Stephen J. Butler is the founder and President of Pension Dynamics Corporation in Pleasant Hill, California. He is the author of two books on 401(k) plans —
The Decision-maker’s Guide to 401(k) Plans” and a sequel, “401(k) Today.” He is the originator of the “Butler Index” which is an index of total costs of 401(k) plans — an index featured in articles in the New York Times and the Wall Street Journal. An expanded version of the index prompted an eight-page cover article in MONEY magazine in 1998, entitled, “Beware, Retirement Plan Rip – Off.” Mr. Butler also testified at cost-related hearings conducted by the Department of Labor in 2000 and was on national television with Tom Brokaw and CBS news at the time. More recently, in March of 2007, he testified on the subject of hidden costs before the United States House of Representatives Committee on Education and Labor.
Mr. Butler founded Pension Dynamics Corporation in 1978. The company’s first 401(k)plan was established in 1980 and since that time, over 1,000 plans have been operated in behalf of participants who have accumulated well over $1 billion in retirement assets.
Independent of any single financial institution, Mr. Butler’s company has been free to “roam” the entire mutual fund industry in search of investments that offered the best potential for achieving the goals of plan participants. Roughly forty percent of all plan assets have found their way to the famously low-cost Vanguard family of funds, but other popular fund families have included T. Rowe Price, Dodge and Cox, the American Funds and then a broad smorgasbord of over one hundred no-load fund families.
The net effect of this experience and independence has led to an astonishing revelation based on recent research. A broad selection of investment choices for participants, selected solely based upon high-performance and low-cost considerations, will outperform the typical plan sponsored by a financial institution by as much as several percentage points per year. Several percentage points per year, thanks to the magic of compound interest, can easily double the amount of money available at retirement.
The author’s company, Pension Dynamics Corporation, has proven to be more than just another record-keeper operating in the backwaters of the retirement plan administration community. It is has served as a “skunk works” over the years to time-test 401(k) plan design features, investment selection practices, employee education exercises and seamless electronic record keeping. Every idea illustrated in theory is backed up in practice at the “noble experiment” of Pension Dynamics.
