Lifting the Lid on 401(k) Fees

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Fees do matter. Your company plan will improve when you address and verify the fees paid in your plan.

Plan sponsors that previously made such information available in all-but-invisible legalese on the back pages of an inch-thick Form 5500 should prepare themselves for the reaction from employees. “An enormous percentage of plan participants have no idea they’ve been paying fees all along, and many of them will be shocked,” predicts Joel Shapiro, vice president of ERISA compliance at 401(k)Advisors.Bracing for a Backlash
Plan pricing is notoriously variable, and there are instances of plans charging participants as much as 400 basis points, “which is egregiously beyond the scope of the reasonableness test,” Shapiro says. Future retirees paying, say, 3.5% or more of their retirement assets’ value for a money-market fund that could be 1% underwater “makes no sense,” adds Chad Parks, CEO of The Online 401(k), a provider of plans for small businesses. “When they realize it, chances are they’ll march angrily into their HR office for an answer.”

The new fee disclosure regulations become effective April 1, 2012. This is a great opportunity for plan sponsors to improve the retirement plan they offer their employees.

Please comment or call to discuss how this affects your company retirement plan.

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