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Looking at 401(k) Fees
By JLP | April 26, 2006
There’s an interesting article on the LA Times website titled Fees Eat Away at Employees’ 401(k) Nest Eggs. It is a pretty long article (something like 10 pages) but I think it is worth reading. One thing I don’t quite understand is the authors’ interpretation of fees. It isn’t clear to me from reading the article as to what they consider fees.
Fees in 401(k) plans basically come in two parts:
Mutual fund fees or expenses, and
Administrative fees which are the costs involoved in managing the plan.
I’m thinking that they are lumping the two together and calling them fees, which is misleading. Regardless, it is still an interesting article.
Topics: 401(k), Retirement Planning | 9 Comments »
April 27th, 2006 at 9:00 am
Great post. It would be interesting to see how much of the of the company match is eaten way by these higher fees.
April 27th, 2006 at 11:32 am
I am in charge of the 401k at work and we are in the process of changing plans because of fees. Not the mutual fund fees, but the plan administration fees. We are currently with John Hancock, and their plan fee is just over 1%. We’re switching to Great West who is giving us a 0% plan fee in exchange for the company paying $1,650 as yearly fee. Great for everyone. The company writes it off and the employees get an additional 1% return!! I’m happy about it!
April 27th, 2006 at 4:00 pm
Great post. At our company, we do get charged an Administrative Fee for handling of our account, but we do not forward this charge on to our employees. Very interesting post!
April 28th, 2006 at 8:35 am
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Here are interesting posts and news this week from the MoneyBlogNetwork members and beyond: Consumerism Commentary discusses fancy weddings on a budget. AllFinancialMatters looks at 401k fees. MightyBargainHunter introduces us to the Second Life eConom…
June 8th, 2006 at 8:04 pm
I design 401K plans for a living – Anyone using an Insurance company and paying a fee on their assets is being ripped off. There are great companies out there that don’t charge these fees even for start up plans. I run into plans with $5 million dollars in them with a Nationwide or John Hancock being charged 1% – that is over $50,000 a year!!!! We do it for usually under $4,000 for large companies. Insurance companies should be run out of the 401K world. Have a great day.
July 21st, 2006 at 8:19 am
bunny, Good luck w/ Great West. You have $1650 as a admin fee plus the expense ratio on the funds (held in separate accts)That they tack on extra fees. plus they charge you a wrap fee on your assets….. GOOD WORK… You are locked into a group annuity contract… SMART MOVE… Do they have a surrender charge? cna you look up your funds in the paper daily..NO. Cause they are clone funds held in serarate accts…. Talk to a professional next time …
September 7th, 2006 at 3:40 pm
It’s truly amazing how many people are unaware of the hidden fees inside insurance company retirement plans. We are a ‘fee-only’ retirement plan provider and compete regularly against the big insurance companies (and almost always win after showing the layered expenses). Great West is one of the best at hiding their fees. We are talking to a firm that swears they are only paying for the mutal fund expenses – and therefore, not paying Great West anything except for the Admin charges. Yeah right! They are on their Net Asset Value (NAV) platform. How can we find literature to prove to them that they are also being charged wrap fees. The Act of 1940 says that insurance products are exempt from full disclosure (hence, no fund symbol etc). Any concrete documentation would seal this deal. Please send response to samrscott@hotmail.com if you know. Thanks.
January 28th, 2007 at 11:08 am
The key to fee disclosure is to have your vendor ( the company that is providing the platform ) and the investment advisor to be a co fiduciary in writing. This requires them to act in the particpants best interest by law.
I would suggest that you have them prepare a one page fee disclosure form that they sign and that can be presented to plan particpants for their signature. This must state that they are NOT receiving ANY revenue other than what they are disclosing.
December 11th, 2009 at 3:09 pm
Are the fees of 1% quarterly or annually?