Starting next year, the federal government will require providers of 401(k) plans to reveal information about the fees and expenses connected with each plan. According to the U.S. Department of Labor, more than 70 million Americans are covered by participant-directed plans, which require individuals to decide for themselves how to allocate their investment dollars.
How does that differ from today?
The law now in place doesn’t guarantee that individuals receive information about the fees and expenses associated with their investment choices. But that will change come next year, as participants receive more information, which can help them make their best investment decisions. Although the rule takes effect Jan. 1, 2012, the new information doesn’t have to be provided to employees until April 30, 2012.
What kind of information will be included?
Participants will receive information on the plan’s administrative charges, such as for legal services and accounting, as well as for individual expenses, such as the costs related to taking out a loan against your plan.
The new rule also requires that participants receive statements at least quarterly showing the cost of the fees and expenses, as well as a description of what the charges covered. Information about historical investment performance also must be provided, and the information must include a chart to make it easier to compare available investment options.
Is there a way I can now determine what my plan costs me?
A study done for the Investment Company Institute found that median fees were 0.72 percent of assets, or about $350 per participant who had an average account balance of $48,522.
If you want to learn about plan fees before the new rule takes effect, AARP has a calculator that helps you determine and compare fees associated with particular plans, and calculates the fees’ potential impact on your 401(k) balance when you reach retirement age.
About the Writer
Susan Ladika has been a writer and editor for 25 years. Her freelance work has covered everything from business to travel to science to international issues, and have appeared in such publications as Science, Town & Country, HR Magazine, Developer, The Wall Street Journal-Europe, The San Francisco Chronicle, and many others. She has also done extensive editing as a newspaper and wire service editor holding positions such as the Tampa Tribune Bureau Chief.
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