Yale Law Prof Shakes Up the 401k World

by Marc Bastow | July 26, 2013 2:00 pm

As an employee (hopefully) enrolled in a 401k plan at work, you’re literally invested in the ability of your employer to pick a plan administrator … like it or not.

In addition to a robust list of investment options and alternatives, you’re also hoping your employer is looking out for that expense line, too. Expenses in a 401k can crater the best investment ideas; indeed, they’re one of the key elements to look for when judging retirement investment options made available through your company plan.

With this in mind, how nice would it be if an independent third-party source showed up to “call out” your plan administrator for charging excessive fees, shining the spotlight on plans that can cost you thousands of dollars over the life of your retirement?

Well, look out, plan administrators — Yale Law School professor Ian Ayres is coming.

According to The Wall Street Journal[1], Ayers has sent out around 6,000 letters to companies suggesting he will identify them — via social media among other possible outlets — “as a potential high-cost plan” provider. At least one letter reviewed by the Journal included a bit of a scolding, reminding a company that “fiduciary duties are the most stringent imposed by the law, and require administrators to act solely in the interests of plan participants.”


Peeling back the onion on 401k fees is a great idea, period. While federal fee-disclosure rules requiring greater transparency went into effect in 2012, let’s be candid: Very few people have the time, resources, or expertise to sift through the details.

Enter that independent third party: Ayres’ efforts to quantify costs would be a big help.

Is it a perfect solution? Of course not; fees and charges should represent what you are getting for your money. Fee structures are wide-ranging[2], depending on company size (typically larger companies pay less in fees than smaller ones) and services provided (advice, reporting and record-keeping).

In addition, actively managed accounts will always carry a higher fee structure than passive accounts that adjust holdings automatically.

But I like Ayers’ plan. Any opportunity to help out in what’s become a do-it-yourself retirement landscape is a step in the right direction.

Bring it on, Ayers!

Marc Bastow is an Assistant Editor at InvestorPlace.com.

  1. The Wall Street Journal: http://online.wsj.com/article/SB10001424127887323971204578626103409341648.html
  2. Fee structures are wide-ranging: https://investorplace.com/2013/05/keep-your-eye-on-the-401k-expense-line/

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