Comments on: The Retirement Trivia Questions Were a Hit

By: Jeremy

Jeremy — Wed, 31 Oct 2007 16:02:01 +0000

That is a good idea for a post. But as you said, the information is a bit tricky to come by. I do think I remember reading something somewhere about retirement plan providers, but I can’t recall where. Of course I have a stack of industry magazines about 10 feet tall from the past year, so I’m sure I could dig it up.

Thanks for the idea, and I’ll see what I can find. That would make an interesting post.

By: Steve Austin

Steve Austin — Wed, 31 Oct 2007 15:31:31 +0000

Thanks for elaborating on the details. Something I would find very useful as a future genxfinance post: an enumeration of the best plans and plan providers down to the worst. I think it could be good ammunition for job hunters who are considering multiple similar positions and trying to decide amongst them based upon the quality of benefits offered. I realize that each employer can negotiate different terms and arrangements for each plan, but there must be some way to compare plans apples-to-apples.

I’ve had trouble finding this information myself. The sector seems opaque and tight-lipped (and frankly, rather smug) about their operations and pricing. “We’re not going to tell you because we are not legally obligated to do so.”

By: Jeremy

Jeremy — Tue, 30 Oct 2007 23:27:50 +0000

Right, there will always be fees, but people are under the impression that they are being charged quarterly or annual fees in addition to any expenses built into the fund expenses themselves.

And actually, the plan participants are very fortunate to be a part of a large plan with very attractively priced institutional funds with low fees. Expense ratios start at 0.12% and max out around 0.80%, with the majority falling in the 0.40% range.

Also, since you mentioned advertising/marketing, it is interesting to note that the plan provider doesn’t have a retail business at all. They strictly provide for retirement plans, which is what can keep costs down.

Of course, other companies that do have other markets to service, they do have to provide room for covering marketing expenses.

By: Steve Austin

Steve Austin — Tue, 30 Oct 2007 22:00:39 +0000

Perhaps their plan does not have any explicit fees, but there most certainly are implicit fees passed along to the participants in the form of plan funds (offered by the provider) that are above market for the particular fund category.

To imagine that there are no such implicit fees is to imagine that the plan provider is not getting paid for 401(k) plan servicing and accounting. And if they are not getting paid, why wouldn’t they just spend all the advertising / marketing budget on boosting retail business?

It’s this kind of opaque compensation for 401(k) plan services that burns me. ;-\