Due to the provisions in the Pension Protection Act of 2006 plan sponsors can provide a 401(k) plan which looks more like a pension plan. Plan particiapnts are automatically assigned an age appropriate portfolio. They can then change the risk level or sign a simple form and choose their own fund mix.

Understanding 401(k) Fee DisclosuresAs of July 2012, a new Fee Disclosure Rule was put in place by the Department of Labor. Known as Rule 408(b)(2), it requires 401(k) plan administrators to fully disclose their fees in a way that makes it easier for the plan sponsors, or employers offering 401(k)s, to understand what they are paying for. It’s a step in the right direction, says Carpenter, but not necessarily enough. Business owners, and especially small business owners who don’t have the same leverage that larger companies have when dealing with 401(k) plan administrators, still need to ask more questions about exactly where each dollar goes.That means digging into expense ratios, the fees that you pay for mutual funds. Who gets each dollar your employees pay? And what about the share class? Even if the mutual fund being offered is a good one, there might be a cheaper version of it in a different share class.

“Fees matter,” Carpenter says. “Over a long period of time even a quarter of a percent or less makes a huge difference in the value of the investment at retirement. The plan sponsor who has his or her eye of the ball needs to know this so they can make the best decisions about the employee’s money.”

Plan sponsors primary goal for now is the understand the new fee disclosure regulations. Many service providers will continue to confuse plan sponsors by ‘hiding’ the fees in mountains for documents.

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