The Web Brings 401ks to Small Business

by Lynne Z. Rigolini

December 18, 2000 —

First, the web revolutionized stock trading; now it's going after 401ks. And it's easy to see why. The Investment Company Institute, a trade group that tracks investment policy and industry research, reports that 401k pension plans have grown at 18 percent each year over the last 10 years. And according to The TowerGroup, an IT analyst firm in Needham, Mass., $2.9 trillion will be invested in 401ks by 2004.

Edward Kountz, a TowerGroup analyst, says that traditionally, smaller businesses were discouraged from offering 401k plans because of the administrative cost. But new low-cost online money managers have made such plans more attractive. American Centuries Fund Advisers, Fidelity Investments and State Street Global Advisers have recently started online 401K management advice services. And a spate of dotcoms, including Financial Engines, Standard & Poor's Personal Wealth and DirectAdvice.com, have thrown in as well. Some of the new dotcoms, such as DirectAdvice.com, are primarily advisers. Others, such as American 401k.com and ez401k.com, handle the administration of 401K plans.

ez401k.com, for example, offers online management of 401k plans for companies with fewer than 200 employees. The company files reports, automates deposits and withdrawals, and works with financial service firms to reconcile the online paperwork so that the employer doesn't have to. Founded in October 1999 by Robert Steinhorn, of Steinhorn Consulting in Walnut Creek, Calif., ez401k.com helps investors make their own decisions concerning which stocks to invest in as part of their retirement plans.

Terry Hall, a controller for Dynavax Technologies Corp. in Emoryville, Calif., began using ez401k.com at her 25-person biotech firm in October. "Here employees can move their money every day," says Hall. "It's very user friendly and makes my job a lot easier because it empowers employees to make their own decisions.

CIO