The Wall Street Journal said the following about our self-service 401k software back when we introduced it in 1999:
"(It) allows small businesses to manage 401k plans as easily as a consumer navigates family finances with programs such as Quicken" ("Web Helps Small Firms Start 401ks," 12/27/99, C1).
Our 401k software (401k Enginuity at www.401kenginuity.com) developed in conjunction with Union Bank of California (UBOC) and customized 401k plan proved so innovative in the 401k forum that it's patented. Features that are proving particularly popular with clients include...
For more than a decade before developing our revolutionary self-service 401k system, we operated as a valued full-service provider of 401k, 403b and other government-sanctioned retirement plans.
Back then, as now, we specialized in plans for small and mid-sized businesses. In fact, we were providing small businesses with affordable plans rich in investment options and plan flexibility long before other 401k providers showed any interest in the small plan market.
Back then, as now, we found that by diverging from the "big plan" administrative setup used by most of the 401k industry, that rethinking the areas that were particularly inefficient, we could cut administrative overhead and save clients money. For instance...
In traditional 401k plan administration, assets are pooled within investments. The plan administrator must then track what portion of the pool belongs to each plan participant. We found this undesirable from the individual investor's standpoint and redundant from an administrative standpoint. So we had the mutual fund companies instead set up INDIVIDUAL asset accounts for each plan participant, negating the need for us to do any per-asset accounting because done by the investment company and detailed in the monthly account statement that each plan participant received from that company. So what we focused on was supplying plan participants with complementary "401k Account Activity" statements that showed the participant how much money came into his or her account (broken down into salary deferrals, employer contributions, incoming rollovers, trust transfers, etc., as applicable) and how much money went out of his or her account (broken down into 401k loans, distributions, etc., as applicable). Our statements of course also noted any loan repayments and other activity, as relevant, as well as the investments into which the participant was currently directing incoming money (for example, 25% to Investment A, 25% to Investment B and 50% to Investment C). So from us plan participants got a breakdown as to how much money entered and exited their account that month (and year and to-date), then from the investment company they got a breakdown of the actual value of that money as invested in each of the participant's designated investments. A much more useful, efficient and complementary (rather than duplicative) system, if we do say so ourselves.
We also created a prototype 401k plan for the IRS to approve that allowed for any of a range of choices for participant eligibility, employer contributions, 401k loans, and more to give clients the potential to create 401k plans that would prove popular with and beneficial to company employees. By using a single, pre-approved plan we saved a great deal of administrative time at each plan's set up; by allowing for lots of pre-approved customization flexibility within that plan, we ensured that clients could design plans truly suited to their needs - not to mention, amend their choices later, if their needs changed.
As a result of all that plan flexibility (including unbeatable investment flexibility), our plans see participant rates that are nearly twice the national average.
Finally, we developed our own 401k administration software to suit our streamlined administration schema.
Our highly efficient software system allowed us to provide valued services - monthly participant account statements and monthly compliance testing, for instance - at no extra charge. Both the frequency of our services (other plans offered them, at best, quarterly or semiannually) and that they were offered at no extra charge was unheard of at the time We knew clients would like the zero price tag, but what really inspired us was the importance of the items. Frequent compliance testing, for instance, is particularly important to smaller plans because small plans, by definition, have fewer participants, and with fewer participants it only takes slightly out of balance contributions by one or two highly compensated employees to overly offset those by non-highly compensated employees. With testing run every month with the contribution processing, companies immediately know if their plan is getting out of balance and can take corrective measures long before the IRS-mandated year-end tests must be run.
By the mid 1990s we had so refined our software system that we saw the possibility that our clients could use a slightly more layman's version to run their 401k plans themselves (and thereby save even more money), that this would be particularly doable if the software was customized to each client's exact plan design choices (investment options, loan policies, etc.), because that would mean that processing could be even more automated. We recognized how simple it would be particularly for companies with 100 or fewer plan participants to do the basic data input and money transferring themselves, because the software does all the bookkeeping work. Our goal became to build a self-service 401k system from our in-house, full-service system and to make that system highly affordable yet flexible and of the highest quality.
In the end, the system we created enabled small business clients to spend less than 15 minutes a month running their company plan and at a cost of less than $1000 year (less than $500 a year for small businesses with only a very few employees). A rounding success for all concerned!
(Summary) In conjunction with Union Bank of California, Pension Systems Corporation developed 401k Easy Online, a web-based 401k plan administration service based upon the success of the 'run-it-yourself' pc-based 401k Easy.
President, Pension Systems Corporation
Sharon Woodson-Bryant, Union Bank of California
Donna Ross, Union Bank of California
Union Bank of California, N.A., Pension Systems Corporation, Launch Web-based 401(k) Administration Service for Small Businesses
LOS ANGELES Union Bank of California (UBOC), N.A., and Pension Systems Corporation have jointly developed a web-based 401k plan administration service based upon their existing desktop product. The service allows clients to set up and manage low-cost, option-rich "run-it-yourself" 401k plans from any location connected to the Internet - be it via computer terminal, web-enabled mobile phone or PDA device; access via a toll-free automated voice response system is also available. Like the desktop product, the system is geared particularly toward serving small businesses of one to 100 employees.
"The small business market has been grossly underserved and we are pleased with Union Bank's decision to develop this unique web-based 401k service to deliver full featured, self-service 401k plans to small business and potentially save clients 60% to 80% a year relative to traditional plan administration costs," says Jim Gilbert, President of Pension Systems Corporation
The new online service called 401k Enginuity (www.401kenginuity.com) affords employers plan-specific, convenient access and rapid processing of data and information requests relating to all areas of 401k administration activity, including point-and-click plan compliance testing with results potentially in seconds. Other features include participant account access, investment education materials and enrollment seminars via web casting.
"Our company is a current user of the 401(k) Easy desktop product and have been very pleased with our 'hands-on' experience and are able to process and validate our 401k activity in approximately 15 minutes a month," says Clark E. Cook, Controller for CHSI of Nevada.
As with the desktop product, the online service allows the client to customize the options and services it wants for its plan. Employer matching contributions, participant loans, a broad selection of mutual fund investments from well-known mutual fund companies and other features are available. All the client's customized choices, including investments, are integrated into its online plan administration service.
"Our online service will not only retain the affordability and flexibility of our desktop product but also add the conveniences of online access to plan administration information and provide expanded plan sponsor and participant functionality," stated Donna Ross, senior vice president and manager of UBOC 401k administration in a joint UBOC / Pension Systems Corporation press release.
UBOC intends to launch its online service in 2003.
Based in San Francisco, UnionBanCal Corporation is a bank holding company with assets of $35.8 billion as of March 31, 2001. Its primary subsidiary is Union Bank of California, N.A., the second largest commercial bank in California with 244 banking offices in California, six banking offices in Oregon and Washington and 18 international facilities. UBOC's Institutional Services & Asset Management Division has more than $138 billion in assets under administration servicing the 401k, employee benefit trust, custody, corporate trust and investment management markets. Their website is located at www.uboc.com.
Pension Systems Corporation, Inc. is a Los Angeles-based California corporation and an affiliate of Pension Service Associates (PSA), which has been providing full-service defined contribution retirement plans to small and midsize companies since 1982. Pension Systems Corporation developed 401(k) Easy, a desktop "run-it-yourself" 401k service, from PSA's experience and successes in the small plan marketplace. A retail web-based product called 401(k) Easy Online is now being offered. Licenses for 401k Enginuity, the enterprise Internet-ready plan administration software are now offered to financial institutions, TPAs, HR service providers, and others by Pension Systems Corporation, an affiliated company. Call (800) 660-0050 or e-mail James Gilbert at email@example.com for more information.
(Summary) Pension Systems Corporation created the patented run-it-yourself 401k Easy, heralded by The Wall Street Journal "...allows small businesses to manage 401k plans as easily as a consumer navigates family finances with programs such as Quicken."
Reprinted from THE WALL STREET JOURNAL.
YOUR MONEY MATTERS
By JEFF D. OPDYKE
Staff Reporter of THE WALL STREET JOURNAL
Tom Hendricks's employer recently adopted a 401(k)-retirement plan for him and his colleagues. Big deal, you say? Well, actually, it is. Mr. Hendricks and the 13 managers who oversee trust-fund operations for a California union have never had access to the hugely popular retirement accounts because of the expense and complexity of running them.
Now, though, cheap and efficient technology is changing those notions. Easy-to-use software and low-cost, back-office support - much of it available online - are opening retirement-savings benefits to an estimated 27 million small-business workers who don't have retirement plans. It's also allowing companies with inflexible and meager plans to upgrade to more appealing, full-blown 401 (k) s by pushing down administrative costs and challenging the idea that small-business owners can't manage the rule-bound accounts. "There's been a whole lot of mumbo jumbo used in this industry to create a Tower of Babel that running a 401(k) is tough," says Jim Gilbert, who has spent 15 years in the industry designing and overseeing retirement plans. Mr. Gilbert, president of 401(K) Pro Inc., Los Angeles, recently introduced a software program called 401(k) Easy - which allows small businesses to manage 401(k) plans as easily as a consumer navigates family finances with programs such as Quicken. "This is not brain surgery," he says.
Mr. Hendricks, who heads up the administrative office for the Southern California International Brotherhood of Electrical Workers-National Electrical Contractors Association trust fund, began looking for a 401(k) for the managers on his staff, who are not covered by the union or electrical employers. (The trust-fund office is the intermediary between workers and employers.) But plans administered by outside suppliers were so expensive - $17,000 in one instance - "that I shut the book immediately," Mr. Hendricks says. Some providers "didn't want to talk to us when they found out how small we were." Instead, he found the answer to the group's retirement needs on the Internet for less than $1,000 - in Mr. Gilbert's program. Now, his office controller, who has no background in back-office plan administration, is running the retirement program for the group, which is one of two test sites for 401(k) Easy.
Big financial-services firms are jumping into the game, too, setting up and administering 401(k) s at prices small businesses can afford. In October, Boston's giant Fidelity Investments introduced "e401k," the industry's first Internet-only 401(k)- plan. Safeco Corp., a big Seattle insurance and mutual fund firm, plans soon to introduce its own Internet option for small-business 401(k) s. Small shops are "the new opportunity" in 401(k) s, according to Steven Sundberg, an assistant vice president at Safeco.
Fidelity's e401k is geared specifically for businesses of between five and 50 workers. It allows employers such as Giage Ltd., a 26-person Cincinnati software firm, to build a retirement plan directly online, and requires that employees access accounts only over the Net. The cost: a $750 set-up fee and yearly charges of $1,750, plus $20 a participant. By comparison, the average 401(k) can cost $5,000 a year or more - a price "that would have been a ‘preventer' for us," says Christopher Baucom, chief financial officer at Giage. Fidelity also handles onerous compliance tests for an added fee. With a smaller, less-flexible 401(k) plan that Reprinted from THE WALL STREET JOURNAL Giage once had, one Internal Revenue Service form took Giage " a whole day to complete and was just a mess" says Mr. Baucom. Fidelity entered the market because internal surveys showed that 401(k) s "haven't been affordable on the very small end," says Peter Smail, president of Fidelity Institutional Retirement Services Co. "That end is grossly underserved." Federal lawmakers tried to promote broader retirement coverage for small-business employees several years ago by creating simplified retirement plans. The legislation reduced or eliminated some of the most onerous rules, but imposed on employers certain contribution mandates.
For example, Collins, Butler & Co., a 24-person accounting firm in Enid, Okla., opted against a simplified Safe Harbor 401(k) because it required the firm to contribute 3% of income to a plan for each employee - a costly proposition. A traditional 401(k) doesn't require that, so long as certain tests are met. Instead, John Garrison, managing shareholder, turned to 401(k) Easy after spending the last three years running the company's plan in-house with a homemade spreadsheet. He expects the new software will cut his 401(k)-administration time to less than an hour a month from about five hours. "A lot of companies are going to look at something like this," Mr. Garrison says, "and see that there's finally a good way to administer a 401(k) plan at a reasonable cost."
The idea of businesses managing their own 401(k) plans in-house, however, doesn't sit well with some financial advisers. "People who have tried [to run their own plans] have botched them up pretty badly," says Richard Kaplan, chief executive officer at Benefit Planning Inc., a Marina Del Rey, Calif., employee-benefits consulting firm that administers 401(k) plans for employers. Indeed, mistakes can prompt IRS "penalties that can be severe," says David Wray, president of the ProfitSharing/401(k) Council of America, a Chicago trade group. An employer mistake, he says, can nullify an entire plan and impose immediate tax burdens on all participants. Of course, complicated rules and high fees aren't the only reasons many small companies have spurned 401(k)s. "They're too constrained financially, or the owner wants a pension for himself, but doesn't want to make matching contributions for employees," says Annika Sunden, associate director for research at the Center for Retirement Research at Boston College.
Attitudes are changing, though. A recent survey by Spectrem Group, a San Francisco financial-services consulting firm, found that 167,000 small businesses, representing roughly 1.6 million workers, expect to add a retirement plan in the next two years. In today's tight labor market, Ms. Sunden says, a growing number of small businesses are deciding that they can't afford not to offer retirement benefits if they want to hang on to hard-to-replace workers.
Reprinted from THE WALL STREET JOURNAL
When 401k plans first came on the scene in the late 1970's, all the industry focus was on the big, big companies. Lots of employees meant lots of investment dollars meant lots of revenue for the 401k providers and investment companies. Everything from fee schedules to service regimes was set up to capture and service large 401k plans.
Before long, though, the big plan market was all divvied up. By the late '80s and early '90s some 401k providers developed pared-down 401k plans with which to approach the less colossal businesses. They called the plans "bundled" or "turnkey" plans, because using them was designed to be as simple as turning a key.
Bundled/turnkey plans usually come as a preset package of administration plus investments; "prefabricated" is an alternate adjective that's often used.
Turnkey plans are highly simplified, pared-down versions of the full-fledge 401k plans offered to high-paying companies. Turnkey plans take the decision-making out of creating a 401k plan. They are akin to buying an off-the-rack suit, though: It may fit fine or it may not, but you're stuck with it if there's no tailoring available.
Turnkey plans offer a reduced price in exchange for reduced service, far fewer investment choices, and inflexible plan "options."
Many small and mid-sized companies have adopted turnkey plans, frustrated by the lack of flexibility and truncated service but glad, nonetheless, to have at least some kind of 401k plan for their employees. 401ks rank #2 in employees benefit choices; only health insurance gets more votes.
We, however, did not see the turnkey plans being developed as necessarily the best (or even a good) answer. So while most 401k providers lopping off desirable aspects of their big-business 401k product to create something that was supposed to woo small business clients, we opted to instead develop a 401k product specifically for small and mid-sized clients.
We created what we call a semi-bundled plan. It merged the simplicity and lower cost of turnkey plans with the flexibility and scope of many Fortune 500-type plans.
We developed an innovative approach that allowed plans to include investments from multiple mutual fund companies - for no additional charge. Not only were our clients NOT limited to a preset investment bundle, they had an almost unlimited array of mutual fund families from which to select their plans' investments.
We used IRS-approved prototype documents that allowed plan design flexibility, not to mention popular features such as loans, various types of employer contributions and various administrative approaches (the safe harbor approach, for one). None of the turnkey plans offered such investment and design flexibility.
We created an administrative system that complemented rather than replicated the administrative work being performed by third-party administrators, saving everyone time - and money. We then passed these savings on to our clients.
We were one of the first (and remain one of the few) 401k providers to offer MONTHLY employee statements and MONTHLY compliance testing - at no additional charge, nonetheless.
While most vendors in the 401k industry were scrambling for the big company 401ks, we were concentrating on creating plans suited to small and medium-sized companies. We made sure our plans contained the diverse features and offerings small-scale companies needed at prices they could afford.
Since the mid-1980's we have catered to small and medium-sized companies, providing them with quality full-service plans. We even created a division focused on developing a self-service approach to 401k plan administration and participation (namely, 401k FedForms).
Over the years, many of our clients' businesses have grown substantially. Because our 401k plans allow for wide investment selection and a range of plan options that can be amended at any time, the plans have been able to grow and adapt to clients' burgeoning work-forces.
We keep our 401k plans flexible to clients' needs and changes in those needs, because, however affordable a plan may be, it is of little use if ill-suited to the client's needs.
Even if plan participants only rarely change or add to their investment mix during the life of their 401k participation, they like to know they COULD.
The driving force behind our self-service 401k software is making 401k plans affordable to small and mid-sized companies while making the plans appealing to their employees.
Pension Systems Corporation founder, James Gilbert, has been a professional 401k investment advisor for more than 30 years. His career began shortly after the time when the 401k plan first was introduced.
We continue to provide full-service 401k plans as well as 403(b) plans (for nonprofit organizations), SEPs (for self-employed persons) and other government-sanctioned retirement savings plans along with our self-service products, 401k FedForms and 401k Easy for the PC.