TMG Reflections

The purpose of our blog is to make you feel included and informed on a more personal level. We want to keep you up-to-date on industry and company news while giving you a glimpse inside The Meltzer Group. Our blog posts may range from helpful tips, to breaking industry news, important information and reminders, random musings, expert opinions, and even some gratuitous employee shout-outs. From time to time we’ll have various employees writing blog posts as a way for you to become familiar with them. We promise to check the industry jargon at the door.

Aug, 27 2013

Value of 401(k) plans for participants


Recently, a number of 401(k) plan sponsors received letters from a Yale Law School professor on the topic of plan costs to participants. We take very seriously the responsibility to keep plan costs low and know that our clients do as well. We want to address this issue directly and emphasize how our services accomplish the important goal of providing the best value for 401(k) plan participants.

We recognize that plan sponsors who received this letter may wonder what it means for them and how to proceed. We are very confident that our clients are well-equipped to discharge their fiduciary duties, utilizing many of the tools that we offer.

401(k) plan fees are an important issue, and the letter notes this; however, the tone of the letter and the conclusions it reaches are not in line with our thinking. We have several issues with the BrightScope data used to support the letters’s conclusions:

  •  The data in the letter is from 2009 and out-of-date.
  •  The data reflects only plan cost, not plan value. To assess whether participants are getting a good deal, you must look at both the costs and benefits of the plan.
  •  BrightScope uses assumptions to estimate costs that are not publicly disclosed. Using assumptions to compensate for incomplete data limits BrightScope’s accuracy.
  •  The number BrightScope calls “total plan cost” actually only includes costs paid by the plan itself, not costs paid by the company which sponsors the plan. For this reason, “total plan cost” is not an accurate measure of the true cost of administering the plan.

If you are a plan sponsor who became a client in 2009 or later, we have worked with you to evaluate and possibly revamp the investment options in your 401(k) plan. If you receive this letter, the figures in it may bear no relation to the current state of your plan. Other clients have worked with us for longer periods of time to select investment options that offer the greatest value to plan participants. To see that hard work and careful balancing of costs and benefits overlooked in favor of a single, imprecise statistic can be frustrating.

Helping our clients fulfill their duties as plan sponsors is our top priority. We offer a variety of services which focus on helping you meet your important fiduciary duties:

  • Fee benchmarking and pricing re-negotiation help you keep costs in line with other similarly-situated plans.
  • Our fund scoring process helps you select investment options with the best track records and maximize investor return potential.
  • We help execute and document all compliance-related activities, including committee meetings and required disclosures.

Andrew Prevost, President, Meltzer Retirement Plan Services