Full Disclosure of 401(k) Fees
I work for a large money center bank. My employer is charging me one-third of 1% of the balance in my 401(k) account. The fees are calculated daily when the funds are valued and withdrawn from my account. The fees never appear on any of my statements, and I'd like to know if that's normal or even legal? I would assume if an employer is charging fees they would at least be required to report what an employee was charged. I have $350,000 in my account, and I believe my fees for this year alone are more than $1,000. This seems excessive to me.
You may have a better deal than you realize. "The one-third of 1% (0.33%) doesn't sound excessive to me, if that is the total fee being paid," says Rick Meigs president of the 401(k)helpcenter.com. "In fact, I'd say it was a pretty good deal."
He says most plan fees range from 0.50% to 1.5%, depending on the plan size. Make sure the fees you were quoted include the investment management fees, which represent the bulk of the fees, as well as administrative fees, which more plan participants now have to pay.
You're in better shape than most people because you seem to know what the fees are. The U.S. Government Accountability Office recently found that most people have no idea what they're paying in 401(k) fees, and there is no legal requirement for plans to disclose the dollar amount of fees charged (for more information, see Shedding the Light on 401(k) Fees). Instead of being provided with an expense ratio, most plan participants are only told about the net total return on their investments, which is the return after the investment fees have been deducted.
"That being said, the future is more disclosure," says Meigs. "It is only a matter of time before the Department of Labor or Congress requires better and more comprehensive fee information be provided."
Until then, ask your plan administrator for information about the investment management fees for all of your fund choices, as well as administrative and any other fees you have to pay.
Got a question? Ask Kim at firstname.lastname@example.org.