A letter making the rounds in the corporate world has thousands of companies that offer 401(k)s shaking in their boots. In the missive, Yale Law School professor Ian Ayres has threatened to go public with a study that he claims will expose the companies for imposing excessive plan fees on current and retired employees.
According to the letter, the information collected by Ayres and Quinn Curtis, an associate professor at the University of Virginia School of Law, was “a study of the financial impact of investment and administrative fees in retirement plans.” The researchers compiled the results by studying 2009 data available through the Department of Labor and BrightScope Inc., a financial-information firm.
A total of about 6,000 letters were sent to companies that Ayres and Curtis deemed had “a potential high-cost plan.” And it gets better: The letters announced that the study will be brought to publications such as The New York Times and the Wall Street Journal by next year.
Ayres has also said that he will release the information over Twitter, using each and every company’s name as a hashtag.
401(k) Fees in the News
Ayres’s stunt certainly isn’t the first time that 401(k) costs have come under scrutiny. Workers recently issued suits against several companies—including Cigna Corp., Prudential Financial Inc., International Paper Co. and Ameriprise Financial Inc.— claiming that they were overcharged for their plans. And, last year, the federal government mandated that employers more clearly explain the fees associated with their 401(k) offerings.
Despite his likely virtuous intentions, Ayres has faced criticism for relying on data from 2009—before the federal mandate was enacted, and companies subsequently made changes to elucidate the fees associated with their plans. But a spokesperson from Yale University told the Wall Street Journal that “no company-specific data will be publicized that is based on 2009 data.”
According to the Wall Street Journal, the study also focuses solely on fees, discounting paid services—such as participant education and automatic enrollment—that experts say tend to boost returns.