Putting the 'e' in retirement plans

Imagine a 401(k) plan with all sales loads waived from dollar one, no paper to file or process and instant daily access to your plan information. This is happening with the Internet’s impact on the 401(k) marketplace, completely changing the way 401(k)s are managed and used.

Online 401(k) plans are not only improving the quality and timing of the traditional 401(k), they are creating a new platform — the paperless 401(k) program known as e401(k). As a result, many of the problems that have plagued plan sponsors and participants have been eliminated.

Are we saying goodbye to paper-based 401(k) systems? Not yet, but the paperless solution offers increased efficiency and accuracy, coupled with decreased cost. Traditional plans have been a labor- and paper-intensive benefit, making plan administration a laborious, inefficient and error-prone process.

Administrators have routinely had to make manual corrections on transactions to ensure they meet required compliance plan rules. Census information and payroll deductions required manual input, increasing the chance of mistakes. And, the plan sponsor typically had to wait until the end of the quarter to view activity or get updated compliance information or investment data.

The new e401(k) platforms are automating these processes. Automation should not only increase efficiency and accuracy, it should also lower the cost of administration, recordkeeping and investing, enabling even small employers to attain a cost-efficient retirement plan.

Using the Web, participants can view account balances, conduct daily transactions, reallocate investments, view current data and get updated education information.

Sponsors can view the performance of the plan and transactions, check on individual participant accounts, broadcast messages to its employee base, monitor compliance thresholds and link 401(k) deductions to payroll systems.

All documents and tests are stored and updated online. Not only are the plan sponsors’ documents available online, so are participants’ summary plan descriptions. Since education and enrollments are online, the cost savings of not printing and shipping enrollment kits are huge.

Among other benefits participants receive from e401(k) plans are online enrollment; information alerts via e-mail or onlne; account information; investment rebalancing; loans/withdrawals; educational tools; online advice; and online summary plan descriptions.

Among benefits to e401(k) plan sponsors are plan activity reports; investment performance benchmarks; online compliance processing; broadcast message capabilities; access to individual participant’s accounts; e-mail or Web notification from the plan provider; and online storage of documents.

But paperless 401(k) plans don’t come without challenges. First, not all participants have Internet access. Second, most e401(k) providers expect plan sponsors to design and fill out their own documentation online.

The Oswald Financial 401(k) Online was developed specifically to address these issues. It has all the advantages of a paperless system; however, a 401(k) specialist reviews and discusses plan design with the plan sponsors, then enters it online for the employer.

Onsite educational and enrollment meetings assist participants with their choices, enhancing the benefits of the paperless 401(k) plan. Sponsors have the option of having quarterly statements sent to participants’ homes until they are ready to go paperless.

Plan sponsor documentation and correspondence is stored online and can be retrieved immediately. Employee data, including summary plan descriptions, loan requests, educational programs and investment information is updated daily. Sponsors have more than 300 mutual funds to choose from, all of which are just a click away from retrieving online Morningstar information.

The advent of Internet-based 401(k) plans will have a substantial impact on the number of companies with fewer than 100 employees which provide retirement benefits. It’s expected the percentage of these employers who have a plan will double from 20 percent to 40 percent by 2004. David M. Kulchar is senior vice president of Oswald Financial Inc.