Wall Street Gyrations Keep Benefits Managers Hopping

By Staff Report

Oct. 30, 2008

The current financial climate isn’t just keeping those on Wall Street busy.

Benefits management departments in recent weeks have been fielding questions and addressing concerns from employees worried about their 401(k)s and other employer-sponsored investment vehicles as the stock market plummeted and continues to show signs of instability.

“Employers are very busy trying to keep an eye on what’s happening,” said Pamela Hess, director of retirement research for consulting firm Hewitt Associates Inc. in Lincolnshire, Illinois. “I think everyone is working a little overtime.”

Hess said some benefits departments have seen as much as a 20 percent increase in call volumes from concerned employees.

Barrie Christman, vice president of the individual investor segment at Principal Financial Group in Des Moines, Iowa, said call volume at the 401(k), mutual fund, retirement and investor provider’s call center has increased by 50 percent compared with normal volumes.

The increase in calls, though, doesn’t necessarily correlate with the number of people deciding to move their money or cease investing in their retirement accounts, Hess said: “In times like these we do see some movement, but by and large, people are staying the course.”

In September, the most recent period for which figures are available, she said about 1 percent of the assets in plans Hewitt tracks experienced changes. She said employees moved $900 million in assets from equities into fixed-income accounts. Nearly two-thirds of those assets were moved into stable-value funds, while the rest were shifted to bonds and money market investments.

Michael Pikelny, employee benefits manager for Hartmarx Corp. in Chicago, and Jack Towarnicky, associate vice president for benefits planning at Nationwide Insurance in Columbus, Ohio, said calls from concerned employees to either their benefits departments or their investment plan administrators have increased, but not by overwhelming amounts.

Towarnicky said employees seem most concerned about whether their money is safe. Pikelny said employees commonly call to find out whether the financial plan administrator is stable and what happens to their money if the plan administrator goes out of business. Employees also want to know if their investments are well diversified, according to the mutual fund firms.

Once their questions have been answered, so far, few people have changed their investments, firms said. However, Pikelny said, some employees have cut back on the amounts they are contributing to their accounts.

A spokeswoman for investment management company Vanguard Group in Valley Forge, Pennsylvania, said it was still too early in the financial downturn to tell if workers would continue to resist pulling their money out of the market entirely or transfer their money into different investment options.

While most employees are not making significant changes to their investments, Hess said, more calls inevitably result in more transactions and more activity. According to a report released by AARP in early October, 13 percent of Americans 45 and older are prematurely withdrawing funds from their 401(k)s, IRAs or other investments to cover day-to-day expenses.

“Retirement Security or Insecurity? The Experience of Workers Aged 45 and Older,” which surveyed 1,628 workers 45 and older, also found that because of economic changes over the past 12 months, 20 percent of respondents have stopped contributing to a 401(k), IRA or other retirement account. Additionally, the report concluded 65 percent of respondents will delay retirement and work longer should the economy not improve significantly.

Bill McClain, a Seattle-based principal for human resources consulting firm Mercer, said that although some people will move their investments to the most conservative funds, he doesn’t foresee a rush to invest in stable-value accounts. Most people will probably stay the course with their current investment vehicles, he said.

“I don’t think it’s going to be a wholesale movement,” he said. “The power of inertia is still pretty powerful.”

Preventing employees from making rash decisions about their investments requires a robust and timely communication plan from the employer or the plan sponsor, or both, experts said. Sam Templeton, a communications consultant for Watson Wyatt Worldwide in Seattle, said that to keep up with the ever-changing news in the markets, employers should respond quickly, communicating through intranets, e-mail and HR contacts or managers, rather than through printed brochures.

“The situation is so fluid, it’s somewhat of a challenge,” Templeton said. “It’s keeping benefits departments quite busy. They need to get information out very quickly.”

Employers should reassure employees of the safeguards and protections on their investment accounts, reiterate the importance of diversifying investments and encourage employees to review their investments, but discourage them from panicking, he said.

Towarnicky said the Nationwide benefits department has increased communication regarding investment portfolios to its employees, particularly through e-mail and the company’s HR portal.

The company is reminding employees that retirement saving requires long-term—not short-term—thinking, and that that the company matches contributions and is encouraging them to continue saving, he said. Nationwide directs all other specific financial questions to its investment administrator.

Hartmarx, for the most part, is simply directing employees to its mutual fund provider, Vanguard, for information, Pikelny said. The firm is offering webinars and has a plethora of information on its Web site that typically answers any concerns, he said.

It’s critical that employers are careful to not offer financial advice for which they could be held liable, Hess said. She said employers should simply make sure employees understand the resources available to guide them through turbulent times.

“It’s a fine line employers have to walk,” she said. “They want to give out information to reassure employees, but they don’t want to overwhelm them and tell them what to do.”

Filed by Kristin Gunderson Hunt of Business Insurance, a sister publication of Workforce Management. To comment, e-mail

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