Author: Site Staff

Retirement plans should be required to provide greater transparency regarding fees associated with 401(k) investments, according to a new report by the investigative arm of Congress.

The likely incoming chairman of the House Education and the Workforce Committee, Democratic Rep. George Miller of California, said he would hold hearings next year on the issue.

In a study released November 30, the Government Accountability Office recommended that Congress amend retirement security law to make it easier for participants to compare the costs of 401(k) investment options. It also called for service providers to disclose fees they earn for referrals to mutual funds and other products, and for plan sponsors to submit a fee summary to the Department of Labor.

“The information on fees that 401(k) plan sponsors are required by law to disclose is limited and does not provide for an easy comparison among investment options,” the GAO wrote.

Workers are hurt by hidden costs, Miller asserts. He highlighted a portion of the report showing that small differences in fees can curb fund gains by tens of thousands of dollars.

As an increasing number of Americans rely on 401(k) plans, “it’s critical that workers’ hard-earned savings not be wasted on excessive fees,” Miller said in a statement.

The business community says it supports greater disclosure, but cautions against undermining confidence in 401(k) investments at a time when most workers save too little for retirement.

“You want to be practical and thoughtful,” says Lynn Dudley, vice president of retirement policy at the American Benefits Council. “The vast majority of 401(k) funds are pretty straightforward. The last thing you want to do is create an unstable environment. You could scare participants into opting out.”

The investment industry is already working with the Labor Department to increase fee transparency, says David Wray, president of the Profit Sharing/401(k) Council of America. Wray welcomes congressional hearings.

“The system can stand the scrutiny,” he says. “You’ll see that the fee levels are reasonable.”

Congress encouraged growth of 401(k) investments by approving an automatic enrollment mechanism in pension reform law that was signed by President Bush in August. The number of participants in 401(k) plans has grown from fewer than 8 million 20 years ago to 47 million in 2005. Assets total more than $2 trillion.

The fact that Congress will hold hearings on opaque fee structures shortly after facilitating 401(k) participation is not inconsistent, according to one expert.

“There is no conflict between those two things because Congress in both cases is trying to make it easier for individuals to save and to make the decisions necessary to save in 401(k) plans,” says Mark Iwry, a non-resident senior fellow at the Brookings Institution and senior advisor to the Retirement Security Project. “They’re both intended to promote savings.”

For now, the 401(k) fee discussion isn’t partisan. Steve Forde, spokesman for current House workforce chairman, Howard “Buck” McKeon, R-California, says his boss “will look forward to examining this issue in greater depth.

“Under a Republican Congress, we’ve made great progress in strengthening retirement security and increasing participation in 401(k) plans,” Forde says.

—Mark Schoeff Jr.

Cultural affinity and proximity to the United States combined with a government effort to promote English education have led to an expansion of call centers in Central America’s largest country.

“The call center industry is growing very rapidly mainly because of the large, highly skilled bilingual labor pool that we have in Guatemala,” says Mario Lopez, commercial manager of Transactel, an outsourcing company. “Our clients have told us that Guatemalans are great listeners, and that gives us an edge in customer services and sales.”

The number of outsourcing agents in Central America—for both international and domestic services—will grow from 21,000 to 40,000 by the end of next year, according to a study by the Zagada Institute, a consulting firm that focuses on emerging markets in Latin America. The region is attractive to companies looking for call center support for their businesses, which cater to the large Hispanic population in the United States.

Help Desk Now, Esso and Telefonica have call centers in Guatemala. Representatives from PeopleSupport Inc., a Los Angeles-based business process outsourcing provider, traveled to Guatemala City early this month to assess the investment climate there.

The company already has an operation in Costa Rica, which is known for its educated population and political stability. Guatemala, by contrast, is struggling with rampant violent crime.

Costa Rica is “a much more successful country than anyplace else in Central America,” says Sidney Weintraub, the William Simon Chair in Political Economy at the Center for Strategic and International Studies in Washington, D.C.

Guatemala is trying to compete with Costa Rica, where productivity is more than twice as high, by focusing on being bilingual.

“All universities in Guatemala have English as a requirement for graduation,” says Carolina Castellanos, executive director of the American Chamber of Commerce in Guatemala. The 17,000 college students in the country who can speak English are an important talent pool for call centers.

Further training is provided by the Instituto Guatemalteco Americano, which sponsors English classes tailored to meet the needs of call centers.

“You can know English, but that doesn’t mean you can speak English,” Lopez says.

For a large portion of Guatemala, however, being bilingual doesn’t mean speaking English and Spanish. It means speaking Spanish and indigenous languages. Improving the skills of Mayan descendents, most of whom are mired in poverty, may help determine how quickly Guatemala develops.

“This is important for indigenous people because they’re still focused on manufacturing and agriculture,” Lopez says.

Another factor in the country’s growth may be the Central American Free Trade Agreement, which in addition to providing new markets for Guatemalan products also promises to foster the service sector and bolster the rule of law.

In the meantime, many Guatemalans are embracing call center work as a path toward prosperity.

We are agent-focused,” Lopez says. “They see in short- and medium-range time the chance to grow into supervisor or manager positions.”

—Mark Schoeff Jr.

A job-posting process that often hampers hiring for companies with franchises spread across the country could be getting a makeover if Monster gets its way.

Monster is launching its National Account Suite, which seeks to streamline the recruitment process and quell the push and pull that often exists between corporate headquarters and franchisees, says Mike Madden, the company’s senior vice president of product.

The suite makes use of existing technology to the meet the recruitment needs of specific employers, says Peter Weddle, CEO of Weddle’s, a research firm and consultancy in Stamford, Connecticut. Such customization is the wave of the future, he says.

“This product spells the next evolution of online recruitment services,” he says. “Companies will be tailoring technology to better meet the needs of their recruiting clients.”

Essentially, Monster is mimicking something newspapers created over time. As papers evolved, they developed classified advertisement products that cater to specific industries, such as real estate and automobiles, Weddle explains.

Monster, which launched its suite in November, believes there will be significant interest from clients because it is the only product of its kind in the industry, Madden says.

“There are about 2 million franchise businesses in the U.S.,” he says. “It would be great if we could get 30 to 50 percent of that market.”

Monster’s product aims to reduce recruitment gridlock. Though each company differs in its policies, the job-posting process generally is slowed because hiring managers at franchise sites must get approval from corporate headquarters each time they want to post an opening.

Often, headquarters will contend that it’s a necessary step to control recruitment expenses. Local hiring managers have complained that the process is cumbersome, time-consuming and ineffective, particularly in industries where turnover is high, like chain restaurants.

Monster’s new product offers a compromise. Franchisee hiring managers will no longer have to seek approval from corporate headquarters before posting a job. That will enable them to more easily hire the help they need. Corporate headquarters, meanwhile, don’t have to worry about overspending at the franchise level because the price of the subscription has been pre-negotiated.

The subscription, typically lasting a year, gives local hiring managers access to self-service tools that let them control the content and the frequency of job postings. Customizing the ads at the local level is important because hiring managers can use language that resonates with the community in which they are trying to hire, Madden explains. The entry base price is $800 to $1,000 for a year’s subscription, he says.

Local managers will be able to quickly post a job opening, even proactively managing future needs in the workforce pipeline. Posting a job can take 24 to 48 hours, compared with a week or more with the traditional checks and balances.

—Gina Ruiz

Dear Motivation Skeptic:

This is a great question that highlights the need for performance management systems to go beyond merely setting objectives and conducting periodic reviews. Although these are important steps that help identify top performers, the real power of performance management lies in the daily ongoing coaching and feedback that should take place as well. It is here that your leaders connect with their people and build a motivating work environment.

Motivation of employees is built around three factors:

• Do employees have focused work–is there direction, support and accountability for what they do?

• Employee value–are they growing and viewed as unique, and do they have a sense of ownership?

• Is their work environment harmonious and collaborative?

• These factors nearly always outweigh compensation.

So how do you create such motivation? Certainly one way is using your performance management system as an ongoing coaching process for providing focused work. Make sure leaders are guiding and supporting associates toward meeting objectives (not just at the annual review). Adjust objectives when they no longer fit the direction of the business or the person so that accountabilities are relevant.

There are many ways to recognize, value and create a collaborative workplace. They include recognizing individual and team accomplishments, spotlighting collaboration, creating team ground rules based on respect and creativity, breaking down silos, rotating assignments, creating and following through on personal development plans, being honest, asking for feedback and living up to those company values.

There is no one right answer, however, as different companies have different cultures and constraints. But the people who know best are your own. Brainstorm with them about innovations that will work in your organization. A key tactic for retention is for leaders to ask individuals what they like and don’t like about their jobs and the company. Tell people you want them to stay. You may not be able to address all the concerns and ideas you receive, but knowing you care works wonders. And you will find that one size does not fit all. Managers need to create environments that motivate a diverse workforce. Gimmicks won’t work, but good leadership will.

Perhaps the single greatest thing you can do is to grow leaders who are great coaches and listeners, and who use those skills at every opportunity. Although this may not seem like an innovative strategy, it will be more unique than you think.

SOURCE: Jeff Eilertsen, Development Dimensions International, Pittsburgh, February 27, 2006.

LEARN MORE: Another Dear Workforce article discusses the linkage between employee performance and compensation. Another discusses the challenge of moving from a paternal culture to one that relies on performance measurement.

The information contained in this article is intended to provide useful information on the topic covered, but should not be construed as legal advice or a legal opinion. Also remember that state laws may differ from the federal law.

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Dear Workforce Newsletter

The digital health records Intel plans to create with the help of other large employers are expected to save companies as much as 6.7 percent in total health care costs, a nearly fourfold savings increase over current systems, says a consultant who has worked with Intel on the project.

Intel, along with Wal-Mart, British Petroleum and several other employers, is scheduled to announce on Wednesday, December 6, a plan to provide employees with digital health records and create a data warehouse that can be used to store them, according to Brian Golden, a consultant with Mercer Health and Benefits. The records will differ from current models because they will exist independent of any particular health insurance company or medical provider, according to people familiar with Intel’s plan.

While other efforts are under way to create digital health records, the coalition is yet another sign that employers do not have the patience to wait for the health care industry to bring itself into the 21st century while health costs increase every year.

“They obviously don’t want to sit around and wait to make it happen,” says Laurel Pickering, executive director of the New York Business Group on Health.

Representatives of Wal-Mart and Intel declined to comment.

Most health experts agree that electronic health records would improve medical quality by flagging redundant treatments and making it easier to read prescriptions and doctor’s order forms. The records also would provide detailed information about past courses of treatment, lab and radiology tests, and other aspects of an individual’s medical history that can be used to diagnose and treat new illnesses. As many as 98,000 people die each year from medical errors that could be avoided with the help of digital prescriptions and medical record keeping.

Intel has been working on the project, called P3HR, for some time. When the public announcement is made Wednesday, Intel plans to rename it Dossia, a source says. The company has registered a Web site, Dossia.org, under the name of Omid Moghadam, the director of Intel’s personal health record program.

Though its efforts to develop a system that is widely adopted may eventually pay dividends, it is touting the project as a public service. That is partly why the collaboration will take the form of a nonprofit organization whose members make a $1.5 million contribution.

While most current health records are populated by an insurance company’s claims data, Intel’s health records will contain more useful information that could result in significant cost savings, Golden says. Eventually the personal health records will tell consumers when a generic drug is available; whether a better and more cost-efficient doctor is available; and whether the dosage of a medicine is too high.

The initial phase will last from 2007 to 2009, at which point the project will be running on its own, Golden says.

“What Intel is trying to do is build a public consortium of data that would be utilized as a personal health record,” Golden says.

The fee to join the association will drop as more employers get on board, until the price tag to offer employees digital health records becomes nominal, Golden says. In this sense, the collaborative will resemble another employer coalition, Care Focused Purchasing. That effort, led by Boeing and Lowe’s, is focused on gathering data on doctors to rate their performance.

The individual consumer will be at the center of a network that connects patients to doctors, pharmacies and hospitals. The employers involved in the collaborative hope that by acting together they can use their massive employee base as an incentive to compel medical providers to adopt compatible technology. Some details of the plan were first reported November 29 in The Wall Street Journal.

The personal health record, or PHR, differs sharply from the electronic health record, which is simply a record of a health service in digital form. These records exist at hospitals, doctor’s offices, pharmacies and health insurers. The personal health record is a digital file owned by individuals containing their health information from various medical providers.

“What is required to make the personal health record work is a network, and this consortium might be trying to do that,” says David Lansky, senior director of health programs for the Markle Foundation. “The PHR would be the place where information is pulled together and made available to other parties to the extent the user wishes.”

Questions remain regarding who will own these records, who will be responsible for paying to maintain them in digital warehouses, what they will look like and how to ensure the records can be read by the hundreds of different medical computer software currently on the market. Privacy advocates also worry about the vulnerability records may have to hackers.

“I’m not sure what the ownership model is, but that will be a critical thing to watch,” says Kenneth Mandl, co-director of the Center of Excellence in Public Health Informatics at Harvard University.

Despite the challenges, Lansky says personal health records in general have the potential to transform the health care system.

“This is a dramatic idea. So far we’ve relied on doctors, hospitals and pharmacies. The big idea is that instead of relying on those institutions to move information around, the patient is the manager of his information.”

—Jeremy Smerd

An effort to increase the number of visas for highly skilled immigrants is likely to fail during the lame-duck session of Congress, although the issue is sure to be revisited next year—perhaps as part of comprehensive immigration reform.

Democratic and Republican aides say legislation to raise H-1B visa caps probably won’t be attached to an appropriations bill in December, since most government funding measures have been pushed to next year.

In addition, a desire by some House Republicans to link H-1B caps to a mandatory employer verification system may force the issue into a broader immigration measure.

Advocates say the cap must be raised immediately from 65,000 to at least 115,000. The current limit was hit before October 1. No more slots are available until next October.

“American companies cannot afford to wait to retain the workers they need and to attract more workers,” says Lynn Shotwell, executive director of the American Council on International Personnel.

At Ingersoll-Rand, an industrial and construction equipment maker, the challenge is to find candidates with specialty technology degrees like design engineering.

“They’re very critical employees,” says Elizabeth Dickson, manager of immigration services at Ingersoll-Rand. “Your candidate pool is largely foreign nationals.”

When one of the company’s business units wants to make an international hire, Dickson often delivers bad news.

“I have to tell them there are no H-1Bs until October,” she says. “That’s hard for them to comprehend.”

Ingersoll-Rand is part of Compete America, a coalition of more than 200 companies and organizations that is lobbying to raise H-1B caps.

Others in Washington, however, are concerned that foreign workers are forced to accept low wages and U.S. applicants are denied job opportunities because of H-1B visas.

“Reforms need to be on the table before any discussion of lifting the caps comes up,” says Ron Hira, vice president of the Institute of Electrical and Electronics Engineers-USA. “There are fatal flaws in the program.”

Congressional action on immigration of highly skilled workers may come next year in a bill sponsored by Sen. John Cornyn, R-Texas, and Rep. John Shadegg, R-Arizona. The measure would raise the H-1B cap to 115,000 and the green card limit from 140,000 to 290,000.

Elements of the bill may be included in a broader measure, as they were in this year’s comprehensive Senate immigration bill.

Conservative House Republicans refused to negotiate the differences between an enforcement-only House bill and its Senate counterpart this year. The fate of immigration in a Democratic-controlled Congress is hard to predict.

Some incoming Democrats are so-called economic populists who might be inclined to focus on how H-1Bs could hurt U.S. workers. But party veterans might support raising the caps.

“There’s not a clearly articulated Democratic Party position,” Hira says.

Ingersoll-Rand has a firm stance.

“Most of our competitors are in Europe and the Asia-Pacific region. They can hire [foreign nationals],” Dickson says. “If you want to remain competitive, you want to hire the best and brightest.”

—Mark Schoeff Jr.

Tens of thousands of furniture and textile jobs in North Carolina have succumbed to international competition in recent years.

But putting together a chair or weaving fabric requires workers to perform highly mechanized tasks each day. Those habits can translate to a laboratory setting—and provide a potential path out of unemployment.

“Skilled workers are skilled workers,” says Russ Read, executive director of the National Center for the Biotechnology Workforce, located at Forsyth Technical Community College in Winston-Salem, North Carolina. “They’re able to cross-train and be effective in a biotech world.”

The center, established in 2004 by a grant from the Department of Labor, is aimed at transforming ex-manufacturing workers into biotechnology research assistants and technicians.

Demand for lab workers is projected to grow by 15 percent to 20 percent annually in the state, which is home to many pharmaceutical, research and diagnostic firms.

Students in the program earn a two-year associate’s degree in applied science in biotechnology. The students range in age from their early 20s to mid-60s. About 67 percent are female.

Classes include biology, chemistry, statistics, introduction to the Internet and technical specialty electives. Each semester, about 120 students start the program. So far, 50 have graduated.

Attrition doesn’t necessarily come in the form of students dropping out altogether. Often, they switch their focus to another health care field, like nursing.

But seeing through a midlife career change takes fortitude. One student entered the biotech program at 56, having been laid off by two electronics companies. After he earned his biotech degree, he went on to work at the Institute for Regenerative Medicine at Wake Forest University.

“He was very courageous. He persevered,” says Bob Hall, project coordinator at the BioNetwork Pharmaceutical Center in Winston-Salem.

While students have to dig deep within themselves to remain employed in a shifting economy, communities in northwest North Carolina have to collaborate to build the kind of labor pool that will lure high-tech businesses.

In the Piedmont Triad, which encompasses the cities of Winston-Salem, High Point and Greensboro, business, education and government will work together as part of a three-year, $5 million annual federal grant for workforce innovation.

An implementation plan released in September calls for leaders of companies in four clusters—advanced manufacturing, creative enterprises and the arts, health care and logistics/distribution—to outline the skill sets that employees will need. They’re asked to describe how education and training providers throughout the region can deliver those skills.

“A lot of the goals are to break down institutional, geographic and political barriers,” says Don Kirkman, president of the Piedmont Triad Partnership. “We need to think and act regionally.”

Doing so produces results, he says. Dell Inc. announced in 2004 that it was going to build a plant in the region to manufacture computers and servers. Later, the company settled on the exact location—Winston-Salem—for the facility, which now employs 1,100 people, or 400 more jobs than were projected.

“They are a Piedmont Triad company, not just a Winston-Salem or Forsyth County company,” Kirkman says.

—Mark Schoeff Jr.

A pay discrimination case facing the U.S. Supreme Court may hinge on whether justices decide that a worker can sue an employer for many years of unfair wages—a cumulative-effect approach that would treat pay suits similarly to suits involving sexual harassment.

On November 27, the court heard a case involving Lilly Ledbetter, a former floor manager at a Goodyear Tire & Rubber Co. plant in Gadsen, Alabama. Ledbetter, who worked for Goodyear from 1979 to 1998, is suing the manufacturer for paying her substantially less than it paid men for performing the same work.

Ledbetter filed a charge with the Equal Employment Opportunity Commission on March 25, 1998. Alleging that the discriminatory practices dated to the beginning of her tenure, she sought a ruling against the company for pay disparity that had accumulated over decades.

Such a time frame is far beyond the 180-day statute of limitations for a Title VII case. Goodyear argued that it should not be liable for any pay discrimination unless it occurs within the statute window.

A trial jury sided with Ledbetter, who was eventually awarded $360,000. But the 11th U.S. Circuit Court of Appeals in Atlanta overturned the verdict, citing the 180-day limitation.

The way the Supreme Court rules on the case may come down to whether pay discrimination can be assessed over a number of years, in much the same way a judgment can be made about a negative work atmosphere that fosters sexual harassment.

“Do you put it in the box with the hostile environment that builds up over time, and as long as the environment is hostile at the time you bring your complaint, then it doesn’t matter that it started 20 years ago?” said Justice Ruth Bader Ginsburg. “This notion of one year [a raise is] 2 percent, and the other person got 3 percent, you don’t really have an effective claim unless it builds up to the point where there is noticeable disparity.”

Justice Samuel Alito asked Ledbetter attorney Kevin Russell whether it was necessary to show that a company intended to discriminate when a paycheck was issued during the 180-day EEOC charge period.

“No,” Russell said. “The execution of a prior discriminatory decision constitutes a present violation of Title VII.” Russell said companies are responsible for knowing whether they have been giving disparate pay based on an employee’s sex.

The attorney representing Goodyear argued that courts have ruled a claim of intentional discrimination is limited to a 180-day time frame in which a case is filed.

“No one at Goodyear took Miss Ledbetter’s sex into account during the charge filing period in deciding what to pay her,” said Glen Nager, Goodyear’s counsel. “What Goodyear did was it said, ‘We are looking at the pay rate contained in our payroll system and applying those rates as they are mandated for all our employees, male or female.’ “

But Ledbetter says the payroll system was skewed against women—something she didn’t discover until she received a copy of Goodyear’s pay scales anonymously in the mail.

“I’m very disappointed a large company would do this,” she told reporters after the oral argument. “I didn’t have any idea I was getting paid so much less. Once [pay] gets out of line, you can never get it back in line, which I learned much too late.”

An employment lawyer says companies must keep payroll records for one year or so, depending on the statute. If plaintiffs can reach back decades to make pay discrimination claims, it would put the company at a disadvantage in gathering evidence and witnesses to defend itself.

“The rationale and documentation behind those decisions may be long gone,” says Debra Friedman, an attorney with Cozen O’Connor in Philadelphia. “Employers are in a position of having to defend against stale claims.”

If the lawsuit clock can be turned back to when an original discriminatory decision was made, long before the 180-day limitation, companies might face big costs.

“It could open the floodgates for long-term employees to bring pay claims,” Friedman says.

—Mark Schoeff Jr.

It’s been three months since Nissan North America moved its headquarters from Southern California to central Tennessee. Despite losing more than half of the 1,300 employees from its Gardena, California, facility, the automaker says it has now filled the 1,000 open positions that it had.

In November 2005, Nissan announced it was relocating to Tennessee to take advantage of lower taxes and cheaper real estate. The automaker established a temporary headquarters in Nashville as it builds a permanent home 15 miles south in Franklin, Tennessee, that is scheduled to open in summer 2008.

The company has not been hindered by the loss of talent resulting from the move, says James Morton, vice chairman of Nissan North America. Fifty-eight percent of the 1,300 employees didn’t relocate, including 20 percent of its management. Nissan has recruited aggressively across the country, particularly in the Detroit area.

“Last I heard, we had about 50,000 résumés,” Morton says.

The company also realized several workforce-related benefits from the relocation, Morton says. Once it settles into its Franklin headquarters, Nissan’s financial, marketing, product planning and engineering staffs will be less than an hour away from the company’s manufacturing headquarters in Smyrna, Tennessee, where it has 6,500 workers.

“People are now in the same time zone and able to meet face to face easily,” Morton says. “It’s easier to bring people together now.”

Nissan hopes that having its employees in closer proximity to one another will facilitate faster decision-making and help the company stay ahead of its competitors, Morton says.

But losing so much Southern California talent is likely affecting Nissan’s sales, says Arthur Wheaton, a workplace and industry education specialist at Cornell University.

“As much as the auto manufacturers want to make it about the car and the mechanics, this is really a people business,” he says. “Those people in sales and marketing were their biggest link to the dealerships. Losing a lot of those connections has to be hurting sales.”

In September, Nissan North America reported sales of 88,340 vehicles, a decrease of 9.2 percent from the prior year.

Morton concedes that the company lost good people, but recruiting has been a top focus at Nissan.

“I am very pleased with the hires we have made,” he says. “This is one area where we felt we did a very good job.” The company has filled all key management positions, he says.

Even if Nissan has some short-term struggles while rebuilding its staff, the company will realize the benefits through cost savings in the long term, says Jim Hossack, a consultant at Auto­Pacific, a research and consulting firm in Southern California.

“They are going to be short on people for a bit,” he says. “But Detroit is long on people and they will be able to bring in some great folks.”

—Jessica Marquez

Disclosing retirement plan fees to employees is a Catch-22 for most organizations. On one hand, there is pressure for more disclosure, given an increasing level of regulatory scrutiny and litigation surrounding fees that retirement plan participants pay. On the other hand, disclosing fees to employees might be more confusing than illuminating, experts say.

Revenue-sharing fees in particular have been a source of much controversy. These fees, which are paid by investment managers in retirement plans to the plans’ administrators, often end up being passed through to employees. Despite this, plan providers are not required by law to disclose these fees to participants.

But one organization, the Los Angeles Unified School District, is taking extra measures to disclose such fees to its 110,000 employees.

Specifically, the school district is having its provider, American International Group, list the revenue-sharing fees for each of the funds in its new retirement plan to employees in every communications piece they receive.

Los Angeles Unified has suffered the consequences of failing to disclose fees in the past, says David Holmquist, chief risk officer with the district.

The problem began with a 403(b) plan that the district had in place, a retirement savings vehicle for public entities similar to a 401(k). A few years ago, employees were outraged when many of them realized that they couldn’t withdraw money from that plan—which invested in annuities—without paying high withdrawal fees, he says.

Unlike 401(k) plans, in which employers act as fiduciaries and are legally responsible for understanding fees, employers who offer 403(b) plans are not, and so the district couldn’t intervene, Holmquist says. “The only thing we offered was the payroll deduction service,” he says.

This year, however, the school district has launched a 457 plan—the public-entity equivalent of a 401(k). And that puts the fiduciary responsibilities in the hands of the employer. In this role, Los Angeles Unified wants to take extra care to make sure its teachers understand the fees they are paying.

“We want to protect our employees,” Holmquist says.

But some experts aren’t sure that disclosing these fees will help participants.

“We are concerned about that level of disclosure,” says David Wray, president of the Profit Sharing/401(k) Council of America. “If employees are in a voluntary plan where they have to decide to save, we find that they are less likely to do so if they get complicated and intimidating information,” he says.

Holmquist says the school district is making a concerted effort to educate employees on the fees. “We have 20 marketing reps from AIG dedicated to our account who are explaining this individually to employees,” he says. Additionally, the district is offering workshops to employees and has online tools on its Web site.

“I fully expect to have some people confused about what these fees are and how it affects them,” Holmquist says. “But we felt the right thing to do was to encourage employees to get more educated and, as a result, make better informed decisions.”

—Jessica Marquez