The fundamental flaw of the BrightScope article is the writer’s attempt to reconcile our study with a commentary by Matthew Hutcheson (Elder Law Journal, “Uncovering and Understanding Hidden Fees in Qualified Retirement Plans”). It’s impossible to compare the two, because Hutcheson’s commentary does not describe or provide his methodology, sample size, or detail on anything other than a “conventional” plan of his own recollection. The Deloitte/ICI study uses an original survey that gathered more than 1,000 data points from each of the 130 plans included and includes comprehensive fee and other data on plans of all sizes.

We have posted a detailed response to this blog item on our web site (http://www.ici.org/statements/remarks/09_brightscope_stmt.html). Three of the items where we would take exception are:

o Sample. The Deloitte/ICI report provides an extensive background of how Deloitte conducted the survey. It is a study to understand the fee structures of 401(k) plans and how they work, using a sample of plans ranging from very small plans to very large. Exhibits throughout the report clearly indicate the size segments associated with each data item.

o Data. We did not calculate a participant-weighted “all-in” fee in our study. The data in our report, however, allows a user to calculate such a participant-weighted fee. That calculation produces an “all-in” fee of 0.86 percent of assets—not very far from the median fee of 0.72 percent for the 130 plans in the study.

o Trading costs. Trading costs is a complicated issue. The blunt approach used in the blog posting—simply multiplying the investment cost of a fund—is misleading because it does not apply well to 401(k) plans and exaggerates the burden that trading costs put on investor returns.

We would invite your readers to review our Research Department’s full analysis of the BrightScope blog post on our web site at http://www.ici.org/statements/remarks/09_brightscope_stmt.html.

— Mike McNamee
Senior Director, Public Communications

My posts are not official ICI responses (hence the “in my humble opinion” acronym). I am not familiar with the official ICI policy for rank and file employees to express thier opinions in a public forum (hence the pseudonym).

My post was for two reasons. First, I personally felt that some clarification needed to be given in a public forum to help continue with the productive conversation on this topic. Second, a personal expression of my frustration with the conflict of perception between what I have viewed from the inside in the last few years, and how ICI is sometimes represented by others. Yes ICI (and myself) do have an invested interest in this topic which is why they support the research. However, I have been highly impressed with the level of professionalism and integrity that each person at ICI exhibits everyday. The entire company tries very hard to make sure they get it right.

Thank you for your work and attention to this incredibly important issue. Also, thank you for a location for me to express my perceptions and opinions.

Thanks for visiting the BrightScope Blog. I appreciate your opinion on this matter and agree with you that making the distinction between plan-weighting and participant/asset weighting is a very important distinction and one that should be explicitly mentioned in any future analysis of this topic. Ultimately each 401k plan has its own unique fee structure and I think we all can agree that plan sponsors and participants should know exactly how much they are paying.

By the way I couldn’t help but notice that you posted your comment from the ICI Washington DC office. Are you an ICI employee? Am I to assume that this is a official ICI response to my post? Thanks for the clarification.

Basically, my bottom line conclusion is that the report is not written for the casual reader but appears to be well done by Deloitte and ICI. Most people pay a fairly decent price for all of the work that goes into these plans (thank you government). 3% appears to be on the very high end of things and the government should consider a way to help small and tiny plans.

On a personal note, I think 4 pieces of information should be given to all participants:
1) The “All-in-fee” of thier personal account.
2) How much of that “All-in-fee” is paid by the employer directly.
3) How much of that “All-in-fee” is paid by the participant.
4) Any contingent fees for the plan (loan fees, market timing fees, etc.)

Of course all of this is only IMHO Nevin and Ryan.

It is rare to read such a scholarly and compelling argument (on either side) so cooly delivered. Hats off to Ryan and Mike.