May 21st, 2012
After many delays, 401k plan providers and advisers will finally have to begin disclosing their fees. Some of these fees may come as a shock to some employers who were told that their plans were “free.”
Providers will have to disclose what the administrative fees are for the plan even if they are bundled into the mutual fund expenses in the plan. Mutual fund fee will have to be disclosed to participants in terms of the annual cost per $1000 invested.
Many participants will be surprised to discover that they are paying 2-3% of their 401k plan balance in annual fees. High fee plans are often sold to small businesses that lack easy access to lower cost 401k plan solutions, and lack the expertise to decipher the hidden costs in a supposedly “free” plan.
Hopefully the new disclosures will serve as a wake up call for small business and get them to ask some tough questions to their plan providers. Read the article for more details.