Rate Your 401(k)

A new website ranks 401(k) company matches, fees, and investment choices

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Have you ever wondered how your 401(k)’s company match, fees, and investment choices compare to those offered by other employers? Now there’s a place where you can dish all the juicy financial details online. BrightScope Inc., an independent data analysis firm, launched the nation’s first online 401k rating system today.

The BrightScope ratings calculate how quickly each 401(k) plan will propel the average participant to retirement including factors such as the company match, fees, investment quality, and vesting schedules. Each 401(k) plan is then compared to peer companies that are roughly the same size and industry. “The rating ties directly to a person’s ability to retire in dignity,” says Matthew Hutcheson, an independent pension fiduciary with a minority interest in the company. “The lower the rating, the longer that participant is going to have to work to have the retirement security that perhaps a person in one of the peer groups with a higher rating would enjoy.”

Companies with 401k plans currently ranked among the nation’s best are Avis Budget Group, Inc., Bank of New York Mellon, Nucor Corporation, Southwest Airlines Company, and Saudi Arabian Oil Company. “Participants contributing to these plans have a high likelihood of having a secure retirement,” the company says.

Some companies have more than one 401(k) plan for different classes of employees. For example, the Southwest Airlines Pilots Retirement Savings Plan gets a high rating from BrightScope, but the Southwest Airlines Co. 401(k) Plan for other employees received just an average rating, partially due to a lower company match for employees in this plan. Brightscope estimates that the difference between these two plans could equate to 12 additional years of work required under the lesser plan to achieve the same level of retirement security or $242,200 in lost retirement savings.

When comparing 401(k) plans on this site, the factor consumers should monitor most closely is fees. “The average 401(k) participant is paying close to 3.5 percent in fees,” says BrightScope co-CEO Mike Alfred. “Fees are more important than performance of the funds themselves because fees are going to be there in the future regardless of how the market performs.” The generosity of your employer match is also a large factor in retirement security, he says.

So far, BrightScope has reviewed and rated 1000 of the largest U.S. 401(k) plans. The San Diego-based firm expects to rate the plans covering two out of every three employees by the end of 2009. Companies can update information about their 401k plan to refine their current rating. Individual employees can also submit paperwork to have BrightScope review their plan. “Download your company’s data, send it to us, and we will add the plan and rank it within 12 days,” says Alfred.