Pay To Play In 401(k)? Pimco, Dodge & Cox, American Funds Eyed

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At the request of Dow Jones, pension consultant BrightScope used its database to gauge payments by a handful of individual funds that are popular in retirement plans.

It estimated:

  • The Bill Gross-led Pimco Total Return Fund (PTTRX) pays about $145 million a year for what’s termed “shelf-space.”
  • The popular Growth Fund of America (AGTHX) pays $75 million a year to retirement plans.
  • The Dodge & Cox Fund (DODGX), whose managers are famous for refraining from self-promotion and avoiding the media, pays around $20 million a year.

Salisbury presented BrightScope’s numbers to all three companies. Pacific Investment Management Co., whose Pimco Total Return fund holds $50 billion in retirement assets on more than 13,700 plans according to BrightScope, didn’t comment directly on the figures.

Pimco did say it provides “a range of share classes” with different fee options for employers and investors. It also told Salisbury: “We strongly support efforts to bring fee transparency to both plan sponsors and participants.”

American Funds also declined to comment, but said it didn’t dispute BrightScope’s totals. Dodge & Cox said what it pays to plan packagers is “much lower than the industry average.”

The report notes that the Department of Labor has said it will require plans to start telling employees if payments from funds are used to cover plan costs starting next year.

If these funds are that good why do they have to pay to be included in 401(k) plans?

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