Figuring out retirement plan costs
Illustration by Jonathan Bartlett
In recent weeks, the Labor Department has published its interim final proposed regulations on fee disclosures to plan sponsors, and a similar initiative for disclosures to plan participants is already under way—in fact, during the Bush Administration, a proposed solution for disclosing fees to participants was introduced. Additionally, legislation has been introduced in the Senate and in the House to provide for that kind of disclosure. The bottom line: Whether or not you think participants need, or know how, to respond to those fee disclosures, it seems inevitable that, before too long, they will have access to that information.
What that means, of course, is that sooner or later you will want to—or have to—respond to participant questions about those disclosures. Now, the government mandates may well provide some structure for doing so—and may, in fact, impose mandates for how those disclosures must be made. Nevertheless, the topic of 401(k) fees is on regulatory radar screens again, and seems likely to continue to garner headlines.
Remember that, when it comes to retirement plan costs, investment management traditionally accounts for more than 70% of the total—and yet, those fees generally are netted against investment returns.
This month’s Know How is designed to help participants get a better handle on the costs, as well as the benefits, of their retirement plan accounts. You can help by:
• Identifying the class(es) of fund shares available in your plan (while your program may use investment alternatives beyond mutual funds, they continue to dominate most retirement plan menus)
• Making fund prospectuses available (or telling participants how to obtain them)
• Highlighting the expense categories on their retirement plan statements (if any).
As always, we look forward to your feedback.
Nevin E. Adams