Shopping for a new 401(k) program

[Guest JSinbad]

My firm employs approixmately 10,000 ees with about a 20% participation rate. We are with Fidelity but are not convinced that they meet our needs. Anyone have great experiences with any other companies?

[Larry M]

I assume your message means you are using Fidelity's prototype plan and admiinstration as well as its investment portfolio.

With your firm having 10,000 employees, consider unbundling all the services and buying those which meet your needs specifically.

It is YOUR money and it should be doing what YOU want it to do, not what is required to fit within the limits of a prototype plana nd administration.

[note: my prejudice is opposed to any prototype plans sponsored by and, worse, administered by, financial institutions - even for smaller firms. There is too much money involved to buy a plan "off the rack", which requires you to fit into its parameters.

You should spend a few dollars designing one which fits your needs and which responds to your wishes - even as they change - and paying reasonable fees for the services you need. The money spent in advance should save you lots of money in the future and lots of grief.]

[MWeddell]

For a plan of that size, Fidelity handles plenty of plans with customized documents, not just prototype plans. Typically for a plan of that size, you can get some non-Fidelity funds included, but that'll depend a lot on the amount of assets in the plan.

It seems to me your first course of action is to figure out what's wrong. With only a 20% participation rate, it's highly unlikely to be just the provider causing it. Second step is if Fidelity is the problem to try to work things out with the incumbent provider if it's a problem that's fixable because Fidelity is a reputable provider and it'll take a LOT more time to shop for and convert to a new recordkeeper. I'd guess from your e-mail you already went through those steps, but I thought I'd mention them.

In terms of who does well, the short answer is everyone. The 401(k) market is split among many providers, even if you just like at plan sponsors with 10,000+ employees, and client satisfaction surveys typically show that 90% - 95% of plan sponsors are satisfied with their current providers. This is an odd finding considering other surveys show that 25% - 30% of plan sponsors plan to change 401(k) recordkeepers during the next 12 months.

Throwing out some specific names of providers who've done well in the searches we've conducted for clients of your size are Hewitt Associates, Administrative Solutions Group, Northern Trust, New York Life Benefit Services, Vanguard, Putnam, T. Rowe Price, J.P. Morgan / American Century, maybe Charles Schwab Retirement Plan Services or TPAs if you can find ones that you're not too large for. I'm sure I've omitted many other strong providers , but they're sure to speak up on their own in response to your posting. The key is to include a variety of different types of bidders unless your goals are more specific than what you've told us.

[This message has been edited by MWeddell (edited 10-31-98).]

[Guest ESOPwizard]

With only a 20% participation rate, you problem is probably with the plan design, not with the administration.

My advice is to start with a "check-up" from a consultant. You may need to redesign all of your company's

retirement plans. Pick a consultant who charges by the hour, not someone who works for an investment organization

that is primarily interested in getting asset based fees. Furthermore, try to find one that can actually analyze

your situation, as opposed to giving you a canned product. (Hint: the people that are good at this, probably

aren't good at sales presentations or proposals.)

[Guest SPerson]

JSinbad - Have your employees attended any education / enrollment meetings? Does the company offer a match? There has got to be a reason only 20% of your employees participate. Fidelity is a very well respected and familiar name,

I have a few clients that exceed 10,000 employees. Before you make any decisions I'd suggest hiring a consultant to look over your plan. If a simple change in the current plan design could help, I would say go that route before you make a drastic change. If you do decide to leave Fidelity, talk to the consultant you hired and have them gather proposals for you To be honest most companies of your size deal directly with vendors, I don't agree with the logic, but they do. Good Luck

[Guest SPiwowar]

We are looking for a new vendor as well and keep hearing about the "blackout period." As anyone experienced this? What went well? What didn't go well?

[LCARUSI]

SPIwowar -

The blackout period is the period in which participants cannot inititate actions such as new loans, investment reallocations, withdrawals etc. This occurs during the transition between recordkeepers.

For example, if you were changing as of 12/31/98, the prior recordkeeper might require that all of the activities I mentioned above must cease as of 12/15/98 to give them time to prepare a file for the new recordkeeper. Similarly, the new recordkeeper (as of 1/1/99) might not allow any of the above activities until 1/15/99 to allow them to setup the plan on the new recordkeeping system.

In the above example, you have a blackout of one month (in total). That can be a serious issue to a participant with a significant balance - not being able to reallocate his or her account for on month. It is important that you communicate the blackout to partiicpants IN ADVANCE of the blackout period. Also, this should be an issue in your vendor selection, because different vendors will impose different blackout periods. Obviously, the shorter the better.

[Guest Dan Cassidy]

As mentioned above, your issues probably stem from issues other than the administrator/investment manager - Fidelity. You can and should demand some additional service from Fidelity to help you with education, employee meetings, etc. It's in their best interests and yours. You may also want to discuss with an independent actuarial consultant other issues like

plan design - are their provisions we could add that can help participation (maybe w/ low/no cost

demographics - how well educated is your group. maybe making them investment and tax savvy is a difficult/unacheivable burden. Should you use some other retirement plan vehicle to help them save? Can you target certain populations for intensive education? etc.

Good luck.

Dan Cassidy

Boston

[Guest SPerson]

I am a broker/consultant and have worked through many "BLACKOUT PERIODS" and let me be honest, they are a huge pain in the neck. I always tell my clients " If anything can go wrong, it will go wrong". When you switch plans -you are actually firing one company and hiring another. I give this example - If your fired from your job, and your old boss calls and asks you to send your uniform back, how long does it take you to respond? You are no longer the fired companies top priority. A good measuring stick is: If your statements took 4 weeks to get to you - expect that they will provide the account valuation to the new provider in 6 weeks. Once they do that your new provider has to reconcile the accounts, that process (providing the information is correct) should not last more than a week.

I'm a little biased and feel you should always hire a consultant / broker to help you. They are usually better equiped to answer 401k questions, they should know where to dig for infortamtion. It is also a good reflection from you. Let them take the calls from Participants "When can I take a loan?" ,"Are we done yet?"

I wish you much luck.

Steven