Fidelity Investments Institutional Services Co. and AIG Sunamerica Retirement Markets Inc. have expanded their 401(k) offerings to meet small-business plan sponsors' demands to reduce administrative burdens and boost plan participation.
Small and midsize companies are looking to reduce the costs of their retirement programs while meeting their fiduciary responsibilities, according to executives from Fidelity and Los Angeles-based AIG Sunamerica, a subsidiary of American International Group Inc.
Fidelity's Advisor 401(k), which is designed for plans with up to $100 million of assets and is sold through third-party financial advisers, automates many of the administrative and record keeping tasks required of plan sponsors. Small businesses often lack the staff resources to handle such tasks, said Dave Liebrock, an executive vice president at Fidelity Investments in Boston.
"An individual who might be in charge of benefits at a smaller company might be wearing several different hats throughout the day," he said.
AIG Sunamerica's new small-business product, called the Polaris401(k), is intended to simplify benefits administration by letting ADP Retirement Services manage the plan, said Hal Rose, a vice president and the national sales manager for Polaris401(k). Plan sponsors can also choose to have ADP do their payroll processing.
"When ADP is already doing the payroll, it streamlines the process if they also do 401(k) administration because they already have all the participant information," Mr. Rose said.
Small businesses also have a financial interest in helping employees retire earlier, Mr. Liebrock said.
"If the 401(k) is the only mechanism people have to retire," he said, "what would happen if at age 55 people hadn't saved enough to retire? Older workers have a higher compensation base, and if they can't retire, companies have higher health-care costs."
Small-plan sponsors often look to financial advisers to help them navigate the 401(k) plan options available to them, Mr. Liebrock said.
"There are a whole host of investment vehicles out there, and the plan sponsor often doesn't have the time to evaluate them," he said. "They can bring in an independent third party to help them address those issues."
Small businesses also often look to financial advisers for guidance on educating participants and encouraging them to diversify their portfolios, Mr. Rose said.
"Having a local rep to guide the sponsor is key to a successful plan for small businesses," he said. The AIG Sunamerica plan is sold through advisers and broker-dealers.
Fidelity plans to introduce several features this year in its Advisor 401(k), Mr. Liebrock said. Among them are an automatic enrollment service, on-site enrollment support for advisers and their plan-sponsor clients, detailed investment and industry benchmarking, a Roth 401(k) option, and a communication and education program that helps participants determine whether they are on track for adequate retirement income.
The company said Thursday that assets in its Advisor 401(k) plans had risen 16% last year, to $13.5 billion at Dec. 31, and that it added 380 plans, up 44% from the growth in 2004. The Advisor 401(k) business now serves 2,176 defined contribution plans, it said.
The AIG unit's Polaris401(k) plan also includes several automatic features, including account rebalancing; asset allocation models; and a death benefit equal to the amount invested less withdrawals and fees or to the account's current market value, whichever is higher.
The plan materials are written in language intended to avoid confusion among sponsors and advisers, Mr. Rose said. "We want to avoid unnecessary bells and whistles."
