Retirement outlook is murkier for some

By Andrea Coombes, MarketWatch

SAN FRANCISCO (MarketWatch) -- There are many reasons why your neighbor might have a much brighter retirement outlook than you, or vice versa. Maybe one of you sets aside more each month, started saving younger, or chose investments that fared better in the downturn. But to what degree does your 401(k) plan itself make a difference?

A lot, says Mike Alfred, chief executive of San Diego-based 401(k) rating company BrightScope, which keeps a database of information on some 30,000 retirement plans.

For instance, when you compare Google's retirement-plan rank of 84 to, say, the 67 earned by Procter & Gamble's profit-sharing plan, you might wonder where your own plan stands -- and why the variation?

BrightScope's rankings are based on total plan cost, the size of the company match, the quality of the investment choices offered, how many employees participate and how much they save, among other things.

"The biggest problem is fees," Alfred said.

There's a "huge divergence, particularly at the small end of the market," he said. "Coupled very closely with that is the fundamental lack of transparency and disclosures. ... That's why you see two companies in the same industry, with the same demographics -- and one has fees twice as high," he said. Visit BrightScope to see whether your company's plan is rated.

Others agreed there are wide differences in the types of plans companies offer their employees, and how much those plans cost.

"There clearly is variation within the 401(k) marketplace," said Pam Hess, Chicago-based director of retirement research at Hewitt Associates. "You find more of it on the small end of the market, where there's less leverage for an individual employer than at the large end of the market."

"If you're a big company, the market's pretty competitive for you because you can negotiate, and there are fixed costs that can be spread over more people and you have billions of dollars of assets potentially to use to get lower fund costs," Hess said.

Of course, the outlook for any one worker to save enough of a nest egg to last in retirement will depend on many factors -- not just the 401(k) plan -- including how much that person saves, the age at which they retire, and the return their money earns.

But fees, for one thing, can take a big bite out of your savings. Do you know how much your plan costs? Even employers have a hard time answering that question.

"It seems impossible to get your hands on a solid number," said Kathleen Demarest, a senior manager in human resources at Synteract Inc. in Carlsbad, Calif.

Demarest investigated Synteract's plan, set up by a prior employee, after seeing its BrightScope rating. The company, which offers services related to clinical trials on a contract basis, employs about 260 workers.

"We got a rating of 51. The average rating for our peer group is 55, so we did OK," she said. "We didn't have employees coming into complain or inquire about our plan, but [during the economic downturn] what people suddenly took a great interest in was what were their fees?" she said.

When they took that question to the company administering the plan, Demarest said, "We couldn't get a really solid answer."

Eventually, they found they were paying almost 2% for their plan. Now, with their new broker, they're paying 1.45% in total plan costs and are working to get that down to 1.25%, Demarest said.

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