The $37,109 Commission Payment to a Broker that a Plan Sponor Insisted was "Free"

Mark Twain once said "It's easier to fool people than to convince them they have been fooled."  Too bad more retirement plan sponsors don't heed his words.  If they did, it might one day occur to them that broker's commissions are not free.  Unfortunately, I don't see this happening any time soon.To illustrate, I recently had a conversation with a woman in charge of overseeing a company's 401(k) plan.  I tried explaining to her that the $37,109 commission payment that her broker received in 2012 was paid for by the participants despite her insistence that the mutual funds paid this commission and that it was free to the participants.  I tried explaining the concept of a share class to her which is the means by which a broker determines the level of compensation.  Plan sponsors have no idea what this means, so brokers always have complete control over the compensation they take from participants' accounts.  The reason for the availability of different share classes is to allow the broker and plan sponsor to discuss different levels of compensation.  Of course this never happens nor does the broker ever remember (or perhaps conveniently forgets) to reduce the percentage-based compensation as the assets increase.So this situation naturally begs the question:  If mutual fund payments to brokers are free, and the broker has the ability to select the share class without asking permission from the mutual funds, why would mutual funds bother offering different share classes?  Since everything is free to the participants, why wouldn't every broker just continue to select the share class that pays the most?  And why would the Department of Labor bother having a fee disclosure requirement?If any plan sponsor ever bothered going on the Department of Labor's website in order to verify what should have already been obvious, they would find the following:"Mutual funds also may charge what are known as Rule 12b-1 fees, which are ongoing fees paid out of fund assets. Rule 12b-1 fees may be used to pay commissions to brokers and other salespersons, to pay for advertising and other costs of promoting the fund to investors and to pay various service providers of a 401(k) plan pursuant to a bundled services arrangement. Some mutual funds may be advertised as “no-load” funds. This can mean that there is no front- or back-end load. However, there may be a 12b-1 fee."http://www.dol.gov/ebsa/publications/401k_employee.html#section4Sadly, the plan sponsor's only response to this was:  "I need to do more research."  Even more sadly, this response was not the exception, but the norm.  If common sense requires research, a broken and corrupt retirement plan system is the least of our worries.