Spot the Hidden Fees in Your Plan

Hidden fees in 401(k) plans make it extremely challenging to identify the actual fees paid for services. Plan sponsors need to know that it is very rare, indeed, when hidden fees will be included in a plan that includes a 3(38) investment fiduciary.

In a universe rife with "pay to play" inducements, it is difficult to find a 3(38)fiduciary to sign on the dotted line to accept responsibility for the investment selections of a plan — to become a fiduciary who will commit in writing that their actions will always be in the best interest of plan participants. Many companies prefer to provide the impression of being a trusted fiduciary, while the fine print says otherwise.

Insurance giant John Hancock bills itself as a leader in providing "fiduciary responsibility support," even going so far as to provide plan sponsors of retirement plans with its "fiduciary standards warranty." When pressed on the issue of fiduciary, however, John Hancock admitted they are not a fiduciary, nor do they have any desire to be one. Hancock’s decision to skirt a fiduciary obligation may largely be attributed to a desire to include and recommend funds that carry 12b-1 and other hidden fees. Accepting a fiduciary obligation presents a direct conflict of interest for advisors who choose to be paid by multiple parties. A fiduciary cannot serve two masters.

Index Funds Advisors is a 3(38) fiduciary for 401(k) plans. This means IFA is 100% responsible and liable for its investment decisions, which include the selection, monitoring and replacement of plan investments options. IFA is fully committed to making independent investment choices that are in the best interest of plan participants. It is IFA’s view that this commitment is what is required to maximize the probability that all plan participants have success in their retirement plan.