comparison by Organization’s Operations and Sector
• 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.


Which of the following are the subjects of that investment advice?

Fund investments 94% 2% 4%

Contribution level 90% 4% 6%

Asset class allocation 88% 6% 6%

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

Yes No Unsure

Note: n = 205-210. Only respondents whose plan provides or makes available
investment advice to 401(k) participants were included in this analysis.

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?

Unsure, 22% Yes, 7%

No, 70%

Note: n = 412. Percentages do not total 100% due to rounding.


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)?

Computer-model-based advice, pursuant to the PPA-eligible
investment advice arrangement (provisions include, among other 42% 6% 17% 35%
things, that the computer model has been certified by an eligible
investment expert and is audited annually by an independent auditor)

Level-fee-based advice, pursuant to the PPA-eligible investment
advice arrangement (provisions include, among other things, that 15% 8% 33%
compensation to the adviser does not vary depending on the basis of
44%
any investment option recommended).

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

Yes, currently provide No, do not currently provide but plan to provide No, do not currently provide and do not plan to provide Unsure

Note: n = 388-391.

In addition to your responses on computer-model-based and level-fee-based advice
arrangements, 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)?

60%
56%

50%

43%

40%

30%

20%

10%

1%
0%
Yes, other changes in the service No changes in the service provision Unsure
provision anticipated anticipated

Note: n = 373.

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%



Demographics: Organization Industry (continued)

Industry
Other 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%



Demographics: Organization Sector

Privately owned for-profit organization 42%

Publicly owned for-profit organization 24%

Nonprofit organization 20%

Government sector 11%

Other 4%

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


Demographics: Organization Staff Size

40%

34% 34%

30%

21%
20%

10%
7%
4%

0%
1 to 99 employees 100 to 499 employees 500 to 2499 employees 2500 to 24999 25000 or more
employees employees

Note: n = 282


Demographics: Other

Does the organization have U.S.-based Is organization a single-unit company or a multi-
operations (business units) only or unit company?
does it operate multinationally?
Single-unit company: companies in 35%
U.S.-based operations 74% which the location and the
company are one and the same
Multinational operations 26%
Multi-unit company: companies 65%
that have more than one location
Note: n = 473

Note: n = 490

• 20% of organizations indicated that Are HR policies and practices determined by
employees at their work location were the multi-unit corporate headquarters, by each
unionized. work location or both?
Note: n = 468 Multi-unit headquarters determines 61%
HR policies and practices

Each work location determines HR 2%
policies and practices

A combination of both the work 37%
location and the multi-unit
headquarters determine HR
policies and practices

Note: n = 329

SHRM Poll: 401(k) Investment Education and Advice

Methodology

• 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

For more poll findings, visit:
www.shrm.org/surveys
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SHRM Poll: 401(k) Investment Education and Advice

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