What You Don’t Know Can Cost You a Lot of Money Over Time
 

This is the second article in a series I’m writing for anyone interested in uncovering the hidden pitfalls of 401(k) plans.

Plan Provider Secrets: Improving Their Profits, Not Yours
 

Where do I start? There are countless ways a plan provider can increase your costs without you realizing it. Here are just a few:
• Interest-bearing accounts with low rates
Insurance-based plans often offer interest-bearing accounts to participants. In many cases, the rates are not competitive with other investment options.
• Outdated or limited platforms
 

Most plan providers have several platforms—some designed for small plans, others for larger ones. Older platforms that are no longer available to new plans are usually more expensive. If you’re still on one of these legacy platforms and don’t realize that a newer option exists, you could be paying far more than necessary. You may also be restricted from choosing from a broader list of funds that offer better performance or lower costs.

• Recordkeeping fees that grow with your plan
Every plan provider charges a recordkeeping fee. Some charge a percentage of assets; others use a flat fee plus a per-participant charge. As your plan grows, your provider’s fees can grow as well. If you don’t periodically comparison shop, you may miss out on significant cost savings.
• Conflicts of interest in investment management
 

Some plan providers also manage the investments within your plan. This can create conflicts of interest and add unnecessary costs. When a provider limits fund choices to their own proprietary funds, performance can suffer—and over time, that poor performance can be very expensive.
 

The Bottom Line
The best thing a plan provider can hope for is a plan sponsor who doesn’t care and doesn’t pay attention. When that happens, the plan grows—and so do the provider’s profits—while your employees’ retirement outcomes suffer.
Plan costs and investment expenses directly impact bottom-line returns. Take the time to learn what you never knew you didn’t know.