As hard as times are for investors in Best Buy’s shares, far grimmer is the plight of the 110,000 employees participating in the company’s approximately $1 billion 401(k) plan. Not only do they have to worry about possibly losing their jobs if the company can’t right itself, their so-called retirement plan is heavily invested (17%) in company stock. Assuming the company stock in the plan has lost half its value this year, employee retirement assets have likely taken a near 9% hit. Average account balances of around $9,000 have plummeted to around $8,000, it seems. With nest eggs this puny, they’ll be lucky to spend their golden years eating at the Golden Arches.To add insult to injury, Best Buy’s 401(k) participants have been paying over a million a year to financial advisors involved in the design and administration of an optimal retirement plan for them—firms such as Aon Hewitt and JP Morgan. Clearly, it was foreseeable to these professionals, as well as the company sponsor, that a heavy concentration of plan assets invested in company stock could be disastrous. Nevertheless, the decision was made to offer company stock as an investment option in the define contribution plan and the percentage allocated to it, not surprising, mushroomed to imprudent levels.
Many companies allow their employees to pay for the administration of their 401(k) plan. When fee disclosure becomes more publicly known, employees will begin asking questions. One question might be “if you the employer does not pay any of the expenses is this really an employee benefit?’
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