Cruise Control

To chart the proper course for your company's plan, take a hands-on approach.

Evans of Techneglas knows that firsthand. “With our previous recordkeeper,” she says, “employees would take out loans and the recordkeeper would forget to tell us, so we wouldn’t take repayment out of their paychecks and the loans would default. We couldn’t afford to make those kinds of mistakes. We have a fiduciary responsibility, and part of that is to make sure the recordkeeper is doing the job.”

But the company learned. “We’ve put several checkpoints in place,” says Evans. “We get monthly trust statements from our recordkeeper, and we pay for an internal audit to make sure that we, as well as the vendor, do a good job.”

When Patricia Gondolfo took over as CFO of Mount Kisco (New York) Medical Group, her review of the company’s 401(k) plan revealed that the funds offered by the vendor were great, but its recordkeeping was a mess. When she decided that the only solution was to take the business elsewhere, she says, “We didn’t go into the market and say, ‘Who’s got the best financial performance?’ and try to shoehorn in recordkeeping. It had to be a well-integrated service; recordkeeping had to be something they were doing in-house, and doing well.”

Experts agree it’s good to monitor the plan in terms of overall participant satisfaction, and that’s exactly what Rich Novak, vice president of human resources at Guilford Mills, is doing. “We log all employee complaints,” he says of the Greensboro, North Carolina, textiles manufacturer, “and if we find out that statements are not issued on time, or that there are other problems, we will be discussing remedies with our vendor.”

Talking It Out

What about employee communication? What do you do in terms of boosting plan participation and helping participants make informed investment decisions? Sponsors are increasingly demanding more than a measly brochure or newsletter. Today, in addition to call centers with live operators and automated response systems, they ask for Web-based financial-modeling tools to allow employees to explore their individual objectives.

Another increasingly popular service is automatic enrollment, in which an eligibility date and savings rate are determined in advance. When an employee becomes eligible for the plan, pretax deferrals take effect. Although currently in use at only 11 percent of plans, the practice is becoming more common, and can provide a big boost to participation rates. Web-based enrollment services are yet another way in which Internet technology is reshaping the defined contribution arena.

“If the services aren’t technologically up to speed,” says Jackson, “that’s a reason to start looking for a new vendor. Plan participants should have the opportunity to access their accounts and perform transactions via the Internet, and plan sponsors should also have the opportunity to access information and run reports and investigate performance of the plan on [a separate] plan-sponsor Web site.”

In addition to Web access, the availability of phone reps to respond to detailed questions from plan participants is becoming important, according to Jackson. “Many companies have employees spread across many time zones, and some call centers may not be open for more than 8 to 12 hours. Some vendors have responded by providing weekend or extended hours,” she says.


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