The U.S. Department of Labor’s 401(k) fee disclosure rule went into effect in July of 2012. Minnesota company 401(k) retirement plan administrators are required to disclose all company 401(k) retirement plan fees. This disclosure comes in a quarterly statement mailed to each company 401(k) company retirement plan participant.
The statement must include the rate of investment returns, investment-related fees, and administrative expenses deducted from your company 401(k) retirement plan account.
Company 401(k) retirement plan fees and expenses fall into three categories. The three categories are plan administration fees; investment fees; and individual service fees.
Plan administration fees are paid for the annual operation of a company 401(k) retirement plan. These expenses are for the basic administrative services like record keeping and accounting. Plan administration fees may also include legal and trustee services.
Larger Minnesota company 401(k) retirement plans deduct plan administration expenses from investment returns. Smaller Minnesota company 401(k) retirement plan sponsors may pay these expenses. Another option is to allocate plan administration expenses to each company 401(k) retirement plan participant based on account size.
Investment fees are the most expensive part of a company 401(k) retirement plan. These fees are paid to the mutual fund companies that make up the options on the company 401(k) retirement plan menu. Investment fees are charged as a percentage of assets invested in each individual mutual fund.
Set’s say that you have $100,000 invested in a single company 401(k) retirement plan mutual fund. If the annual investment fee is 1.25%, it costs you $1250 a year to own that mutual fund.
Individual service fees are the smallest part of your cost of your company 401(k) retirement plan account. These fees may include an annual account service fee. There also may be fee to open a self-directed brokerage account (SDBA). Last, you may be charged a fee to take out a loan from your company 401(k) retirement plan account.
Ric Lager
Lager & Company, Inc.
