Lower Fees to Help Employee Savings Grow Over Time
Even experienced, savvy plan sponsors and employees can find 401(k) fees frustrating. Opaque fee structures can lurk among the complexities of company retirement plans.
And while plan fees may be deemed “reasonable” they may be higher than necessary. Such fees can substantially reduce account growth and hinder retirement readiness.
Billed fees paid by employees and/or employers are often the most visible of fees.
A significant percentage of overall fees can be buried in plan investment fund expense ratios and revenue-sharing. Fund managers are able to build expenses into funds and pay a portion to plan service providers. Different share classes make it challenging to separate fund management fees from fees added to offset administration expenses.
Plan sponsors should schedule a plan fee review, then review fees periodically going forward. They should also obtain a 408(b) Fee Disclosure from their provider detailing all fees.
If fees are found to be higher than necessary it may be time to reevaluate plan providers.