Investment-related information:
- Historical performance with one-, five- and 10-year returns for any investment that doesn't offer a fixed rate of return.
- Benchmarking information that compares the returns on these investments with the returns of the appropriate broad-based market index.
- Total annual operating expenses expressed as both a percentage of assets and as a dollar amount for each $1,000 invested. If there are other shareholder fees, they must be revealed here as well. You are likely to be directed to a website for further information and tools that will allow you to more easily compare information about the investments you hold.
The cost for providing all of this data to you online and on paper, an option the Department of Labor mandates, is about $4. And your employer is allowed to subtract it from your 401(k) quarterly, Ferrigno says. Lucky you.
What you should ask
When you get one of these reports -- by midsummer or fall -- you can expect to have your basic questions answered, says Connie Certusi, general manager of Sage's Small Business Accounting Solutions business unit.
If you read the report and you still don't have these important answers, you have every right to question the boss or the human resources department.
Ask these questions:
- What are the total all-in fees and expenses applicable to my company's 401(k) plan?
- What are we getting for the costs we are paying?
- How much is this plan likely to cost me if I were to work at this company until I retire?
This new law will encourage employers to look hard at the costs they are paying for 401(k) plans and motivate plan providers to offer options that cost less. Large providers of 401(k) plans, including Fidelity Investments and Vanguard, are already offering employers new, very low-cost 401(k) options that are almost certainly good for investors.
But Ferrigno warns employees against focusing solely on fees. Some excellently managed investment options aren't cheap, he says, but they may be providing you great results. So don't buy or dump anything before studying up. "You don't want to just chase fees," he says.
Ferrigno also advises against putting too much of your money in what is almost always the cheapest option -- company stock -- because having too much company stock in your 401(k) could be costly if the company has financial problems.