Companies may have just been given a little more time to prepare for the new 401(k) fee disclosure regs, but there are certain things all firms should be aware of right now.
There are three main fee categories. While there are an array of different 401(k) fees, the DOL has broken down the fee types into these three categories for the purposes of the disclosure requirements:
- Plan-level (administration) fees. These are the fees associated with the day-to-day workings of a 401(k) plan, such as recordkeeping, accounting and legal services. They can also include services like access to a customer-service reps and electronic access to 401(k) plan info.
- Investment fees. The bulk of a plan’s fees are spent in this area. These fees are generally made up of a percentage of the assets invested – and are deducted directly from an investment’s return.
- Individual service fees. These are fees that may be charged separately to employees who take advantage of specific features their plan offers. Example: Fees for taking out a 401(k) loan.
There will be surprises. Many companies currently use a bundled service provider (one vendor for all of the firm’s 401(k) needs) to avoid being hit with higher fees. But experts believe that the fee disclosure statements will show employers that hasn’t necessarily been the case.
You can get a good idea of how your plan stacks up against others by using sites like this: BrightScope.com.
Employees will want some answers from you. Chance are, some workers won’t even read their fee-disclosure statements.
But you can bet the ones who do will have some pointed questions about why they’re paying so much of their money toward plan fees. So it’s important for employers to be prepared to explain – in simple terms – all of the major expenses associated with their 401(k) plan.
