Why 'lousy' 401(k)s are a good thing

When people ask me what I do for a living and I say I write for a health care and retirement benefits magazine, their eyes glaze over. “Boring as dirt,” one friend told me recently. I try explaining that this industry, at some point, touches the lives of everyone: We all need health care and we’re all going to eventually retire, at least partially.

As a hard working benefits pro, I’m sure you’ve seen your fair share of glazed over eyes and stifled yawns during countless retirement seminars. So I have to hand it to Martin Smith, producer of the recent documentary, The Retirement Gamble that aired on PBS’s Frontline recently. He took the topic of retirement – and our woeful lack of preparedness for it – and made it not boring. Exciting, even. (or, at least more exciting than dirt.)

The show claimed most 401(k) programs are “lousy,” citing excessive fees and lack of transparency. For those of you who missed it, the story went something like this: The good guys are average working Americans who unwittingly pay far too much for their retirement plans. The bad guys are mutual fund and investment companies and brokers, who are intent on bilking these average working Americans out of their retirement savings through high fees.

Not surprisingly, industry insiders hit back. The notion “that fees are by far the most important factor to be considered when choosing an investment, and [that] the retirement industry offers participants little value” is troubling, said Brian Graff, executive director and CEO of The American Society of Pension Professionals and Actuaries.

“When he [Smith] put the microscope on one particular area [fees] of the retirement crisis, it does magnify that but it also obscures everything else that goes into our retirement system,” Chad Parks, CEO of The Online 401(k), told me. “As glad as I am to see him focusing on it, I think in order to do it justice, we need to look at more than just that.”

In an interview with FiduciaryNews.com that was conducted after the program aired, Smith said “the purpose of the program was to alert people, to get them more informed …” and that to do that required some “shock” value.

Whether you agree with the narrative or not, the program should be required viewing for employees if for the simple reason that it’s a well-told (albeit one-sided) story that will get them (hopefully) asking questions about their 401(k) plans. And isn’t that a good thing in the long run?

So while I don’t believe that 401(k) plans are lousy – far from it – I do believe employers need to take every opportunity they can to educate, inform and engage employees about their retirement benefits.

What do you think? Would you encourage employees to watch the program? Share your thoughts in the comments.