After reading about the 401-K fee scandal that recently hit the wire,
I decided to look at the fee structure within my employer's 401-K (Nationwide
is our plan provider). We are a small company (about 100 employees).
I was surprised and shocked to learn that the plan provider penalizes
participants who choose to invest (wisely) in Index-based funds (eg.
Vanguard). Our provider charges a 2.69% annual "asset-management" fee
if we choose any index-based funds, or any fund with a low expense
ratio. A quick email to the plan representative yielded the following
response - "The
asset management fee which is a Nationwide fee that covers the platform cost
(i.e. 800 number, internet access, daily valuations, fund window feature,
seamless investing between different fund families, broker commission and
Pension Associat wrap fee). The asset management fee is determined by fund
classification".
I find it incredulous that the provider is allowed to levy such a
hefty percentage-based fee for what is essentially a fixed cost
expense for them. Are any laws being broken ? Is this the norm for
other companies ?
Unfortunately, I am the only one in the company attempting to raise
red flags about this ... and I stick out. I really would like to make
the company aware that we, the participants, are getting a raw deal.
How should I do this without alienting executive management.
I decided to look at the fee structure within my employer's 401-K (Nationwide
is our plan provider). We are a small company (about 100 employees).
I was surprised and shocked to learn that the plan provider penalizes
participants who choose to invest (wisely) in Index-based funds (eg.
Vanguard). Our provider charges a 2.69% annual "asset-management" fee
if we choose any index-based funds, or any fund with a low expense
ratio. A quick email to the plan representative yielded the following
response - "The
asset management fee which is a Nationwide fee that covers the platform cost
(i.e. 800 number, internet access, daily valuations, fund window feature,
seamless investing between different fund families, broker commission and
Pension Associat wrap fee). The asset management fee is determined by fund
classification".
I find it incredulous that the provider is allowed to levy such a
hefty percentage-based fee for what is essentially a fixed cost
expense for them. Are any laws being broken ? Is this the norm for
other companies ?
Unfortunately, I am the only one in the company attempting to raise
red flags about this ... and I stick out. I really would like to make
the company aware that we, the participants, are getting a raw deal.
How should I do this without alienting executive management.
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