Fees for All?
Figuring out retirement plan costs
One of the more controversial aspects of the current mutual fund trading scandal is the emerging focus on mutual fund fees. New York Attorney General Eliot Spitzer recently struck a settlement deal with Alliance Capital Management to reduce fund fees by 20% over the next five years—ostensibly to levels more in keeping with the fees associated with "comparable" mutual fund offerings, according to published reports.
Regardless of that settlement, the topic of mutual fund fees is on regulatory radar screens again—and seems likely to continue to garner headlines. While the current controversy about mutual fund trading practices has had some impact on individual retirement plan balances, it is clear that fees have a much broader—and larger—impact on every retirement plan investor. 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 KnowHow 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;
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.
- The Editors