401(k) Provider Offers Lowest Cost Investments to Small Employers, TPAs

Hammers participant costs; rejects revenue-sharing, asset-based fees

Mobile, AL (Feb. 14, 2005) Employee Fiduciary has launched a new 401(k) service offering any mutual fund or ETF without mark-up, with full fee disclosure, to any sized plan. By selecting low-cost investments, employers can reduce employee costs by as much as 80% over typical fully bundled, broker-sold 401(k) plans. "We are the lowest cost, full-service provider for plans under $15 million," asserts company CEO and founder Greg Carpenter. "Considering investment management and trading costs, we can save not just hundreds, or thousands, but tens of thousands of dollars."

Unlike other providers, Employee Fiduciary services plans of all sizes; it does not take any asset-based fees, and returns all third-party revenues from investment companies, including any 12b-1s and sub-transfer agency fees, back into the plans. Total cost: $25 per eligible employee. "No one else returns these fees to participants and offers full service at our price point," claims Carpenter. "In the small-plan market, no one else even comes close."

No minimum plan size, unlimited investments, no wrap fees, no revenue share. Total cost: $25 per person.

Employee Fiduciary expects brisk business from Third Party Administrators (TPAs), whose clients are unhappy with the high fees associated with fully bundled, high-cost insurance providers. These providers typically offer TPAs free recordkeeping and custody services, but with investments that carry some of the highest fees in the industry. And small employers—who often make up the bulk of a TPA’s practice—pay the most. "We are actively working with TPAs across the country to build low-cost alternatives to bundled providers," says Carpenter. "Best of all, there is usually no additional cost to the TPA, and client transition is seamless."

TPAs have a low-cost alternative

Employee Fiduciary also works through registered investment advisors. "Investment advisors, especially fee-only advisors, justify their charges based on how much they can save their clients," Carpenter explains. "By dropping the costs of recordkeeping, custody and trustee service, we’ve opened up ¾ of the defined contribution market. By making all of our fees transparent, we are prepared to challenge other providers to meet both our standards and costs."

• Access to 16,000 funds and investments, regardless of fund family, including the most efficient, low-cost index funds and ETFs, without any mark-up, wraps or asset-based fees, with all revenue-sharing returned to the plan.
• Screening tools to help select the most cost-effective investments.
• Enrollment specialists to guide sponsors through set-up, plan document preparation and ERISA requirements.
• Full-service testing and preparation of all federal filings.
• 24/7 on-line account access.
• Participant statements that show balances, recent activity, investment-related charges, refunds and total savings.
• "Default" asset-allocation selections based on the number of years employees have to retire.
• Auto portfolio rebalancing.
• Auto enrollment and auto contribution escalation, which increases employees’ contributions proportionately with each pay raise.
• Assigned account representative available for participants anytime during normal business hours, toll-free.
• Directed trustee services with a fiduciary guarantee.

"Our goal was to completely revamp a 401(k) plan from a user’s perspective," says Carpenter. "As a provider, we asked ourselves, what do plan sponsors need; what do participants use, and what’s the best way to control total plan costs."

Carpenter concluded that high asset-based charges, whether derived from "annuity wrappers" or revenue sharing, make no sense in an industry where it costs just as much to service an individual account worth $5,000 as it does for an account worth $500,000. "Pricing in the industry is all wrong," Carpenter asserts, "worst of all, it forces plan sponsors into plans that ultimately do not serve the best interests of participants."

"The major players in our industry sell their services as ‘high value,’ merely to justify higher fees. What could be of higher value" Carpenter asks, "than reducing fees to give people a larger nest egg? Everyone in this business claims to be a fiduciary. It’s time for 401(k) providers to start acting like fiduciaries."

Employee Fiduciary guarantees the lowest total-cost (including investment expense) full service 401(k) for any 401(k)/profit sharing plan worth under $15 million in the industry.

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