Every few months, I hear a plan sponsor brag, \u201cOur provider said the 401(k) is free!\u201d And every time, I have to resist the urge to reply, \u201cSo is lunch\u2014if you\u2019re on the menu.\u201d<\/p>\n
Let\u2019s be clear: there\u2019s no such thing as a free retirement plan. Somebody, somewhere, is footing the bill. If it\u2019s not you, it\u2019s your participants. The trick is figuring out where the money\u2019s actually coming from\u2014and whether it\u2019s being disclosed in a way that would make a DOL auditor smile.<\/p>\n
\u201cFree\u201d plans usually work like this: the recordkeeper builds their costs into fund expenses. So instead of writing a check, you\u2019re just letting investment fees quietly chip away at employee returns. It\u2019s like saying your accountant is free because their fee is buried in your tax refund. It sounds clever until you do the math.<\/p>\n
I get it. Nobody likes writing checks, especially for something as unglamorous as plan administration. But let\u2019s not confuse convenience with transparency. Paying a fair, visible fee for service isn\u2019t a bad thing\u2014it\u2019s honest. And honesty is the cornerstone of fiduciary prudence.<\/p>\n
Here\u2019s the danger: the minute you call a plan \u201cfree,\u201d you stop asking questions. You don\u2019t compare costs, you don\u2019t benchmark performance, and you don\u2019t check what\u2019s being deducted from participant accounts. Then, one day, you get a plaintiff\u2019s attorney explaining the difference between \u201cfree\u201d and \u201cfiduciary breach.\u201d Spoiler alert: that conversation isn\u2019t free either.<\/p>\n
So next time a provider pitches you a \u201cno-cost\u201d 401(k), smile politely and ask, \u201cWho\u2019s paying?\u201d If they can\u2019t answer that in one sentence, you\u2019ve just learned the most expensive lesson in retirement plan management: free never is.<\/p>\n
<\/span><\/p>","protected":false},"excerpt":{"rendered":" Every few months, I hear a plan sponsor brag, \u201cOur provider said the 401(k) is free!\u201d And every time, I have to resist the urge to reply, \u201cSo is lunch\u2014if you\u2019re on the menu.\u201d Let\u2019s be clear: there\u2019s no such … Continue reading