401(k) Plans: How Plan Sponsors See the Marketplace INVESTMENT COMPANY INSTITUTE ICIResearchReport Winter1995 401(k) Plans: HowPlan Sponsors SeetheMarketplace INVESTMENT COMPANY INSTITUTE ResearchDepartment Winter1995 Copyright 1995 Investment Company Institute 401(k) Plans:How PlanSponsorsSeethe Marketplace TableofContents IntroductiontoICISurveyof401(k)PlanSponsors ................................................... 1 Study Objectives . 1 Research Methodology . 2 ExecutiveSummary .........................................................................5 Overview . 5 Plan Participation and Contributions . 5 Plan Expenses . 6 Investment Management Services . 6 Plan Investment Vehicles . 7 Investment Options . 7 Purchasing Preferences . 9 Customer Satisfaction . 10 Provider Selection Criteria . 10 Frequency of Transactions . 10 Participant Communications . 11 Background .............................................................................. 13 Shift in Pension Coverage . 13 Growth of 401(k) Plans . 15 Mutual Funds Become Active in 401(k) Market . 18 I.DescriptionofCompaniesSurveyedandCharacteristicsofTheirPlans . ................................ 21 Plan Formation . 21 Plan Size . 21 401(k) Plan Eligibility and Participation . 22 Primary vs. Supplemental Plans . 22 401(k) Plans by Industry . 23 Contributions and Expenses . 23 A) Contributions . 23 1) Matching Contributions . 23 2) Limits on Matching Contributions . 25 3) Amount Contributed to the Plan . 25 Pagei 401(k)Plans:HowPlanSponsorsSeethe Marketplace 4) Typical Account Balances . 25 B) Plan Expenses . 28 II.InvestmentManagementServiceandInvestmentPreferences . ......................................33 Type of Provider Used . 33 Satisfaction with Investment Manager . 33 Likelihood of Switching Investment Manager . 35 Types of Investment Vehicles Used . 35 Number of Investment Options Offered . 36 ERISA Section 404(c) Qualification . 36 Investment Direction . 38 Types of Investment Options Offered . 38 Types of Options Added in the Past 12 Months . 38 Types of Options Sponsors Are Planning to Add . 41 Distribution of Assets by Type of Investment . 41 Analysis by Each Type of Investment Option . 41 A) Guaranteed Investment Contracts (GICs) . 44 1) Current GIC Offerings . 44 2) GIC Additions in the Past 12 Months . 44 3) GIC Additions in the Next 12-18 Months . 44 4) GIC Assets . 45 B) Growth Funds . 47 1) Current Growth Fund Offerings . 47 2) Growth Fund Additions in the Past 12 Months . 47 3) Growth Fund Additions in the Next 12-18 Months . 47 4) Growth Fund Assets . 47 C) Money Market Funds . 48 1) Current Money Market Fund Offerings . 48 2) Money Market Fund Additions in the Past 12 Months . 48 3) Money Market Fund Additions in the Next 12-18 Months . 49 4) Money Market Fund Assets . 49 D) Equity Income Funds . 49 1) Current Equity Income Fund Offerings . 49 2) Equity Income Fund Additions in the Past 12 Months . 49 3) Equity Income Fund Additions in the Next 12-18 Months . 50 4) Equity Income Fund Assets . 50 E) Balanced Funds . 50 1) Current Balanced Fund Offerings . 50 2) Balanced Fund Additions in the Past 12 Months . 50 3) Balanced Fund Additions in the Next 12-18 Months . 51 4) Balanced Fund Assets . 51 F) Government Bond Funds . 51 1) Current Government Bond Fund Offerings . 51 2) Government Bond Fund Additions in the Past 12 Months . 52 3) Government Bond Fund Additions in the Next 12-18 Months . 52 4) Government Bond Fund Assets . 52 Pageii 401(k) Plans:How PlanSponsorsSeethe Marketplace G) Aggressive Growth Funds . ..