Fee disclosure is coming this year for employers who provide and employees who save in 401(k) plans.
It has been more than a decade in the making. It has technical terms like 408(b)(2), and 404(a)(5). Want that in plain English? Good, we are here to translate.
What most people don’t know about their retirement plan is that there indeed hidden asset-based fees being charged to your account.
Your employer has responsibility to ensure that they are providing you a ‘good’ plan.
And now the Department of Labor has issued regulations that require the industry to tell you what those fees are.
Employers will be told who and what is being paid in terms of real dollars and how much they are paying. Many, I predict will have sticker shock. What you don’t know can hurt you. But at least now you know. Act accordingly.
But for employees, is where this falls short. It is you the employee (and you the employer if you are saving for your retirement in your own plan) who are really paying for it, in more ways than one.
With asset-based fees, the more you have in your account, the more you pay in fees. Sort of like our tax system, so there is precedent.
Example: If your plan has ‘extra’ asset-based fees of say 1%, if you have $100,000 saved, you are paying an extra $1000 in fees. If your co-worker has $10,000 saved, they are paying an extra $100 in fees. Just as your balance is 10 times greater than your co-worker, so are the fees you are paying.
That would be nice to know wouldn’t it? But that unfortunately is not going to happen this time around.
The regulations do not go far enough, and still leave employees in the dark.
The point of knowing is so you can make informed decisions, find a better provider, and put some of that money back in your own account. They exist, we are one of them!
So, while it may not be business as usual, thanks to the fact that your employer will have more information to work with, you will still have to dig hard to figure it all out.
We are working for further change, and working on your behalf. Have been for 13 years. Take a minute to think about it, and let me know if you have questions. I’m betting you do.