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Wednesday, May 30, 2012

Demos Spotlights 401k Fees

News summary by MFWire's editors

Fees in 401(k) plans are once again in the media spotlight thanks to a just-released study from Demos and a Government Accountability Office (GAO) report released in April.

The Los Angeles Times pulls a scare number from Demos, pointing out that the "average American couple could pay nearly $155,000 in fees for their 401(k) plans over their careers." That would cut their plan accounts by more than 30 percent from a hypothetical $510,000 to only $355,000.

The Demos report focuses on all fees, including explicit charges and indirect expenses, including trading costs incurred within mutual funds.

Demos is a research organization dedicated to promoting an equitable economy, democracy and a strong public sector.

The Demos research was also picked up by Consumer Reports as was the GAO study from April.

Most surprisingly, one of the frequent critics of 401(k) plan expenses is on the record in the L.A. Times pointing out that Demos may be overstating things.

"There's a problem I'm not quite sure the problem is as large as stated," Mike Alfred, chief executive of BrightScope Inc., told the paper.

Walter Hamilton, the article's author claims that:
Retirement-industry consultants have long complained that a variety of factors hidden fees by 401(k) providers, lax government regulation and poor oversight by employers that sponsor retirement plans contribute to excessive costs.
The report adds coverage of new fee disclosure rules enacted by the Labor Department that will start in July. The San Jose Mercury News gave its take on the fees earlier this week.

The ICI's rebuttal that the average person pays $248 a year in 401(k) fees and that tranlates into an average dual-income household paying just less than $20,000 over a 40-year work career makes the end of the L.A. Times article. 

Edited by: Sean Hanna, Editor in Chief


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