Are my 401(k) Fees Important to Watch?

April 06, 2022

Are your 401(k) fees important to watch? Yes! We go over the Supreme Court case of Hughes v. Northwestern University to explore things to watch out for.

Full Transcript:

Hello, welcome to Arista Advice! Question of the week is: "Paul, are my 401(k) fees important to watch?" Well, they are very important to watch!

On January 24th, 2020, the United States Supreme Court ruled 8 to 0, unanimous decision, that Mrs. Hughes and her co-worker were harmed by Northwestern University in Chicago, one of the greatest business schools in the country, always in the top five of the annual rankings as Northwestern University.

Let me share with you four takeaways from the United State Supreme Court's opinion, and it wasn't 16, 20, 30, 40 pages. It was eight paragraphs three pages. They gave a blistering report to the employer and the university for looking the other way and having expensive investments inside their 403(b) plan. These were the four takeaways.
They had over 400 different mutual funds inside the Northwestern University that was started in 1851.
They didn't monitor and negotiate their fees in their 403(b) retirement plan.
Third, they didn't replace underperforming funds. Nobody was watching the farm, and this is a university! Academia, smart, smart people are on their campuses and are lecturers and professors on campus. Nobody was watching.
Number four - they included identical funds and charged higher fees.

Unfortunately, sorry Fidelity, but I hope you have your checkbook out because it's going to be painful. For many years, this has been going on and the circuit court of appeals struck her down. They then went to the United States Supreme Court and the United States Supreme Court dropped the book on Northwestern University.

So remember, always be monitoring your investments, monitoring and making sure you have low cost, globally diversified investment fees, and also you're not making things too complex for your participants and employees at your place of employment.

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