The Frugal Fiduciary Blog

The Top 4 Lies Told by 401(k) Providers

Posted by Eric Droblyen on Mar 22, 2017

After the death of his beloved mother, Harry Houdini was desperate to contact her from beyond the grave with the help of psychic mediums – who claimed an ability to communicate with the dead. Mediums were very popular at the time, but it didn’t take long for Harry to discover they couldn’t do what they promised. Upset, Harry became determined to expose their lies to protect unwitting customers.

Like mediums, some 401(k) providers make false claims. Their lies can easily go unnoticed to 401(k) fiduciaries due to the highly-technical nature of 401(k) services. However, believing these lies – and hiring the provider that makes them – can trigger severe consequences. They often mask excessive 401(k) fees or a lack of expertise that can increase fiduciary liability.

If you’re a 401(k) fiduciary, identifying 401(k) provider lies is imperative to mitigating your plan liability. The good news? Most are easily debunked with some basic facts.

I’d like to channel (pun intended) Harry Houdini by exposing four of the most common lies told by 401(k) providers today.

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Topics: Revenue Sharing, Fiduciary Responsibiilty, 401k fees, Provider Shopping, Plan Setup

Finding Hidden 401(k) Fees in Participant Disclosure Notices

Posted by Eric Droblyen on Feb 8, 2017

In a 2015 study of 4,368 retirement plan participants, the National Association of Retirement Plan Participants (NARPP) found that 89% could not correctly calculate their account fees.  Even more disturbing, only 42% knew they were paying fees at all.  Most plan participants – 58% - were unaware that fees were being “automatically” deducted from their account.

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Topics: Revenue Sharing, 401k fees

Asset-Based 401k Admin Fees Are Unreasonable; Fiduciaries Should Avoid Them

Posted by Eric Droblyen on Oct 19, 2016

20 years ago, 401k plans were free. OK not really, but 401k providers used this lie a lot to sell 401k plans to small businesses that didn’t want to pay any out-of-pocket 401k fees. In truth, these plans paid “indirect” fees - like revenue sharing paid by mutual funds and/or wrap fees paid by insurance company variable annuities – to 401k providers based on a percentage of plan assets.   

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Topics: Revenue Sharing, 401k fees, Provider Shopping

3 Questions for Calculating Small Business 401k Provider Fees

Posted by Eric Droblyen on Oct 5, 2016

Small businesses have a fiduciary responsibility to pay only reasonable 401k plan fees. The problem? Too many 401k providers bury their fees in complex disclosure documents. When 401k fees are hard to find, it can be easy for 401k fiduciaries to pay too much for 401k services. When this happens, participant returns are handicapped unnecessarily and fiduciary liability is increased.

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Topics: Revenue Sharing, 401k fees, Provider Shopping

(Possibly) The Biggest Small Business 401k Fee Study Ever!

Posted by Eric Droblyen on Aug 24, 2016

Table with person working on 401k study

Meaningful 401k fee data is hard to come by – and that’s a big problem for small businesses. Sponsors of small business 401k plans have a fiduciary responsibility to keep 401k fees reasonable for plan participants. When this responsibility is not met, the consequences for 401k fiduciaries can be severe - including personal liability.

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Topics: Revenue Sharing, 401k fees, Provider Shopping, 401k Studies

John Oliver Should Be Upset; His Hancock 401k Fees Are Too High!

Posted by Eric Droblyen on Jun 29, 2016

Recently, John Oliver lambasted the 401k industry and his own 401k plan with John Hancock on his HBO show Last Week Tonight. If you haven’t seen this show segment, you should check it out now - it was educational as well as hilarious. John Oliver’s main beef with his company’s John Hancock 401k plan was its annual fees - 1.69% of plan assets + $24/participant – which he considered excessive.

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Topics: Revenue Sharing, 401k fees, Provider Shopping

Clarity in a Complex World? A 408b-2 Review

Posted by Eric Droblyen on Jul 1, 2015

I look at a lot of 401k service provider fee (408b-2) disclosures.  At least 2 per week. Some are excellent and straight forward, while others are as clear as mud.  This is a problem for 401k fiduciaries.  It’s their responsibility to ensure their 401k plan only pays reasonable plan expenses.  When 408b-2 disclosures are unclear, satisfying this responsibility becomes more difficult.

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Topics: Revenue Sharing, 401k fees, Provider Shopping

New Year’s Resolution # 1 for Fiduciaries – “I WILL Evaluate My 401k Plan Fees"

Posted by Eric Droblyen on Dec 30, 2014

I have always liked New Year's resolutions. They are a great excuse for ending bad behaviors or starting good ones. Here’s one for all small business 401k sponsors – “I will evaluate my plan fees for reasonableness.” Let me explain why…
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Topics: Revenue Sharing, Fiduciary Responsibiilty, 401k fees

Edison International case highlights a needed reform: Share class restrictions in 401k plans.

Posted by Greg Carpenter on Oct 22, 2014

401k Plans
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Topics: Revenue Sharing, Fiduciary Responsibiilty, Investments

Revenue sharing is on the decline in 401k plans. Three reasons why it will soon be gone altogether.

Posted by Greg Carpenter on Jul 16, 2014

Revenue Sharing
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Topics: Revenue Sharing, Investments, 401k fees

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