While Employers Are Concerned About the Mutual Fund Scandal, Employees Aren't

This is the first national survey that has attempted to assess the reaction of plan sponsors to the ever growing mutual fund scandal.

Chicago, IL & Portland, OR January 20 2004--Do employers who sponsor defined contribution plans like 401(k)s understand the mutual fund scandal and its impact on their plans? According to a just completed national survey of 374 plan sponsors by the Blue Prairie Group and 401khelpcenter.com, the answer is a resounding yes. Two-thirds of the responding plan sponsors indicated that they were very knowledgeable (28%) or knowledgeable (38%) about the mutual fund scandal and are extremely or very concerned about the fund scandal itself (59%). As one plan sponsor noted, "We are keeping an eye on it, and our investment adviser has kept us up-to-date. We are waiting to see how things progress. As long as the market is moving upward, we are reluctant to make any 'spur of the moment' changes."

According to Matt Gnabasik, Managing Director of Blue Prairie Group, "Plan sponsors are clearly concerned by the current mutual fund scandal and are monitoring the situation closely. Some have convened special ad hoc investment meetings while others have placed certain of their funds on a 'watch' list for close monitoring. The scandal only reinforces the need to have formal procedures in place for the ongoing monitoring of investment options within a companys ERISA retirement plan."

While plan sponsors are concerned about the mutual fund scandal, that same uneasiness doesn't appear to be shared by their employees. Just over 45% of plan sponsors reported that they had received no questions from their employees about the mutual fund scandal and 40.1% of plan sponsors indicated that they had received questions from fewer than 10 employees. One survey respondent commented, "I have been surprised by the fact that not one participant has called to discuss the scandal, especially since we have over 4,000 participants in our plan." As a result, more than half (53%) of plan sponsors have not communicated with their employees about the scandal.

"That employees are not raising questions with their employers is a surprising result," said Rick Meigs, President, 401khelpcenter.com, LLC. "It seems to me that if you are a plan participant, you would want to know what your employer is doing to protect your interests. Then again, this may be a reflection of the apathy many participants have as a result of the three year bear market and scandals like Enron."

Other Findings
Just over half of the plan sponsors (52.8%) do not have a mutual fund touched by the scandal in their plans. Of the 18.7% who do, 47.8% have only one fund, 46% have two to three funds, and 6.2% have four or more. Regardless of whether or not they have tainted mutual funds in their plans, most plan sponsors are keeping an eye on the situation.

Almost half (49.9%) monitor fund performance on a quarterly basis, 11.6% monitor semi-annually, and 29.4% monitor annually.
Most of the plan sponsors (85.5%) have not removed any funds from their plan as a result of the scandal. However, many have taken some action:

> 25.3% have put one or more funds on a "watch" list
> 25.3% have convened their investment committees to review all the funds in their portfolio
> 22.8% have requested a review of funds by their investment providers
> 2.1% have frozen assets in any suspected funds and have offered plan participants alternative investments

When asked what actions they would take if the fund company of one of their current funds were formally investigated, 39.1% would place the fund on "watch" status, 29.1% would convene their investment committee, and 16.9% would remove the fund offering from their plan.
Plan sponsors were more likely to take stronger actions if the fund company of one of their current funds was actually indicted. More than half (51.6%) would remove the fund from their plan.

About the Survey
This is the first national survey that has attempted to assess the reaction of plan sponsors to the ever growing mutual fund scandal. The online opinion survey was conducted between December 4 and December 30, 2003 and had a total of 374 responses. To review the entire Executive Summary, go to http://www.401khelpcenter.com/401k/mutual_fund_scandal_survey.html .

About Blue Prairie Group
Blue Prairie Group is a full-service human resources and employee benefits consulting firm for mid-market organizations headquartered in Chicago, Illinois. For more information, visit the company's website at http://www.blueprairiegroup.com .

About 401khelpcenter.com
401khelpcenter.com, located in Portland, OR, is a principal provider of information, opinion, analysis, news, rules, and other 401k resources for retirement professionals, plan sponsors, small businesses, and plan participants. For more information, visit the companys website at http://www.401khelpcenter.com .

CONTACTS:               
Matt Gnabasik, Managing Director   
Blue Prairie Group
Phone: 312.645.1899
Email: e-mail protected from spam bots
Website: www.blueprairiegroup.com

Susan Pedigo, Senior Consultant
Blue Prairie Group
Phone: 312.645.1899
Email: e-mail protected from spam bots

Rick Meigs, President
401khelpcenter.com, LLC
Phone: 503.705.9548
Email: e-mail protected from spam bots
Press Center: www.401khelpcenter.com/press_center.html