Paying for Program Operations
The annual Program budget provides for 64 persons dedicated to our Program activities. The budget includes costs to maintain the Program web site, Service Center, perform recordkeeping services, mail quarterly and annual statements, hire professional help (legal, accounting, and consulting), and process daily transactions and monthly withdrawal requests. These operation costs total about $8 million annually, or approximately $43 per participant account.
Funding the Program’s annual budget comes entirely from participant accounts. Historically, the $2 quarterly administrative fee paid by participants covered about 20% of expenses. The remaining 80% of expenses were paid by recordkeeping reimbursements from fund managers.
To better understand recordkeeping reimbursements, you need to know about mutual fund operations and expense ratios. All mutual funds charge an expense ratio which is automatically deducted from the gross daily returns, resulting in a net return for each shareholder. As an example, the Dodge & Cox Stock fund has an expense ratio of 0.52%, which means that for every $10,000 account balance, the fund reduces earnings by $52 per year to cover expenses. Fund expenses include portfolio management, custody, accounting, transfer agent, legal, and investor services. Since the Program provides participants with these investor services (web site, call center, quarterly statements, etc.) and maintains investor accounts, Dodge & Cox pays a portion of its fees back to the Program as a recordkeeping reimbursement.