|Setting up employee's choice
After the fund committee decided to implement ‘employee’s choice’, the fund committee has to set up systems to support the employee’s choice as well as to educate fund members about employee’s choice concept and investment policies.
1. Condition checklist
To begin with, the fund committee should examine the fund’s current condition in different dimensions whether it is ready or not to apply ‘employee’s choice’.
Firstly, the fund committee should check the readiness of systems for handling extra jobs. Since each fund member can select one or more investment policies, it is necessary to have a reliable data processing system. The committee may have to confer with relating departments in the company such as finance department, personnel department, etc., in order to make sure whether the systems are ready for the implementation of ‘employee’s choice’. Importantly, the staffs that have to coordinate with the investment management companies should also understand the structure of employee’s choice because the systems of contributions, benefit payouts and etc. are more complicated.
The fund’s capital will have effect on the number of investment policies. It is because for a single fund, if the fund’s size is small and the fund committee wants to set up more than one policy, the size of each policy will be small. Therefore, it is difficult for fund managers to manage each policy efficiently. In addition, management cost may increase as a result of the increasing number of investment policies. Consequently, for provident funds whose sizes are not large, an alternative way to exercise ‘employee’s choice’ is to sign up for a ‘master pooled fund’ with other employers.
- Investment Management Companies
The fund committee must compare several key factors between asset management companies such as their proposed investment policies, expertise in managing certain types of investment policies, other additional services, etc., before coming to a decision.
2. Conducting a survey
To find out whether fund members are ready for ‘employee’s choice’, the fund committee should conduct a member survey through the following steps in order to understand members’ needs and check whether they truly understand concept and systems about employee’s choice.
- To start with, the fund committee should inform members about employee’s choice concept, structure and benefit they will get including what will change after the implementation of employee’s choice, how much more responsibility they have to take on, etc.
- The next step is to educate members about ‘employee’s choice’. Here, the fund committee may distribute documents containing information about the new investment policies or invite staff from the asset management companies to explain about different investment policies and the consequences of changing from one policy to another, how to choose suitable investment policies, when they are allowed to switch from the policies they chose, etc.
- For the last step, the fund committee shall distribute questionnaires to check readiness and understanding of fund members, as well as their attitude toward employee’s choice. If the survey reveals that the majority of fund members agree with the implementation of the employee’s choice, the fund committee should decide on which investment policies shall be available for chosen. Because of the cost and other constraints, not all suggested investment policies can be offered to fund members.