Last Friday, we posted an item on the Investment Company Institute's latest efforts to obscure the true costs of qualified retirement plans. We think we touched on a few important points, and that post generated quite a lot of traffic around here for a few days. But the more important contribution to this discussion--more important by far--is Ryan Alfred's latest post at BrightScope's blog. This is required reading, and it's required this very second.
If you're still reading this--and if you are we have to ask why, because you should be reading Ryan's explanation of what's wrong with the research on which ICI has hung its organizational hat--we'd like to note that when we called the ICI's survey "unserious" last week, we didn't expect that term to be among the more charitable adjectives applicable to this particular research product. (Or, more precisely, to ICI's presentation of the research, as they describe it as something it clearly isn't.)
As it turns out, the ICI study oversamples the biggest plans (and thus wildly undersamples small ones) several times over. Because small plans tend to incur higher costs, this grossly unrepresentative sample can't help but understate mean and median plan costs (while excluding implicit costs entirely, which is another big problem).
Here are the key data from Ryan's post:
That pretty much says it all, doesn't it? Taken together, micro and small plans, which comprise fully 96% of the plan universe, are only 20% of the ICI survey. Mega plans, meanwhile, one of every thousand plans in the population, are one of every five in the ICI sample.
Memo to plan sponsors, reporters, and policy-makers: Don't believe the hype. Dig a little deeper. And, as always, follow the money.