Employees' 401(k) and other savings plan investments continue to mount, and Americans continue to invest more heavily in stocks.

So says a survey released today by New York-based William M. Mercer Inc.

The survey also found that participants in 401(k) or similar savings plans have an average of 8.2 investment options, up from 7.7 last year. Most employers surveyed have added new choices in the past two years.

Employees investing more frequently in the stock market are far from securities experts, but they commonly have a good deal of knowledge, said Brian C. Ternoey, Mercer principal in Princeton, N.J., and author of the study.

"They're not investing blindly, but they don't fully understand," Mr. Ternoey said. "They're not MBA candidates. But they know more than they ever have."

For all plans surveyed, non-highly compensated plan members deferred an average of 6% of their pretax income to plans this year. For highly compensated employees, the contributions averaged 6.9% of pay. The average for all employees is 6.4%, up from 6.1% last year, Mercer said in a release.

The survey results, which reflect data from 455 employers with defined contribution plans and total retirement plan assets of $324 billion, found employees have more than twice the number of investment options that they had in 1990. In most cases, the new options are equity funds; use of equity funds rose to 44% of total plan assets last year from 38% in 1995.

While 95% of plan sponsors offered some kind of common stock equity fund in their savings plan, some types of funds were more available for investment than others.

Actively managed domestic growth funds, the survey found, are offered by 82% of sponsors, up from 77% last year, while domestic indexed funds such as those designed to mirror the performance of Standard & Poor's 500 Index are offered by 48%, the report said. The availability of international equity funds has more than tripled in the past three years, with 67% of employers that offer 401(k) or other savings plans now offering them.

Mr. Ternoey said that a surprising finding this year is the relatively high number of plans offering so-called "life-cycle" funds. These are balanced by spreading investments among several funds that fit an employee's stage of life or that match his or her investment strategy. Funds can be allocated depending on how an employee fits an investment profile and how comfortable he or she is with risk: aggressive, conservative or somewhere in between.

Eleven percent of plans are offering life-cycle funds now, compared with 7% last year, the report said.

The expansion of life-cycle approaches to investing could significantly change the way employees view 401(k) plans. Now, virtually all employees configure the distribution of their 401(k) plan money through allocation percentages, said Mr. Ternoey. For example: 60% to stocks, 30% to a bond fund, 10% to a short-term Treasury fund.

"What we've found is a lot of people don't particularly buy that approach," Mr. Ternoey said. "A lot of people just more naturally relate to what (life-cycle) profile they fit."

But the Mercer report notes that while life-cycle investing is spreading in popularity, only 2% of total employee-directed assets are in life-cycle funds. "This year they have arrived," the report observes, "although not quite with a bang."

Mr. Ternoey also makes these points in the report:

The 401(k) plan world will be swept by Internet and intranet fever. Among the plans sponsors surveyed, more than half will be using Internet or Intranet technology within two years, and many of those will use the technology for transaction processing.

"Sponsors like the Internet because so much more information can be provided on a screen than over the phone," he writes. "The biggest potential drawback is implementation problems; a software glitch can completely undermine technological glitz."

Increased employee education should lead to more investment in equity funds, particularly as the education begins to look more and more like actual investment counseling.

Automatic enrollment -- signing up employees for plans unless they expressly refuse participation -- is the best hope for boosting plan participation rates above the average participation rate of about 75%.

Copies of the report, "Survey on Employee Savings Plans 1997," may be purchased for $75 by contacting William M. Mercer Inc. at 800-333-3070.