French catering services group Sodexo employees block the entrance of the local community central canteen of the French southern city of Marseille, on June 7, 2011 as part of an international one-day protest for wage rise.

Any company that wishes, for whatever twisted reason, to create a 401(k) for its employees that is both monstrously incomprehensible and costly, should study Sodexo’s retirement savings plan. I’ve looked at thousands of 401(k)s in my professional career, but this one just doesn’t add up.

Sodexo is one of the largest food services and facilities management companies in the world, with 380,000 employees worldwide. After merging with Marriott Management Services in 1998, it became one of the largest food services providers in America. The company has a history of tumultuous labor relations, alleged low pay and sub-par job standards.

The Sodexo 401(k) plan has a poor participation rate—only about 108,000 active participants—and with almost $1 billion in assets, it’s a mega-plan with plenty of bargaining clout. Given average account balances of $12,000, when these food services workers retire, they won’t be eating filet mignon.

Sodexo may claim to be a world leader in quality of life services that “believes the quality of daily life increases the satisfaction and motivation of individuals,” but, in my opinion, its needlessly complex defined contribution plan most assuredly is neither satisfying nor motivating to employees. It can’t be.

Why? Simply put, I doubt there is a single Sodexo employee who fully understands the inner workings of this beast. Worse still, the flawed design of the 401(k) virtually ensures, in my opinion, that errors in calculating account balances will arise.

Until 2011, Sodexo’s 401(k) used two different methods to track and value employee investments. For amounts invested in any of the plan’s stable value, indexed or balanced investment options, the investments were tracked using investment “units” which had unit values that were unique to the plan. That meant participants had to rely upon the plan for information regarding these investments—they couldn’t look to Morningstar or any other independent third party to verify the unique values.

On the other hand, the plan’s mutual fund options were tracked using share values that were common to all investors in each mutual fund—values that were not unique to the plan.

401(k) investment options with unit values tend to confuse participants because the funds often have names and strategies similar to publicly-traded mutual funds but are opaque, with expenses and performance results that differ from the publicly-traded funds. That was confusing enough.

Starting in January 2011, Sodexo began tracking all the investment options in the plan using the unit value method. Participants were told, “Using unit values that are unique to our Plan allows us to negotiate the most competitive arrangements possible with the Plan’s recordkeeper (ING) and other operational vendors, while spreading the costs evenly across all Plan investments.”

I’m not-so-sure that unitizing all the investment options offered within the plan will, as Sodexo says, result in the most competitive arrangements possible for participants. The recent Form 5500s filed with the Department of Labor do not evidence any savings; indeed, costs appear to have increased. I’ve called Sodexo for information about the savings related to unitizing all the 401(k) options. In the event I am provided with the savings amounts by Sodexo, I will provide them to readers.

In my opinion, using institutional mutual funds in a retirement plan of this size would have resulted in lower costs far more easily and with no loss of transparency. Further, since Sodexo’s unitized funds invest in mutual funds, as opposed to separately managed accounts, it is impossible that the cost of investing in the unitized trusts (which, in turn, invest in mutual funds) could actually be lower than the fixed-cost of the underlying mutual funds. That’s obvious—right?

The fee and expense information provided to participants that I have reviewed is confusing because the total annual operating expenses of each investment option, according to the company, “may include certain plan related expenses.” In other words, the disclosure does not indicate exactly how much participants are paying for money management versus administration. Money management and plan related expenses are lumped together. The plan’s not cheap.

For example, with a fee of 1.16%, the MFS Large Cap Growth Fund offered in the plan is no bargain. Worse still, why should participants pay an annual operating expense of 42 basis points to buy units in the Marriott International Stock Fund? They could simply buy Marriott stock (which is all this fund invests in), incurring only a brokerage commission, as opposed to a recurring asset-based fee on top of any commission.

How confusing can the Sodexo 401(k) plan get?

I was recently contacted by a Sodexo senior management retiree who was perplexed as to seemingly inexplicable fluctuations in the value of her retirement savings account. Last December she had had a sizable capital gains distribution, approximately $30,000, credited to her account which was reversed out the next week without explanation. “The money just disappeared, “she says.

When questioned about the disappearing distribution in December 2012, ING, which did not have any immediate answer, indicated that it would research the matter and assigned a case number. Later that month a representative indicated that the capital gains distribution credited to her account was a computer error. When questioned about what happened to the capital gains distribution amount taken from her account, the ING representative had no answer. This is not surprising to me because it’s unlikely telephone call center staffers would be trained in the complexities related to unitizing mutual funds in 401(k)s. What they can’t explain, Sodexo’s workers can’t possibly understand.

The retiree’s CPA was also mystified. “My biggest question is,” she said to him, “is there possible wrongdoing/mismanagement on ING’s part that is either limited to my account or greater than my own issue? If there could be, who do I engage to see if this is or could be true? You, a financial lawyer, an investment house or. ”

In January, the retiree contacted the mutual fund company involved for information about any capital gains paid in December and was told there had been a distribution, furthering confusing the investor. In March, after contacting Sodexo, the company provided an email explanation that I found to be truly mind-numbing upon first reading: