SURVEY SAYS: How Much Do Your Participants Think They Pay for Their Retirement Plan?

August 4, 2011 ( - As our industry continues to take steps toward fee disclosure, what remains unclear is just how much participants know or understand about the fees associated with their retirement plan accounts.   


Now, it can be tough to know what other people think, but this week, I asked readers how much the participants in their retirement plan think they are paying.

Well, it may come as no surprise to most of you, but this week’s respondents didn’t paint an optimistic picture about participant understanding.

Before we get there, however, let’s look at the situations where respondents WERE willing to hazard a guess.  First off, a full 7.7% said their participants know “exactly, because we’re already disclosing that on their statements.”


Another 5.8% thought their participants would probably think they were paying between 0.5% and 1%, just ahead of the 3.8% who said their participants would probably think they were paying between 1% and 1.5%.

On what turned out to be the other end of the spectrum, just under 3% thought their participants would say they were paying more than 3%, while another 1% thought they would put the figure “somewhere between 2.5% and 3%.

However, the most common response – cited by 41.3% - said, “I'm sure they don't have a clue (though, goodness knows, we've tried...)”, while another quarter (24%, to be precise) opted for “they (probably) think it's free - though goodness knows, we've tried to tell them otherwise.”     

Now, about 12.5% opted for other, though these generally fell into one of three categories:

  1. Some participants know what they’re paying, but all don’t. 
  2. Participants know some of the fees, but not all.
  3. Participants know they are paying something, but don’t know how much. 

Here are some of the "other" reader comments:

The annual admin fee is shown directly on the statements so our associates know this amount.  They have no clue about the cost of the funds.

Some really know how to watch for every penny & question everything, others have no clue.

We cover this in our financial education workshops each year in addition to it being posted on the Retirement Page of our intranet. So I'd say, most team members at least know they are paying fees and where to find them.

They probably think it's free - we have not done a good job telling them otherwise.

They probably think it's free because they probably don't really know they're in the 401(k) Plan due to auto enrollment.

I have no idea what they think

A few know they pay about 0.6% because we keep telling them, but the majority are clueless and do not pay attention

We disclose expense ratios

I don't know and I doubt if the majority of them know.

They probably think they know exactly that it's free, though they don't have a clue of exactly what they know cuz goodness knows they don't read their statement.

I think they know they are paying a fee but I doubt any have a clue how much. 

As usual, the verbatims were insightful (some perhaps inciteful?):

They should know because the administrative fees are explicit and the amount deducted from their accounts are on their statements.  With regard to investment expenses, even though these are listed on their investment statement, only a few have a clue of what the expense ratio means or how to apply it.

There are a myriad of fees - recordkeeping, mutual fund, fees for initiating loan, etc., which are reported differently (flat recordkeeping fee, basis points on funds, flat $ fee on loans, etc.)  So, what are you really asking? (editor’s note – all of the above if the participants are paying it)

Since they aren't charged anything as a direct deduction most will never understand what they pay.

IMHO, plans that unitize their investment options may be hiding overhead costs (benefit staff salary, office space, internal/external counsel, etc.) being charged to the plan.  I have seen annualized costs up to 3% for these types of expenses.  Participants were generally provided with the fund prospectus on the underlying investment of the unit, but had no clue they were being charged additional costs by their employer.  A very savy participant could figure this out by reviewing the plan's 5500 filing.  Until all costs being charged to the plan are fully disclosed, there is no transparency for participants.

For those participants who notice, they've been shocked and think we (plan sponsor) are an outlier, that no other sponsors charge participants any fees. When I explained to one ppt that there are admin fees, for such things as the record keeper's web site, statements, non-discrim testing, audits, he responded that he didn't want any of that, so I could take it away and then not charge him. (Currently a flat $6 per month per ppt, by the way).


The only thing my participants want to know is how much they've made (or lost).

Not sure whether you're talking administrative fees or investment fees...

When many participants don't even know the value of their account, they are not likely to know how much they pay in fees. A few who do notice are likely to protest, or even quit contributing because they don't want someone charging them a fee.

This is not new to our participants. I do think the additional emphasis on it is good, however.  For both the plan sponsor and the participant.

Another thing that people won't read.....

The effort to help increases/enhance participant awareness of fees is sorely needed.  Plan sponsors need to be more aware of the fees too.

You said it well: our industry's typical answer  of more disclosure does not correlate to more knowledge - quite possibly that correlation is negative. 408b2 starts us in the right direction, but a cure all it's not.

Either scare people with "excessive fee talk" so that they don't feel comfortable contributing to the plan, or just give them coupons for cat food....


It's a losing battle to get them to understand, but of course we will soon be dispensing a new level of information that will only further confuse the issue and accomplish nothing - because it will be written in legalese which no one understands (not even the authors of it).  WHY can't we explain something just once in plain English?

It is a good idea. Participants should know how much they get stuck for by the rich.

Most know they "don't have a clue".  You have to read the disclosures and communications to know what the fees are.  A long time ago, I learned that our average, uninitiated participant does not read benefits information.

While they know what the expense ratios are for their selected funds, I'm certain that they have no idea what that means in terms of what they are "paying" for their plan administration.  I'd venture to say that if we told them on average, our participants pay 0.47% for plan administration, they wouldn't know what that means either.  Like anything, without benchmarks and comparisons, information is pretty useless and these people will need to understand such things to value the info we give them.  Don't even get me started on the Wal-mart shopper mentality either.  I can't wait to hear the employees complain that we are not the cheapest out there.

Fees are a fact of life.

The amount of information required is going to make our lives more difficult and will be overload for participants:  a few will appreciate it, a few will become aware that they pay fees for the first time, and the majority won't even unfold the pages before they either throw them in the trash or stuff them in a folder.


We have a multiple employer 403(b)(9). We are charged $60/participant for administration of which $30 is charged to the participants. Our share classes are all institutional so we have the lowest expense ratios we can get without going to CITs or comingled but we still here from various participants how their INDIVIDUAL 403(b) arrangements are so much less expensive.

Sounds more and more true that it's not so much what we don't know that'll hurt us as much as that which we know for certain that just isn't so.

Many of our participants are so, dare I say, clueless that I'm very nervous of what their reaction will be to the new fee disclosures.  We've attempted to educate them on many occasions about the fees that are being paid, but I'm quite certain the message was not received.  Once it is front and center in their statements I'm expecting a wave of hysteria.  Then again, perhaps they'll ignore it like they've ignored all the other efforts thus far.

I agree with Nevin that this will not have much of an impact except those plans whose per participant and other admin fees are hidden in investment expense fees.  In our plan the company picks up all the admin fees except for the participant generated fees i.e. loans withdrawals so we have a good story to tell.

Need to provide participant fees in a context/benchmark or they will still not know even when fully disclosed



These, however, were my favorites:

Those of us who are less expensive plan to show our prospects exactly what they are paying.

"You charge me how much?  My broker doesn't charge me anything!"  Wow, is that disclosure going to be a fun read.......

We are doing good if we can get the reps who are in the field selling these plans to understand fees and they are supposed to be professionals..

Heck I WORK in the industry and I have no idea what I'm paying on my 401k.....(shhhhh...don't tell or I'll have to go sit in the box of shame)

I can't even figure out the fees I'm paying...not paying...revenue sharing...ARGHHHHH!!!!  How can I expect, much less my participants?!

But this week’s Editor’s Choice goes to the reader who is “Still looking for the magic want to get them to read....ANYTHING we send them.”

Thanks to everyone who participated in our survey!