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JMacDonald

Bloomberg Article On High Fees.

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Hi,

Here is an article that I found on the Vanguard Diehards Forum: http://www.bloomberg.com/apps/news?pid=206...id=aUq26wSFjwRA

 

Here is a snippet about NEA:

In extreme cases, fees can be much higher. Jerre Daniels- Hall, a Port Orchard, Washington, teacher alleges in a lawsuit that a 403(b) plan run by the National Education Association for the South Kitsap School District has fees totaling 12.17 percent for some employees. A 403(b), similar to a 401(k), is available to workers in government and nonprofit corporations.

NEA states:

says Lisa Sotir, general counsel for NEA Member Benefits Corp.

``It's hard to deliver a program like this with a low fee because there are commissions paid to agents,'' Sotir says. ``We don't condone high fees, but we want our members to choose the plan that is best for them.''

What give teachers a low cost plan and give up our gravy train--no way.

 

Best Wishes,

Joe

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Joe,

 

Judy already posted the article. I just can't believe everytime I read that 12.17 % fee/ I keep lookin at it to see

of its a typo or if I miss read it as 2.17% Nope, I am dead on. It says 12.17%. They are friggin out of their minds!! It goes to show how far folks will go screwing teachers if we don't educate ourselves.

 

 

Tony

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Joe, Tony, and others,

 

There will be a longer article in Bloomberg's Market Magazine, as expansion of what you read, I believe. I think it will be in the March issue. Keep your fingers crossed. Will post it on this forum when I know for sure.

 

And there MAY even be an exciting (well, for those of us who get all heated up about these issues) sequel!

 

JudyS

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Just an fyi, this comes directly from Hancock without alteration on my part:

 

As many of you may be aware, On January 29, Bloomberg.com published an article titled “Fees on 401(k)s Rock Boomers Facing Flawed Disclosure.”

 

Subsequently this article has been republished under various titles, including “Hidden fees clip boomer nest eggs”  and "Over Time, Hidden Fees Snatch Big Percentages From 401(k)s" in various papers, including the Washington Post this past weekend. This article profiled a 401(k) plan participant from Elcon Associates Inc., a Portland-based plan sponsor, whose plan is invested with John Hancock.

 

The fees noted in the article were incorrect. With the permission of the plan sponsor, we are releasing the plan level fees and expenses.

 

Here are the facts:

•        The management fee on this plan is 10bps (this was correctly reported in the article)

•        Based on plan participants’ investment selections, the average expense ratio is 1.05%. Individual participant expense ratios will vary based on their investment allocation

•        The average total fees for plan participants are 1.15% (0.10% +1.05%)

•        There are no additional fees, as incorrectly alleged in the article.

 

The Bloomberg article inaccurately reported the fees being charged to this participant. In many cases, the fees referenced in the article appear to have been double-counted, while others do not appear to have any basis in fact.

 

We are extremely concerned by the misinformation contained in this article. We have met with the plan sponsor and advisor to the plan and are following up with the reporters and publication.

 

Please be assured that we are pursuing all of our options to correct this misinformation. We sincerely regret the inconvenience the incorrect information in this article may have caused to our plan sponsors and our business partners.

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Guest Skeptical

John,

 

That is very interesting and thanks for the post. It appears that Hancock didn't want to comment prior to publication as the authors state: "Melissa Berczuk, a spokeswoman for John Hancock, declined to comment for this article."

 

Also:

 

"Schneider says he was shocked to learn that in addition to the 0.10 percent management fee on his Elcon account, he pays at least seven other charges to companies that provide 401(k) services. A 0.5 percent fee goes to the providers of the mutual funds in his plan. Then John Hancock Financial Services Inc., the Boston-based unit of Manulife Financial Corp. hired to administer the plan, takes 1.32 percent for those duties and a 0.75 percent advisory fee."

 

...The way some of these fees are hidden is that they're blended into the fabric of the fund so that they're almost impossible to discover,'' says Matthew Hutcheson, a pension consultant in Portland. Hutcheson crunched numbers and reviewed the fine print in hundreds of pages of Elcon's 401(k) documents to uncover fees not disclosed to employees.

 

Unless the Hancock/ Manulife "group annuity" platform has changed in the last year the fees described sound about right. An M&E fee for a future annuitization, a .50 or so wrapper on the funds, recordkeeping charges per participant. I wonder if Judy knows how Matt went about getting the data. Did he review the documents provided to participants? It doesn't sound like he was hired by Elcon.

 

Jim

 

 

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Guest Sierra

Just an fyi, this comes directly from Hancock without alteration on my part:

 

As many of you may be aware, On January 29, Bloomberg.com published an article titled “Fees on 401(k)s Rock Boomers Facing Flawed Disclosure.”

 

Subsequently this article has been republished under various titles, including “Hidden fees clip boomer nest eggs”  and "Over Time, Hidden Fees Snatch Big Percentages From 401(k)s" in various papers, including the Washington Post this past weekend. This article profiled a 401(k) plan participant from Elcon Associates Inc., a Portland-based plan sponsor, whose plan is invested with John Hancock.

 

The fees noted in the article were incorrect. With the permission of the plan sponsor, we are releasing the plan level fees and expenses.

 

Here are the facts:

•        The management fee on this plan is 10bps (this was correctly reported in the article)

•        Based on plan participants’ investment selections, the average expense ratio is 1.05%. Individual participant expense ratios will vary based on their investment allocation

•        The average total fees for plan participants are 1.15% (0.10% +1.05%)

•        There are no additional fees, as incorrectly alleged in the article.

 

The Bloomberg article inaccurately reported the fees being charged to this participant. In many cases, the fees referenced in the article appear to have been double-counted, while others do not appear to have any basis in fact.

 

We are extremely concerned by the misinformation contained in this article. We have met with the plan sponsor and advisor to the plan and are following up with the reporters and publication.

 

Please be assured that we are pursuing all of our options to correct this misinformation. We sincerely regret the inconvenience the incorrect information in this article may have caused to our plan sponsors and our business partners.

 

 

John,

 

INACCURACY IS STILL PRESENT.....they did not add on the investment gain that would have been achieved if not lost to revenue sharing---right, Jim "Skeptical"? I would say one must add on 30-50 bp to be more accurate.

 

Joel L. Frank

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Skeptical,

 

Yeah, I really haven't looked into this nor do I even know much about these Hancock products, but thought it would be interesting to add Hancock's first response. Perhaps it will go back and forth - we'll see!

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Guest Skeptical
Skeptical,

 

Yeah, I really haven't looked into this nor do I even know much about these Hancock products, but thought it would be interesting to add Hancock's first response. Perhaps it will go back and forth - we'll see!

 

I noticed that Hancock said they had met with the plan sponsor and the plan advisor. So how is the "advisor" paid? A separate advisory fee not levied by Hancock? Or through a trailing insurance commission? A pass though of 12b-1s from the eventual underlying funds? 10 bps seems small to pay for distribution, recordkeeping, compliance, at least when a third party advisor is involved. Maybe Judy can tell us more about the Hutcheson work.

 

Best,

 

Jim

 

 

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