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Understanding 401(k) fees

By Jennie L. Phipps · Bankrate.com
Thursday, September 13, 2012
Posted: 5 pm ET

The U.S. Department of Labor offered a free online seminar today on the new rules surrounding 401(k) fee and investment disclosures. The seminar explained in very simple terms what the new disclosure information includes and why workers saving for retirement should care.

The seminar pointed out some staggering facts about 401(k)s.

  • The DOL oversees 512,000 401(k)-type plans, which cover 72 million participants and hold $3 trillion in assets.
  • A 1 percent increase in fees and expenses could reduce your retirement account balance by 28 percent by the time you retire.

Under most circumstances, the deadline for the company that manages your 401(k) plan to give you a copy of the initial 401(k) plan disclosure information -- whether you are a participant in your company plan or not -- was Aug. 31. So even if your disclosure was snail-mailed, you should have it by now.

If you didn't get one of these reports, contact your plan administrator and ask about it. If your plan administrator can't provide a copy or doesn't know what you're talking about, contact the DOL's Employee Benefits Security Administration, which has offices around the country.

Some critics have said that these disclosures don't go far enough and that they are causing confusion for both employees and employers. A survey released today by ShareBuilder 401K, which provides 401(k) plans to small businesses, showed that 83 percent of employers have questions about these disclosures, and 68 percent of them say they aren't prepared to answer their employees' questions.

One of the big questions employers have -- and lots of us employees probably have the same question -- what is a fair 401(k) fee percentage?

If you don't check anything else out, look at the fee disclosure bottom line. The survey showed that many small-business employers believe that 4 percent of a plan's total assets is the right amount of fees, while ShareBuilder 401K says 1 percent of a plan's total assets is a reasonable fee. That's a big difference.

Understanding all this new retirement planning information will take awhile. A good place to start the learning process is on the DOL website, which offers thorough and easy-to-understand fee disclosure information. If you'd like to hear the presentation that I listened to today, go to that site and watch the archived webcast. It should be available by Friday.

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