The new fee disclosure regulations are effective July 1, 2012 for plan sponsors and September 1, 2012 for plan participants. These regulation are a solid step forward in reining in the excessive fees charges by service providers over the las t two decades. However, plan sponsors should consider the excessive fees charged regardless of the new regulations. These fees have a negative effect on their employees and themselves ability to successfully retire.
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The average American household will pay, on average, almost $155,000 over the course of their lifetime in total 401(k) fees. In this economy, that would buy a pretty nice home.
The fees paid by 401(k) participants are 46 percent higher than fees required to manage the typical traditional pension plan.
Merely requiring the disclosure of fees, which new Department of Labor regulations effective on July 1, 2012 will do, will only “marginally reduce” excessive fees.
Employees believe that higher fees guarantee higher returns when the opposite is true. Lower fee index funds often have higher net returns than higher fee actively managed funds.
Many plan participants believe that their 401(k) plan is free to them. This is wrong. When the new fee disclosure regulations become effective later this year (2012) Plan participants will learn the truth. That is if they bother to look.
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Why Low Employee Fees Are So Important to the Success of Your 401(k)
