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EMPLOYERS LIMIT GIC FUND'S EXPOSURE TO RISK; DESPITE INDUSTRY CONCERNS, FALLING RATES, WORKERS STILL FAVOR GICs FOR SAVINGS PLAN INVESTMENTS

EMPLOYERS LIMIT GIC FUND'S EXPOSURE TO RISK; DESPITE INDUSTRY CONCERNS, FALLING RATES, WORKERS STILL FAVOR GICs FOR SAVINGS PLAN INVESTMENTS
 PRINCETON, N.J., Nov. 26 /PRNewswire/ -- A growing number of employers who offer savings plans are taking steps to limit their Guaranteed Interest Contracts (GICs) fund's exposure to risk, a new survey reports.
 The nationwide survey also reports that despite falling interest rates and negative publicity concerning insurance company safety, GICs and similar type investment options such as Bank Deposit Agreements (BDAs) remain employees' most popular investment choice in employer- sponsored savings plans.
 The survey, conducted by A. Foster Higgins & Co., Inc., a New York- based benefits consulting firm, is based on responses from 516 employers who sponsor savings plans such as 401(k) plans.
 "Quality and diversification are first and foremost on the minds of plan sponsors," said Brian Ternoey, principal in charge of Foster Higgins' Investment Services.
 Indeed, the survey reports a sharp rise in employers who follow issuer diversification standards (67 percent in 1991 vs. 48 percent in 1990) and who adopt industry diversification standards (66 percent in 1991 vs. 26 percent in 1990). The most common diversification standard is to invest no more than 20 percent of funds with any one company or bank.
 According to Ternoey, there's a "flight to quality movement" by most plan sponsors. Most employers (83 percent) will only place funds with insurance companies or banks that meet certain quality standards.
 More employers are turning to outside professionals for help in managing their GIC/BDA investments. The number of employers who develop quality standards in-house declined from 78 percent last year to 68 percent in 1991, with a corresponding increase in the use of GIC managers (from 9 percent to 21 percent) and use of outside consultants (29 percent to 31 percent).
 GICs Remain Most Popular Investment Option
 The Foster Higgins survey reported most employers (93 percent) allow employees to choose among several investment options. GICs are the most popular choice.
 According to the survey, employees on average invested 58 percent of their contributions into GICs/BDAs in 1991, virtually unchanged from last year. By contrast, employees invested no more than one-fourth of their funds in any other investments offered, including company stock, equities funds, money market funds and bond funds.
 "Most employees still view GICs, money market and other principal preservation funds as safer than equity funds because their returns are not volatile," said Ternoey. "However, employees need more realistic strategies to accumulate adequate funds during the 1990s."
 The survey also reports that nearly three-fourths of employees (74 percent) participate in a savings plan. Employee participation, however, varies depending on whether the employer matches part of the employee's contribution. Generally, the higher the match, the greater the participation rate.
 /delval/
 -0- 11/26/91
 /CONTACT: Ed Emerman, 609-520-2766, or Brian Ternoey, 609-520-2543, both of A. Foster Higgins/ CO: A. Foster Higgins & Co., Inc. ST: New York IN: FIN SU: ECO


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Publication:PR Newswire
Date:Nov 26, 1991
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