The Hidden Costs: A Deep Dive into 401(k) Fees of Major Corporations
When you think of companies like Salesforce, Marathon Oil, Walmart, Microsoft, and Apple, you probably picture industry giants with robust employee benefits. However, a closer look at their retirement plans reveals confusing costs that might be affecting their employees more than you'd think.
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Dissecting the Numbers:
Let's begin by breaking down the estimated* fees per participant for 2021-2022:
- Salesforce: $25 to $60 per participant (49,396 participants in 2021)
- Marathon Oil: $71 to $344 per participant (2,460 participants in 2022)
- Walmart: $32 per participant (1,051,450 participants in 2021)
- Microsoft: $173 per participant (166,621 participants in 2022)
- Apple: $59 per participant (131,476 participants in 2021)
At a cursory glance, some figures might seem reasonable, but the devil is in the details.
* It’s possible that the fees listed on schedule C refer to the total amount of revenue sharing payments for Salesforce and Marathon Oil
Salesforce’s Opaque Charges:
While Salesforce's total fees per participant seem moderate, deeper analysis shows potential overcharges. Of the $60 estimated per participant in 2021, advisory fees were just $9. The remaining $51 was for estimated record-keeping, administration, and custodial services. This amount, charged by Fidelity in the form of revenue sharing payments, essentially acts as kickbacks, complicating transparent pricing. With Vanguard offering competitive and transparent flat-dollar pricing for such services with no revenue sharing, Salesforce might be paying more than necessary.
Moreover, the leap in advisory fees from $158,268 in 2020 to $433,168 in 2021 raises questions.
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Marathon Oil:
With an estimated payment of $71 to $344 to Fidelity per participant, Marathon Oil's fees could be excessive. More clarity is needed on whether Fidelity’s fee of $177,445 is in addition to or including the revenue sharing payments from the funds shown on schedule C.
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Walmart's Fee Structure:
Despite a low per participant fee of $32, Walmart needs a thorough review of its arrangements with its 11 service providers. It's crucial to ensure that the services provided are proportionate to the fees charged.
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Microsoft’s Misleading Fees:
Microsoft's per participant fee of $173 seems exorbitant for a plan with such a vast participant base. However, this might be misleading since most fees listed were paid to mutual fund companies. Closer examination reveals advisory fees amounting to about $7 per month for each participant. Such fees warrant further scrutiny.
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Apple’s Puzzling Choices:
Apple's total fees of $59 per participant in 2021 seem slightly elevated, especially when compared to Salesforce, which has fewer participants. The question arises: Why does Apple have 24 different service providers, a number significantly higher than most other plans?
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The Common Thread:
All these corporations pass most, if not all, service provider fees onto their participants. This approach makes them less sensitive to costs and less inclined to seek competitive bids. A straightforward solution? Companies should cover these service provider fees. For instance, Salesforce's contributions to employees in profit-sharing and matching far outweigh the fees. Absorbing these service fees would have a minimal impact on their bottom line.
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Conclusion:
The intricate world of 401(k) and 403(b) fees requires meticulous scrutiny. While these figures are merely estimates, they highlight the pressing need for transparency and fairness in retirement plans. Companies owe it to their employees to ensure they aren't unknowingly paying more than they should.
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Remember, retirement savings are a cornerstone of financial security. Don't let complex fees erode your future. Stay informed, ask questions, and always seek clarity.