New Book on 401(k) Issues
In Fixing the 401(k): What Fiduciaries Must Know (And Do) To Help Employees Retire Successfully, author Joshua P. Itzoe suggests that the 401(k) industry is broken and in bad need of repair. As many employers migrate away from defined benefit plans to defined contribution plans, it is critical to understand any weaknesses in the current system and work vigorously to correct them.
Chapter 1 states conflicts of interest and opaque fee disclosures as two of the biggest issues faced by the 401(k) industry. Chapter 3 explains basic fiduciary duties as codified by U.S. pension law in the form of ERISA, co-fiduciary liability and how fiduciary types differ from one another. Subsequent chapters are rich with descriptions of relevant industry players (and there are many of them), inherent conflicts of interest and the generally accepted compensation arrangement for each category of service provider. Though there is an entire chapter devoted to types of fees, it would have been nice to sink one's teeth into some meaty math examples, along with some empirical data about magnitude and dispersion of fees across plans.
Written for 401(k) fiduciaries, the basic nature of the book is both refreshing but worrisome. If current plan fiduciaries (the target market for the book) are unaware of their core duties, how have they been getting along so far? Far from being pedantic, Mr. Itzoe includes several chapters with concrete advice for improving 401(k) fiduciary practices. His provision of important questions at the end of each chapter is a nice touch, along with some helpful appendices such as a "Sample Fiduciary Audit File," "20 Steps to 404(c) Compliance" and a relatively long glossary. There is no index but a short bibliography is provided for interested readers.
For more information, check out http://www.fixingthe401k.com/. Click to read the author's bio. At $13 and change, I recommend this primer. Kudos to Mr. Itzoe, CFP and Accredited Investment Fiduciary, for putting forth a solid book on an important topic.
