Is Your CEO Getting Kickbacks Off Your 401k Fees?

Author David Loeper over in the WiseBread forums explains how your CEO could be getting a kickback from excessive fees on your company’s 401k. The “administration fees” on some company’s 401ks are sometimes 20 times as much as what it actually costs to run the fund. Part of these fees go back to the 401k admin via “revenue sharing.” Usually the admin keeps it but sometimes they’re so big that they go back to the employee’s accounts. But instead of being credited back equally…

…they go back proportional to the account balance. So whoever has the biggest account balance, gets the most money back. David says:

The net result here is if your CEO with a large balance uses an index fund with no kickbacks for his 401k, and other participants use expensive funds, they are in essence making a contribution to their CEO’s 401k because his higher account balance gets the brunt of the revenue share “kickback.”

Wisebread asks, “If your boss is getting a kickback from those fees, do you think he will work diligently to help you find a 401(k) with reasonable fees?”

For more about the dirty secrets in 401ks, check out our post, “How Your 401(k) Is Ripping You Off.”

(Photo: Getty)